February 25, 2010
Host: Ted Simons
- A report by Arizona State University economists shows that cutting funding to the Arizona Health Care Cost Containment System, Arizona’s medical insurance for the indigent, could cost the state a lot in terms of jobs and money. ASU economist Timothy James, one of the authors of the report, talks about the findings.
- Timothy James - ASU economist
Ted Simons: A report released yesterday showed that Arizona would suffer huge monetary and job losses if proposed cuts were made to AHCCCS, Arizona's healthcare plan for the poor. The report was commissioned by the Arizona healthcare and hospital association and was conducted by Arizona State University economists. Joining me now is ASU W.P. Carey School of Business economist Timothy James, who worked on the report. Tim, good to see you. Thanks for joining us.
Timothy James: Happy to be here.
Ted Simons: The idea, the proposed cut, $2.7 billion hit?
Timothy James: Indeed. It's quite a big number but it's important to explain where we get the number from. Largely, speaking, there's a big amount of leverage in this. So the state would contribute $900 million on average but on top of that, there's federal funding which raises the amount by a factor of one to two, one to three. So $2.7 billion.
Ted Simons: And that translates to job losses. 4200, according to your report? How is that number determined?
Timothy James: At ASU, we have a really good model of the way the state's economy operates and we've fed the budget cut in its entirety into that model and it then predicts for us what the economy would like look in comparison to what it would have looked like if the cuts were actually going to take place.
Ted Simons: The matching funds, fine-tune things a little bit here. The idea of reducing the number of folks on AHCCCS saves the state $765 million but you're talking about twice that much in federal matching funds.
Timothy James: And that’s the real issue here, It's not just the amount we'd lose in terms of state funding of AHCCCS fund, there's a funding in federal funding and that's what makes this a really, really big effect in terms of potential job losses to the state and also in terms of the losses in terms of the size of the economy going forward.
Ted Simons: And kids care, would save the state $23 million but got 97 some odd million gone, huh?
Timothy James: We do get a lot of subsidy from the federal government in terms of AHCCCS programs in terms of healthcare.
Ted Simons: Critics will say that Arizona does not have the money to attract the matching funds.
Timothy James: This is the real rock and the hard place type of problem here. We realize we're in really difficult circumstances and what we really need do is find our ways through the woods. I'm not a politician and it isn't my job to come forward with some plan that says this is what we ought to do. But I do think it's worth pointing out this particular format way of reducing the budget deficit we face is a really difficult one to swallow.
Ted Simons: It's difficult to swallow and you're not a politician and the governor's office says all right. Give us an alternative and seems like there are a wide variety of things out there. From a distance, compare and contrast, other things get cut, hospitals and healthcare get cut or we raise taxes.
Timothy James: It's a simple equation. You either need more revenue or you have to reduce expenditure. You don't need me to tell me that you. I think that the governor is in a very, very difficult situation and they've tried lots of plans which involves some degree of revenue raising and cutting and I don't see a clear way through the woods. I think it's something that needs to be looked at again in order to maintain the fabric of what we've got here in the state.
Ted Simons: When you talk about job loss, especially, I don't know if you've done research. But when you put the numbers into your computer, does everything pretty much match up or when you talk about healthcare, does that have a particular formula and then other aspects of the economy have different formulas?
Timothy James: The thing about healthcare, most jobs are highly skilled and highly paid. So a cut in terms of expenditure there means you might not lose so many jobs indirectly in healthcare, because a surgeon gets paid a lot relative to someone in a different industry, but the effect runs through all of the factors of the economy. Less healthcare workers in the state who aren't earning what they would have before, they don't need the services and goods we provide them with and all of the other factors will suffer.
Ted Simons: And as far as the economy is concerned, the idea is if you lose people, fewer people have insurance, most of them are going to wind up in an knowledge in room one way or the other. More people in the emergency room, and higher hospital costs and they come around and get -- you know who.
Timothy James: That's for the medical experts to comment on, but they've been making that case strongly. You're diverting people's usage of the healthcare system from primary care physicians into the emergency room. And that may have cause further problems in terms of all sorts of people's access to the system. Because it might clog up the E.R. system.
