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Transcripts

November 4, 2003

Host: Michael Grant
Topics:
· Mexican President Vicente Fox visits Arizona;
· Arizona Town Hall: Arizona's fiscal planning process
In-Studio Guests:
· Barry Aarons, veteran capitol lobbyist;
· Casey Prochaska, Yuma County Supervisor;
· Richard Meyers, Director of the Southern Arizona Leadership Council.
Important Links and Resources
· Read the final Arizona Town Hall report, "The Realities of Arizona's Fiscal Planning Process"

>>Michael:
Mexican President Vicente Fox meets with Arizona political and business leaders on the first stop of a three-day trip to border states. We'll highlight what took place. Also tonight, what can be done to improve the way lawmakers set tax and spending policy. The latest topic at Arizona's town hall. Good evening, I'm Michael Grant. Welcome to "Horizon." He is the first leader of Mexico to make an official visit to Arizona. Mexican President Vicente Fox came at the invitation of Arizona Governor Janet Napolitano. On the agenda, ways to improve trade between Mexico and Arizona, and a discussion about a guest worker program. Paul Atkinson has more on the Mexican president's visit.

>>Reporter:
Vicente Fox is the first Mexican president to visit the Grand Canyon state, but his visit represents more than symbolism. On his agenda are substantive goals, improving trade with Arizona and the rest of the United States is a top priority. Fox took the time to listen to local state and federal elected leaders about their ideas and concerns. Among them, a better way to deal with immigration.

>>Jeff Flake:
Most say, well, we need a guest worker program or most of those who oppose this say we need it but only after we have sealed the border. Our contention is you'll never seal that border, nor would you want to, unless you have a legal, orderly process for people to come in here, unless you have a relief valve for workers to come. They are coming here to work, they are not coming here by and large for benefits, to get welfare or a library card or anything else. They are coming here to work. We need to recognize that and make sure we have a process to do so and then to return home.

>> Reporter:
A member of the opposition party, Fox was elected president three years ago with the promise of improving his country's economy. So far, reform has been slowed by recession. The president hopes increased trade with Arizona and other states helps resolve that.

>John Loredo:
We are one of the main entry points in terms of economic development, in terms of economic development on both sides of the border as well as trade. The Canamex trade corridor runs through Arizona. It doesn't run through California or New Mexico. This is the main corridor. So that makes Arizona the leader in bringing forward these type of talks with Mexico. It's unfortunate that these talks don't happen between the Whitehouse and Mexico as promised, but the realities is we here in Arizona cannot ignore the reality that we depend very heavily on each other. That's an issue shared by both Democrats and Republicans.

>> Reporter:
Fox left no doubt among business and political leaders that his government is committed to improving its economy.

>>Vicente Fox:
Arizona and Mexico have a relationship of respect and collaboration that dates back many years. The Arizona-Mexico Commission and its twin sister, the Sonoran-Arizona Commission, established since 1959 are a clear example of the will to shape relations, long-time relations for prosperity. Mexico assigns a strategic place to its relationship with Arizona. Trade between my country and this State has reached levels I've already mentioned here over and above $6 billion U.S. dollars. This makes Arizona our fourth largest trading partner in the United States. The economic relations between Arizona and Mexico, which for geographical reasons have centered mainly on the state of Sonora, encompass very diverse business areas, which runs from the inbound assembly of maquila industry, to the wide-ranging opportunities offered by tourism and include advantages of academic work and scientific research between our main national and regional storage centers.

>> Reporter:
Before Fox's plans can succeed, his country must overcome the setbacks resulting from 9/11 and the slowdown in commerce that resulted.

>>Janet Napolitano:
Stifling the trade flow between the United States and Mexico would be the worst possible outcome of increased border security measures. This is why I am committed to working with the other border states and the United States federal government to ensure that new homeland security measures proceed in a way compatible with our economic development. I repeat that commitment to you here today, President Fox, and assure you that we will not waiver in our efforts to make sure that the border is a place that facilitates legitimate crossing of people and trades and goods and information as well as being a secure place for all concerned.

>> Michael:
President Fox left Phoenix about 6:00 tonight to fly to Santa Fe, New Mexico. He'll meet with leaders of that state tomorrow. He'll travel to Austin, Texas, on Thursday.

