Horizon, Host: Ted Simons

January 13, 2009


Host: Ted Simons

Legislative Leadership

  |   Video
  • senate President Bob Burns and House Speaker Kirk Adams talk about the tough task of balancing the state's budget and the bills before the legislature in the upcoming session.
Guests:
  • Bob Burns - State Senate President
Category: Legislature

View Transcript
Ted Simons:
Tonight on "Horizon," new Legislative leaders face the difficult job of balancing the state budget. We'll hear from new Senate President Bob Burns and new House Speaker Kirk Adams about that and more. Next on "Horizon."

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Ted Simons:
Hello, and welcome to "Horizon." I'm Ted Simons. Yesterday, they were sworn into office. Today, state lawmakers were working on the budget. There's about a $1.6 billion deficit this year. Next year the state could be as much as $3 billion in the red. I'll talk to the top two Legislative leaders about balancing the budget. But as David Majure reports, at Least one special interest group is offering some assistance.

Greg Wyman:
Our purpose for being here today is, we understand fully, as leaders of Education in the state, the magnitude of the budget crisis of the state. We're here to help in any way we can.

David Majure:
The Arizona School Administrators Association held a press conference on the Senate lawn just minutes before the 2009 session.

Calvin Baker:
Arizona needs to protect spending in education because education in our state is already under funded.

Greg Wyman:
The economic impact of the K-12 sector is tremendous. We are one of the largest employers in most communities in the state. Any cuts there harm kids, but they also harm people and the economy as a Result.

Calvin Baker:
The simple reality is, when school budgets are cut, local paychecks are cut. Less money flows into local businesses that provide goods and services. The local economy suffers. Consequentially, government spending on assistance programs and unemployment benefits go up.

David Majure:
If cuts are made to K-12 education, the A.S.A. is asking lawmakers to apply them equitably across all of public education, and to allow districts to manage cuts at the local level.

Greg Wyman:
And finally, there's no way you're going to solve this problem just with cuts. So we're going to have to balance out both tax cuts, as well as enhancements and revenue. That's the message we're trying to get forward, and say we're here to help you achieve the difficult task of balancing this budget, and we'd like to be a positive influence in the discussions relative to the kids of our state.

David Majure:
That message was reiterated by Senate Assistant Minority Leader Rebecca Rios.

Rebecca Rios:
Being in the minority, I think we're very concerned about insuring that education is held as harmless as possible. We're very concerned about health care. Ultimately, we're concerned about the budget cuts. We recognize as Democrats that a lot of programs we've historically fought very hard to protect, we're going to have to agree with some cuts. Our concern is that we don't want the majority coming in thinking they can just cut their way out of this budget. We need to look at some way to also enhance revenues where we can. And that means, again, everything is on the table. When Governor Janet Napolitano issued a way to get out of the budget deficit in December, that included $400 million in cuts. But the rest was not in cuts, it was a $1.2 billion solution. So I'm hopeful, and hoping that at least the Majority will look at some of the proposals that she had put forward.

Ted Simons:
Here to talk about the budget and more is Senate President Bob Burns, and House Speaker Kirk Adams. Thank you both for joining us again on "Horizon," good to see you.

Kirk Adams:
Good to be here.

Ted Simons:
I want to get to education, and other aspects of the budget. Let's first of all start with, we're looking at, what? 1.6 and 3 as far as this year and next?

Bob Burns:
Yeah, next year's sort of a question mark, depending on how we solve this year. We don't know for sure what that number is. It could be very, very large, yes, the way our revenues are still declining.

Ted Simons:
The session is just starting; everyone's kind of getting together. I know we've a summit going on in the Senate and a boot camp going on in the House. Is this a way to try to get through to lawmakers just what the situation is?

Kirk Adams:
Absolutely. As you may know, in the house, a third of our membership are Freshmen. They're brand new. Also, many of our returning members may not have a full appreciation for the depth of the crisis we are in right now. Budget boot camp is designed to give everybody an accelerated learning curve on the budget, where we're at. And, towards the end of the week, some of the options of getting out of there.

Ted Simons:
As far as the summit is concerned, it sounds as if you're looking at other aspects of society, business, and government leaders and smaller towns, cities, and counties, as to what they're doing that may help the state.

Bob Burns:
We'd like to get some input from the business community. They've already been through this. They are out ahead of us in solving the problem by balancing their budgets. They've had to make some reductions, they've had to do layoffs and those kinds of things, obviously things they were not necessarily wanting to do, but found to be necessary. So we're going to have one panel of business folks, hopefully to give us some insight into what we might be facing and what we will need to do. And then on the next day we're going to have some people in from local government, counties and cities, because they have also gotten out ahead of us on solving the problem of getting their budgets in balance. Things that we haven't done yet, we have lagged behind in this. I think they have set the example that we need to follow in solving our problem.