Ted Simons: We take from this report, when you reduce the number of people eligible for AHCCCS and reduce programs dealing with the poor and healthcare, they're big multiplier effects.
Timothy James: This is a quite large trench of economic activity in the state and it's pervasive and almost affects every area of activity here.
Ted Simons: Very good. Thanks for joining us. We appreciate it.
Timothy James: Thank you.
- From commercials to TV miniseries, Phoenix was the site of many film productions last year. Phoenix Film Commissioner Phil Bradstock talks about the importance of the film industry to Phoenix.
- Phil Bradstock - Phoenix Film Commissioner
Ted Simons: If you've seen the lifetime mini series "Maneater," or a Red Bull or Go Daddy commercial, there's a chance you might recognize the backdrop. That's because those were some of the productions shot here in Phoenix last year. The film industry had a $38 million impact on the city in 2009. Here to talk about the business side of making films in the valley is Phoenix film commissioner Phil Bradstock. Good to have you on the show. Thanks for joining us.
Phil Bradstock: Thank for having me.
Ted Simons: Was it expected? Was it a goal -- higher, lower?
Phil Bradstock: This is the first year we did a calendar year review. Formally we do it in our fiscal year, which is in July. We don't have any metrics to compare to. I was expecting it $32 million. So I was surprised when it came out to be $38 million.
Ted Simons: This is just in Phoenix, correct?
Phil Bradstock: Correct Greater Phoenix, The city of Phoenix is the only city that has a established film office. So our boundaries in a way are buckeye to apache junction to cave creek out to the city of Maricopa.
Ted Simons: The $38 million, how does that compare to the rest of the state?
Phil Bradstock: Pretty much the majority of film production happens in the Phoenix area. Very, very large percentage. I can't speak for Tucson. But they're not up where we are right now.
Ted Simons: Why do you think that is?
Phil Bradstock: I think this is Phoenix and Phoenix markets itself. A lot of projects are looking to film in Los Angeles but it's expensive so prefer to go outside of Los Angeles and because of our architecture in the downtown area it's easy to replicate the locations. The Encanto neighborhood has a Santa Monica type feel to it.
Ted Simons: Full-time jobs, high paying?
Phil Bradstock: Anywhere from the mid 20 to the mid 30-dollar an hour range. It is a full-time industry for them but similar to construction, once you build a house, you need another house to build. Once you finish a project, you need to find another project. It's not full time in terms of throughout the year, but maybe actors and do this part time and maybe real estate salespeople on the side.
Ted Simons: How did the tax incentive program -- how big a factor?
Phil Bradstock: When I looked at the data, out of $147 million spent here in the greater Phoenix area, over $80 million came from the motion picture tax incentive program which is a big attraction for the projects to come into Arizona.
Ted Simons: I'm a filmmaker, what is presented to me as far as the tax incentive?
Phil Bradstock: Right now, in 2009, of course, you spend between $250,000 and $1 million in Arizona on businesses and crews and wages, you can get it back at 20%. At $1 million, 30%, in the form of a transferable tax credit and $9 million per production is the cap.
Ted Simons: I've heard criticism that the incentives were supposed to bring in X but we're not seeing X yet.
Phil Bradstock: There's 40 states in the U.S. that have some form of incentive program so it's definitely a competition among the states. With our program, it took off and did fabulous. We had a few hiccups in 2007. 2008 we started to gain steam.
Ted Simons: What happened to the hiccups?
Phil Bradstock: We operate what's a cap program. There's only so much available each year. We were finding that a lot of local filmmakers were applying are to the program. And securing $5 million in tax credits and committed to projects that had no funding and as a result of that, major projects from Sony, for example, were never able to make it in the program as a result.
Ted Simons: That reminds me of a criticism. Local filmmakers or those who would film here anyway, don't need this particular incentive.
Phil Bradstock: Because of the $250,000 minimum, they don't qualify for the program. This is more for attracting outside into Phoenix. Those programs aren't taking advantage of the program because they don't meet that $250,000 threshold.
Ted Simons: Surrounding states, how are they competing.