>>Michael:
Arizona should get rid of term limits and repeal the two-thirds majority needed to raise taxes. Those are a couple of the recommendations that came out of the 83rd Arizona town hall held at the Grand Canyon. In a moment I'll talk to a few of the town hall participants about their suggestions about how to improve Arizona's financial planning process, but first Paul Atkinson takes an apples and oranges look at state revenues and state spending.

>> Reporter:
Lawmakers are in special session, once again, asked to approve more money to fund important things, such as Child Protective Services and more prison beds. They just can't snap their fingers and make it happen, they have to find where the money is going to come from, then figure out how to spend it. To better understand Arizona's fiscal planning process, we came to General Street co-op in Tempe to the produce section. Rather than show you a bunch of bars and graphs, We decided to talk about budgets with apples and oranges and avocados and tomatoes. The basket on the left represents the different taxes and fees that make up state revenues. The one on the right, spending on various departments and programs. Apples could be education, avocado, law enforcement and peppers, healthcare. The goal is to have equal amounts in both baskets, but if more is taken out of one, while the other continues to grow, then, there's a problem. This has happened three times in Arizona in the last 25 years.

>>Tom Rex:
1979 property taxes were lowered. 1981, the sales tax and on food was removed. Two major revenue sources were impacted, didn't really do anything to reduce spending, and then the recession hit, and they had a huge deficit, and that's what we're faced with today. To resolve it, they cut spending quite a bit, and they increased the generous sales tax a full percentage point. First it was meant to be temporary, and then it ended up being permanent because of the realization that they couldn't make things balance without doing that.

>> Reporter:
For a few years the baskets were equal, but by the late 1980s, revenue remained flat while spending continued to grow.

>>Tom Rex:
There wasn't so much done in the mid-'80s time frame to affect spending or revenues, but it was still a problem from that 1980-ish time period where we really didn't replace revenues adequately. Because the economy improved in 1983-84, increasing the general sales tax was enough to get us through that period, but we really didn't have a long-term balanced budget, and so when the economy slowed in the late 80s, you ended up again with this same sort of a deficit problem.

>> Reporter:
The solution? Hit up taxpayers for more money while trying to spend less. But after a few years in the 1990s, lawmakers cut taxes, took things back out of the revenue basket, while allowing the spending basket to overflow.

>>Tom Rex:
The experience of the '90s was nothing like anything ever seen before in terms of year after year after year of substantial tax cuts to a whole range of different taxes. Now, you could argue that the first set of them made sense because we had just increased taxes in the late '80s because of the downturn. We didn't need all of that money when the economy improved, so the first couple of rounds of tax cuts, hey, that made a lot of sense. After that, though, it was really a case of severe piling on.

>> Reporter:
Lawmakers came up with a solution to the imbalance between revenues and spending. In 1990, they created the Budget Stabilization Act which basically created a rainy day fund. They socked away money over the years, in hopes that when they really needed it, they would have money to spend.

>>Tom:
The problem was that never really operated the way it was supposed to. The legislature changed it in this way, they changed it that way. They started to ignore it entirely then they raided it for things like alt fuel. By the time the economy slowed, there was very little money in the fund compared to what should have been in it.

>> Reporter: Now, shoppers -- lawmakers have to figure out how to fill the revenue basket and spending basket without having something like squash accidentally fall out. Easier said than done.

>> Michael:
Joining me are three town hall participants, Barry Aarons, a veteran capitol lobbyist, the Yuma County Supervisor Casey Prochaska, and Rick Meyers, Director of the Southern Arizona Leadership Council. Good to see all of you. All right, now, the subject, Richard, is the realities of Arizona's fiscal process. How do I leap nimbly from that to the recommendations of repeal term limits and extend state senators' terms to 4 years.

>>Richard Meyers:
That's a good question. As we got together as a group, we had 130 citizens from across the state. We quickly, I think, grew as a group in terms of looking at what are the obstacles to the long-range planning that needs to be in place in this state to get to where we want to go, and we identified things like the term limits, as things that inhibit, really, our elected officials taking a long-term view of how to address some of the needs here in Arizona.

>> Michael:
Barry, you've been down there for a long time. Do you really think that term limits impacts the ability to do long-term fiscal planning? I don't know that I saw a whole lot more planning in the 1970s and 1980s than I've necessarily seen since 1994.

>>Barry Aarons:
I'm reminded of Burton Barr's term that long range planning is Thursday. I think what you saw was, rather than term limits or four-year terms or prop 108 or prop 105, I think what you saw was a recognition and realization that when you weave all of these things together, you have created tremendous barriers towards the fiscal planning process. If you can address them in tandem or address them in aggregate, you might be able to relieve some of the pressures down there that when taken together have blocked our ability to some planning over time.