Ted Simons:
Do you agree with that?

Kirk Adams:
Absolutely. We need to look to -- if you look at what cities and towns have done, like Bob said, they've done a fantastic job of responding quicker than the State has. They have made difficult choices which have included things like layoffs, and cuts to programs that traditionally cities have been loath to cut. We are facing very dire circumstances, so I think it's going to be instructive for our membership, both in the House and Senate, to have an opportunity to dialogue with these leaders in the business community and the Mayors in the local cities.

Ted Simons:
I want to touch on the State of the State speech yesterday, and the reaction to the speech. I think the general consensus from a lot of lawmakers was that it was irrelevant. I believe you said that it was not really relevant to the budget process. Is that a fair thing to say from an elected governor who was not voted out of office? She was a popularly elected governor, won by a pretty considerable margin. Certainly there were aspects of what she sees and perhaps some of her plan that could be relevant.

Kirk Adams:
Not only is that characterization fair, but it also happens to be correct. It was fair to have her come and give a farewell address to the State. Like you said, she is the elected governor. Out of respect to the office of Governor, that was a necessary thing for us to do. But in terms of it being relevant, if she's not there to help us with the agenda, if she's not there to help us solve the problem, then her budget or State of the State speech really doesn't have relevancy because she's not going to be there to finish the job.

Ted Simons:
Is that something you see, as well? The critics are saying she does have a pretty high approval rating. People seem to like what she's doing.

Bob Burns:
That may be true. What she's done is helped guide us into a deficit that's historic in size. And so what has been provided to us through her guidance as the Chief Executive Officer of the State has not worked. So I think it's time we turned the page and move on and start solving this problem. You know, there were a number of us in the legislature who debated and argued and fought against some of the proposals that she had in her agenda. If we would have adopted those -- we were able to hold off a number of the things that she was pushing for. If those would have passed, we would be much deeper in the hole than we are now. I think it's time to take a new Direction. I believe that's what Jan Brewer will provide for us, is a new direction to getting this problem under control.

Kirk Adams:
And to put a finer point on this, we've had a Chief Executive for the last six years, but particularly the last three budget cycles, who has continued to bet on the come. In other words, she's sold to the legislature that, you know, the economy will improve, we will recover. If we just build this little bridge, make this little borrowing scheme work, if we just have this little accounting gimmick, things will work out in the end because the economy will recover. She was betting on the come. Well, the come never came. Instead, the economy only got worse and the deficit has ballooned. What we're dealing with is a lot of Napolitano chickens coming home to roost. In terms of the credibility of her speech yesterday, I think it was viewed as un-credible because of past history.

Ted Simons:
During the speech there was, I don't know if we could call it a threat, but there was certainly an observation coming from the governor, that perhaps any cuts in classroom spending might be something to reconsider. Let's go ahead and hear what the governor had to say on that.

Janet Napolitano:
Today's short-term budget decisions must not harm the long-term future of Arizona's children. If this legislature cuts classroom spending, the people Of Arizona will recognize such a cut for what it is: not a budget necessity, but a willful and unwise choice. [Applause]

Ted Simons:
The reaction of the public regarding some of these cuts: how much is that into play, as to what you are doing down there?

Kirk Adams:
It's very important, and we're all elected officials and we have constituencies and we want to serve those constituencies properly. We are also, if you will, the Board of Directors of the State of Arizona. We are the ones that have been designated by the people to make these tough choices. If we don't make them as the Board of Directors, who else is going to make them? The governor's comment that you just played is really instructive, because I think you could argue that her budgets over the last few years have been all about the short term and not about the long term. They have been about balancing on paper but not taking care of the structural deficit. And that structural deficit has finally turned into a real cash deficit. So now we labor under not only a structural deficit, but a real-time cash deficit without enough money to pay our own bills.

Ted Simons:
I think implicit in what the governor had to say was something that critics of the legislature are also concerned about, and that this that is just an excuse for the G.O.P. leadership to tear down, dismantle, what they never really wanted in the first place. Your response?

Bob Burns:
I would disagree with that. When I look at this, if we're going to spend more than we can afford, if we spend more than we have coming into our treasury, at some point we go over the cliff. We are about to go over the cliff. I have argued about this and pointed this out for a couple of years already now, that the cliff was coming. The cliff is here. If we go over the cliff and have to shut down complete state agencies in order to survive, how does that help the people of the state of Arizona? All of us want the best education for the children of this state, absolutely. That's one of the top priorities. It's always been one of the top priorities. If you look at the spending that has gone into education, even taking back some of that that has been put in just recently, spending budgets have increased over the last few years by a significant amount. So to me, that has always been a top priority. But keeping the state fiscally sound is even more important. We've got to have a balanced budget to move forward. We cannot continue to try to function spending more than what we take in. It just doesn't work.