Phil Bradstock: New Mexico is hands down the champion. They and Louisiana. But our primary competition is New Mexico. They have the locations and incentive program that offers a rebate of the tax credit. So instead of us offering those tax credits sold on the open market, the state of New Mexico cuts them a check.
Ted Simons: What's the latest project here on the valley?
Phil Bradstock: They haven't told me what it is. It's a very big actor, well known and starting very soon.
Ted Simons: Does it deal with baseball?
Phil Bradstock: No, it does not. Loosely, there's a few scenes that have to do with baseball.
Ted Simons: Thanks for joining us.
Phil Bradstock: you're welcome.
State Spending Web Page
- State Treasurer Dean Martin will talk about his new Web site that lets Arizonans find out how much the state is spending and where that money is going.
- Dean Martin - State Treasurer
Ted Simons: Arizona state treasurer Dean Martin recently implemented a website that allows Arizonans to see how state money is being spent. The site, AZcheckbook.com, was two years in the making. Here to talk about the site and other issues is state treasurer Dean Martin. Good to have you back on the show.
Dean Martin: Thanks for having me.
Ted Simons: Make sure I got that right. It's azcheckbook.com.
Dean Martin: That's correct.
Ted Simons: Why this website, why now?
Dean Martin: Well, it was something I said I was going to do back in my inaugural speech. Literally every dime the state collects and spends has to have a code attached telling the accounting system, how it got here and where it's going. And so I took all of that information and let's put this online so that the public can see what the government is doing with their money.
Ted Simons: Two years in the making, why did it take so long?
Dean Martin: We didn't have a budget. There was no appropriation. We didn't have finances or staff to do. So it was myself, a head of I.T.
Ted Simons: What costs are we looking at here?
Dean Martin: If you were to sit down and do in this, took about four to five weeks of one person sitting in front of a computer. Maybe $13,000 total.
Ted Simons: And in terms of maintaining, what are we looking at here?
Dean Martin: A few minutes to upload the data each month for the spending and revenues and operating budget each day. It's only the hosting cost, about $90 a month.
Ted Simons: There are interesting things there. There's no doubt. Is something like this necessary?
Dean Martin: I think so. I mean, right now, the public is being asked to raise their taxes, being asked to look at cuts, and, you know, what exactly is going on? Where is there money being spent? Who is spending the most on overtime? Airfare? It's difficult to get an answer and so I thought, transparency is the best disinfectant. Sunshine scatters the cockroaches, so to speak. And to put it online gives people power over their government.
Ted Simons: The public has the ability now to see this, but does the public have the resources to put all of this information into context? You can look at a graph and it can go all over the place and you can say, this is good and this is bad. Those sorts of things but can you put it into context?
Dean Martin: That's the reason we did this. I didn't want editorial content. These are just the data and the facts and let the various individuals provide the context. They know what they were spending it on. But we're seeing generally it's a good policing tool because people who work with state government, maybe an employee who is going through the thing, hey, I'm being asked to do this and they're spending how much on that. It's a launching pad. And you can't ask good questions if you don't have a basis.
Ted Simons: Most would agree, but my question is, yes, ask the questions, but where can they get the answers? Is there any way to explain it?
Dean Martin: We have a link on the site to the complete directory of state agencies. You can ask the question to them directly and we provide the information and cannot provide the backup. Only the agencies can do that.
Ted Simons: How far back does this information go?
Dean Martin: Only back to fiscal year '09. We went to the accounting office to ask for historic data and they said it would cost $800 a month, that would be 10,000 a year and we don't have a budget for that. So just stuck with '09 forward.
Ted Simons: As time goes forward, will there be abilities and a way to put into context trends?
Dean Martin: Absolutely. That's why I would like more data going back. Are they spending more, less? You can do it for one year, but more than that, you don't have, so that's why historical data, we would like to have fee waived. Plus we're working on charts and graphs and comparative things. This is more public data and we'll be doing more down the road.
Ted Simons: Senate Bill, wants local governments to do the same kind of things but maybe with more intricacy.