>> Michael: Casey, what are we planning for that's different than what we do currently. We obviously plan for education. We plan for healthcare spending. We plan for law enforcement. We may not do it well but, you know, we do it. So what different planning should we do?

>>Casey Prochaska:
Well, the fiscal planning at the state level also goes down to the local level, and so what's happening is when the state doesn't have a very good plan in place, it's not something that we can look to from the county's level or from the city's level. It's very difficult for us at the very grass root level to be able to provide for people in our communities. I think a lot of people recognize that. And I think that was one of the recommendations is that the closer that you can get to the taxpayer and you can get the monies to the taxpayer, then the better off those people are. That's one of the reasons why we were thinking that the fiscal planning is really important for all of us.

>>Richard:
I'd push back that I don't think we plan well. I think we react well. I think the way the system is set up today, we have legislators who are reacting to the current situation and they are dealing with a one-year budget. I don't think there is anything in the culture or the process that exists today that really asks people to look out and say where do we want Arizona to be in five years. We pushed hard that there should be a joint process between the executive branch of the government and the legislative branch to look out a number of years and then to take actions today that are in the context of where we want Arizona to be on things like healthcare and education a number of years in the future, and I don't think that really does exist today.

>> Michael:
I'm curious, did the subject of the two-year budget process come up, that failed short-lived experiment? At least one of the drivers for it was if you take a two-year look at it, it's not long range, but it's longer than 12 months.

>>Barry:
It's one of those strange paradoxes. The direct answer to your question is no, we conventiently forgot about biannual budgeting. Biannual budgeting does bring up a paradox that we face. On the one hand you would like to have parameters, Casey made excellent points about why it's important for all of us. You want parameters to do planning, and then at the same time, if you go through our recommendation, you'll see that we constantly use the word "flexibility," that we want state government and all of its political subdivisions to have budgeting flexibility. While we want to look down the road to prepare, we want to be able to make mid-course adjustments in as flexible a manner as possible.

>> Michael:
Casey, I guess I read the newspaper last week, read the recommendations. I focused on "repeal the super majority vote required for tax increases and reform the tax structure to be simple, fair and adequate," and I think, gosh, you had 130 big spenders running around the town hall. Was my morning coffee thought accurate or not?

>>Casey:
Well, I think the adequate part was -- and I think maybe that's the word that you were picking up on. "Adequate" means that you are going to provide for the health, safety, welfare and education of the people in the state of Arizona, and I think that you can have taxes that are too high, and you can have them that are too low, and we want to make sure that we attract and retain our businesses. We also want to make sure, though, that we have the infrastructure to take care of the people that are here. And so that's where "adequate" came in. It was just the word that was appropriate to use to provide all of those, and we understood it's going to be hard to come up with a fair, balanced approach.

>> Michael:
What about repealing the two-thirds majority for a tax increase? That passed overwhelmingly, if memory serves, about ten years ago. Why didn't the town hall like it?

>>Richard:
When we look at any of these recommendations, we can't look at them as individual things. We looked at them as a combination of things that I think point a direction. If you have a strong view that we elect people not just to represent us but to lead us, we want to do things to improve the education and knowledge of our voters in terms of what's going on in government, so government needs to reach out more and do that, and then government needs to be responsive to those needs. We talked about competition, and the fact that we don't want our government just to hold us harmless and not hurt us, we want our government to look at where we want this state to be and where we can better compete with other states for an economic vitality in the environment and what things we can do.

>> Michael:
But Barry, do we want government to establish priorities and not necessarily very easily by a simple majority vote, just immediately say, well, you know, here's a forward looking idea, let's just raise taxes?

>>Barry:
You know, I don't consider that a forward-looking idea. By the way, I have never heard of the term "taxes are too low," but having said that, I would remind everybody that what we said at town hall, and Casey and I were on the same panel. We went through this discussion extensively, was not just repeal 108, but repeal 108 and 105 simultaneously. 105 is the limitation on the legislature being able to modify or make any changes in citizen-passed initiatives or referenda. The thought was, if you are going to reduce the ability or shall I say, you're going to increase the ability to raise taxes by lowering that super majority, you need to provide that same level of flexibility on the spending side to be able to control expenditures. If you just eliminate 108, the solution becomes let's just raise taxes. If you eliminate 108 and 105, you are granting the opportunity for the legislature to go back and say, let's take a look at some of those automatic spending things that have been put in place by the voters and see if they need to be adjusted to meet the fiscal circumstances of the times.