Kirk Adams:
To put this into an even more important context, according to the National Conference of State Legislatures, Arizona has the worst budget deficit as a percentage of revenues of any state in the Union. That's worse than the State of New York, worse than the State of California, roughly 24\% by their estimation. Our revenues that we're projecting for the rest of this fiscal year are equal to our revenues in 2006. In 2006 we had a $1.2 billion surplus. So you look at what's happened between 2006 and 2009, where we find ourselves today. It's a remarkable increase in spending that has produced these deficits.

Ted Simons:
Is there an argument, a line of reasoning, though, that goes: because Arizona was such a boom state, because when times were good things were really good here, that when times around the country are bad -- and they are bad everywhere, including here - but when times around the country are bad, they are really bad here. If you go up high, do you not necessarily have to go down low?

Kirk Adams:
Clearly that's been our history. It's been a boom-and-bust economic cycle. I think there are things long-term we can do to work our way out of that. In front of us right now is a real crisis. It's not Monopoly money, these are real numbers, these are real programs and services on the line. We've had the Treasurer of the State of Arizona present his findings that the state is going to run out of cash sometime late February or March to pay its bills, and have to institute a daily borrowing scheme to keep lights on and make payroll. This is not about ideology anymore, this is just about math. One plus one has to equal two. We have a constitutional mandate to provide a balanced budget, and we will do that.

Ted Simons:
The one plus one equals two argument: there are those who say one plus one can equal two now, or one plus one could equal three or four if you move it forward more slowly. This is obviously the Governor's line of thinking, and Democrats as well. Is there a mindset to what is happening further down the line? Let's start with University and Community colleges. There's a lot of thought that Arizona needs to educate these folks, to get an educated working class, to get business and industry here that looks for these kinds of educated folks. Is there a baby being thrown out with some bathwater here?

Bob Burns:
I think we've gone down that path over the last few years of borrowing and trying to extend our resources over a period of time. And now we've crossed the line. We've gone too far in that regard by a long shot, I think. The problem I have with borrowing at the government level is that there is no single person responsible for making sure that the payments get made and making sure that you stays within your limits. Private sector, when you borrow, usually there's one person that's responsible for making that payment. There's a lot more pressure to keep the lid on, if you will, as far as the amount of borrowing that takes place. And that responsible person has to answer, to make sure that the payments are made and things get paid back. In a government situation, it's pretty easy sometimes, and it's too easy, when you get into the borrowing mode, to overextend. I think we've overextended, and we need to draw back.

Ted Simons:
Does that mean nothing along the lines of a government stimulus plan?

Bob Burns:
Well, I think we're open to those kinds of discussions. Let's talk about some of those things, but sometimes when you don't have the funds, how do you invest? You've got to have the resources. When we've eaten up our resources and used up our reserves in the last three to four years, rainy day fund is gone, we've swept the dedicated fund, and so the cash reserves got used up, as well. The hole is pretty deep.

Ted Simons:
The idea of some kind of state government stimulus program, get projects going, obviously University construction and repair, which apparently was already done but we don't know what's happening with that right now...in general, is that something that the legislature will look at, and will consider? Or is that one of those things that, if not off the table, is teetering awfully close?

Kirk Adams:
It really does come down to, do we have the resources to complete these projects? It is something that we ought to look at, that we ought to consider and discuss, and in the context of whatever federal money may come as well. We don't know what that amount is. We don't know how it's going to be earmarked for use, and what kind of flexibility we will have, or even when it will come. As legislative leadership, we've got to proceed as if that's not coming, at least in the '09 Fix. And I think that's how we're going to proceed. It's just too unpredictable at this point. In terms of a stimulus, we ought to discuss a stimulus for our economy. We ought to be discussing, how do we get the Arizona economy moving again? Those are the kinds of discussions that we will be having.

Ted Simons:
In the State of the State speech, the Governor mentioned these are desperately needed jobs that could be filled, and could have folks working here, relatively quickly if that stimulus package goes through.

Kirk Adams:
To that point, Ted, she made that same point when she included that in last year's budget. She made the same point in the previous year's budget. Her State of the State speech was the political equivalent of jumping the shark. It was the same things we've heard over and over again. And frankly, the same type of Pollyanna outlook: things are going to turn around, things will be okay. That is responsible for why we are in this mess today. It's an unrealistic look at where we are at, and simply trying to bandage over the budget, instead of attacking the overspending. If we would have been more modest in our spending in 2006, 2007, 2008, we would not be having the discussions that we're having today, at least to this depth.

Ted Simons:
Do you agree with that?