Dean Martin: We're not part of that legislation, but looking for local governments to provide an extra level of transparency and I think it's a good thing. Transparency doesn't hurt anybody. It may prompt a lot of questions. But that's ok. I mean, that's what we should be doing, is answering questions why we're doing certain things.
Ted Simons: You have come out with a idea to reform the budget process and restructure debt. Again, why this plan, why now?
Dean Martin: Well, the state's in crisis. We're more than $500 billion in debt right now. They're having a hard time making ends meet. The state needs to get through this crisis, but I have a philosophy of do no harm. The problem with the tax increase, people are hurting right now. There's no guarantee this will pass so how do we get through this crisis and bring in temporary bridge revenue but without having a major negative impact on services and impacts the economy flew a tax increase and this debt restructuring, we took a page from a company that's failing. You go in and turn it around and cut up the credit cards and streamline operations and we took that page and said, how do we apply this to the state. We can bring in 1.1 billion as much as $3 billion.
Ted Simons: Without getting into the fine details, this sounds like no more sweeps of funds and want to go ahead and refinance -- a one-time refinancing of existing debt. Why are those important things?
Dean Martin: he reason why we're in this mess, the legislature and governor and two administrations ignored the problem until it got out of control and used fund sweeps and debt purchasing and other tricks and gimmicks to cover up the problem. By eliminating fund sweeps, it reinforces good behavior. Right now an agency that saves moneys is rewarded by having that money taken from them. That doesn't make sense. If they want to borrow it, they can. They've got to pay interest. Same with debt restructuring. Right now we have a constitutional debt $350,000 limit. And obviously, our current constitutional debt limit is meaningless. Let's go back and fix that and say any future debt issuance, the voters need to approve it and approve a refinancing of the existing debt. No additional cost to taxpayers but basically a debt consolidation loan.
Ted Simons: And I know some would say, it's -- when you compare government to a private company, which is done often, they really are two different beasts. I company doesn't have to care for the poor. Or those who might have lost a job or a variety of factors there. Cutting and tightening the belts and all of those things, make sense for a company. But how much for a government where you have a lot the folks dependent on a lot of services.
Dean Martin: That's the reason I brought this forward as a option. The legislature is about to look at contingencies. What happens if the tax increase fails and right now it's losing in the polls. This is a real possible the only the option right now is to do major cuts. Well, this is a way you could, if you go this route, bring in some one-time bridge revenue and cover the additional shortfall without doing additional cuts beyond what they have to do. This is a third option. A middle way between the two.
Ted Simons: And this is the way that you say would keep the state from having to sell off state property.
Dean Martin: Not only would we not have to sell it, we'd buy back the capitol and the buildings that were just sold and this is vitally important because right now, Arizona is being compared with California as fiscal mismanagement. We understand the problem and restructuring our debts and buying back or capitol. That says Arizona is getting its act together. Maybe it's a good place to invest.
Ted Simons: But it's also being compared to other states not spending enough on education and services and these things and it doesn't look like the budget is calling for a heck of a lot of increases along those areas where you can increase or decrease. It's not locked up already in the voter protection funds. How do you balance that out? How do you get the quality of life where it needs to be and be attractive to businesses?
Dean Martin: The quickest way to get to surpluses and increasing budgets and putting more into education is to fill these vacant homes and fill the 40 million we estimate of vacant office buildings. You can't do that when the budget is so out of balance that investors say I don't care how much credit you give us. I'm not moving there, you can take it away tomorrow. The focus needs to be on how not to prolong the recession. You can't raise taxes enough to getting just a few more people into homes would do.
Ted Simons: These ideas, they're concrete and you've released them. Talking about them. The legislature has been locked and it's an absolute wrestling match going on down there. Why not these ideas in the past? Why now?
Dean Martin: I testified during the interim before a senate committee and said this is something we're going to look at. A debt committee for the state. Unfortunately, our finances in the state, there's so much debt it took us a while to dive through the numbers. Because you want to make sure the math penciled out before we proposed it. And we rushed through it to get it done in time for the budget week. We dotted all our Is and crossed our Ts. And got it done.
Ted Simons: Good to have you on the show. Thanks for joining us tonight.
Dean Martin: Thank you.