Bob Burns:
Well, yeah. And to add to that, if we had been more sensitive to using one-time money for one-time spending projects, a lot of the spending might have taken place, but we wouldn't be in the hole that we're in now. We ended up expanding programs that take long-term, year after year revenues to support, and that's not there now. That's one of the problems we face with this federal so-called bailout, if it occurs. What kind of strings are going to be attached to that? If it's one-time money, then we have to treat it as one-time money, and not be using it to hopefully expand a program or get into something that's going to create a long-term commitment.

Kirk Adams:
And it wasn't just one-time money as well, although I agree with Bob, that was a big problem in how we handled that. If you look back in 2006, we had revenue growth of just a little more than 20\% that year. Any reasonable person would ascertain that's an anomaly. That's not going to persist year after year. We budgeted ongoing spending in 2006, based on a 20\% growth in revenue, as if that rate was going to continue. And obviously it didn't. And that type of lack of foresight, and just worried about the short-term, is really part of the reason why we're here today.

Ted Simons:
Let's talk about some specifics here. The state equalization rate, education officials are very concerned about that. I know you've already heard from them. Is it wise to make that permanent now?

Bob Burns:
Well, if we don't, it's a tax increase. $250 million to $260 million property tax increase. The education community is one component of our society. There's a whole 'nother component, which is the people producing the revenue that we use to support the education community. For us to dump a $250 million to $260 million tax increase on that component of our economy I don't think plays well. I'm afraid that we hurt our economy. We cause even probably more of a long-term detriment to the revenues that we will see in the future that will support our education community. It's a mistake, in my mind, to dump that kind of a tax increase on our economy.

Ted Simons:
Was it the idea, though, that: suspend this particular tax when times are good, knowing that if times aren't so good, this could come back and help fund schools?

Kirk Adams:
Well, remember, that money was going into the general fund, and it was not necessarily designated for a particular spot in the budget. I agree entirely with Bob on this. Would that we had the luxury of focusing on one sector of what state government does. In the legislature we are responsible not only for the education of our children, for public safety, but we're also responsible for creating an environment that can attract new capital, great jobs, and grow Arizona's economy. If we were to allow that kind of -- the largest property tax increase in state history to occur, we would be doing serious harm to the very businesses that we want to attract, and those businesses that are already here that we want to help so they can start hiring people again. That would just be very foolhardy of us to go forward with allowing that tax to come back into play.

Ted Simons:
You're talking $200 to $300 million here: go ahead and keep that off the books in order to create an environment?

Kirk Adams:
Yeah. If you look at 2009, the money does not affect the 2009 fix. The initial $1.6 billion, that has no effect whatsoever. The effect it would have would be 2010.

Ted Simons:
In tough times, and we asked Secretary of State Brewer this when she was on the program, the concept of: in tough times, that's when social services and many state agencies are needed the most. She agreed. Do you agree? That is in your formula, as far as where we go from here?

Bob Burns:
I think we have to take a very close look at what's going on in our health and welfare system. If you look at the last five years of growth in government, Access has been our growth component. It has grown by leaps and bounds. I just have a real difficult time believing that one fifth of the population of the state of Arizona has to be on Access. I really can't get my arms around that. The people of the state of Arizona are better prepared to care for themselves than that. We have to take a look at that area in the health and welfare area of our state government spending.

Kirk Adams:
This is an example, Ted, of the very difficult choices that we're going to have to make. I don't think anybody expects these choices to be easy. In fact, it's just the opposite, they are going to be very, very difficult choices to make. But we're not dealing in a theoretical deficit here. We're not dealing in even ideology at this point. We have a cash deficit. You know, it would be irresponsible of us to drive the state into further debt to take care of this. So we are going to make some choices that are going to be hard. I can't imagine any area of the budget that's not going to experience some pain when all is said and done. When you remember that so much of our budget is voter-protected. We have very little resources to work with. We haven't figured out yet where the bottom of the economy is. Revenues continue to decline. We just revised down our estimates yet again. Hopefully we won't have to do it one more time, but who knows? So we have difficult choices.

Ted Simons:
Okay, we have to stop it right there. We have so much more to talk about, I hope we can get you guys back on again relatively soon and we'll discuss even more. Thank you so much for joining us.

Bob Burns:
Okay, thank you.

Ted Simons:
Coming up tomorrow on "Horizon," we'll hear from Democratic legislative leaders. They'll talk about their goals, which are hampered not only by being in the minority, but also because of the incoming Republican governor. That's Wednesday at 7 on "Horizon." Thursday, find out the latest on what you need to know to file your taxes. Friday, join us for another edition of the journalists' roundtable. That is it for now. Thank you so much for joining us. I'm Ted Simons, you have a great evening.

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