>> Michael:
It has been pointed out, Casey, frequently here in the past couple of years as we've moved into severe budget times that a substantial percentage of the budget is now sort of beyond the legislature's control. Is that a driving factor in this discussion, I assume?

>>Casey:
We discussed that very much. We talked about the AHCCCS programs. We've talked about education, the state mandated, both legislative and also by voter referendum, and so I think a lot of that money, we talked about 65% that the legislature can't use in order to budget -- I mean, to balance the budget, that were -- and we're in this crisis that we're having right now. It's very difficult. At a local level we have the same type of mandate. We have the healthcare. We have our law enforcement. We have our courts. Basically the State sends those mandates down to the counties. So we all understand how difficult it is in times where there is not enough monies to go around, and you have to take it from places that are not mandated.

>> Michael:
I'm curious, any of the small group discussions get to the political practicalities of these? In a lot of these, you're talking about enormously politically popular ideas. I'm not sure that you're going to feasibly repeal these things.

>>Barry:
Another interesting term "feasible repealability." you've come up with new terms tonight, Michael. We actually had that issue raised I think when somebody said let's repeal 108, somebody else said you'll never be able to get that done. That's when we started to talk about, if you bring everybody in, if you drive to the kind of consensus where everybody is hurt a little bit, I don't want to see 108 repealed, and maybe Rick doesn't want to see 105 repealed, but if we both come to the table, and we decide we need that level of flexibility in state government, or as Casey said, we need that level of flexibility in the political subdivisions, maybe we are willing to tie our hands together and say we'll repeal 108 and 105, remove term limits, put in four years, and put the package before the voters and say, look, everybody agrees with this, let's take a shot at it and see what happens.

>>Richard:
It reflects on the town hall process itself. You have 130 citizens that came together from across the state that came to these views and this consensus. And I think it speaks for the citizens of Arizona. I think we were a very representative sample, and I think the town hall process starts that dialogue and hopefully furthers that dialogue so people think about actions we need to take for the future.

>> Michael:
Let me return to the simple, fair and adequate reformation of the tax structure. You were telling me before we began, that actually, the phrase started out simple, fair and low?

>>Richard:
What we talked about at our caucus at the town hall was what was going on with the Citizens Finance Review Committee that the Governor has put in place, and if you look at the guiding principles of that committee, they have talked about a low tax rate, but also a very balanced taxis sysstem, a system that is going to further economic vitality here in the state. And I think when people are looking at "adequate," they are looking at it from a couple of different directions. One is providing the safety net, social safety net that we need to provide for the citizens of this state, but also for the government to take the type of actions that will make us more competitive, that will appropriately lower the business property tax. It'll appropriately make other changes to the tax system that will create an environment that we do have more opportunity for economic vitality.

>> Michael:
Casey, I guess one of the difficulties that I have with the word "adequate" is for much of the 1990s and up until a couple of years ago, the tax structure was more than adequate to fund needs. Now, people may have disagreed about whether the right needs were being met, but for example, you had enough money left over to aggressively fund a capital building program for schools. So "adequate" sometimes seems to be measured more in time as opposed to tax structure.

>>Casey:
And that's what we talked about, the necessary steps in reestablishing the rainy day fund, because we need to make sure that when times are good that we are preparing for when they are not, because we know that those economic cycles are going to happen, and so I think that we always have to look forward to that. Times are getting better, I'm looking forward to that, but we have to recognize that it's not always going to be that way. So I think that was a lot of the comments and a lot of the conversation that we had one afternoon was basically about, you know, how to make sure and ensure the vitality of your state long term, and that planning process is really important, and I think that we just have to go forward, and I think that -- I like what Rick said, the 139 participants there recognize that what we were there for was to talk about the ways to make our state better, and we talked about lots of ways. It wasn't that there was one or two answers. In fact, we're not sure those are all of the answers, they are just part of the answers. They are just the ones that we sat around, we discussed, we came to some agreement. The process is wonderful, and I really do think that we came forward with some great ideas, and I don't know that any of them will ever be enacted, but I think that there's something that will start the thinking process in all of the communities that people were from that participated. I talked about it at my board meeting yesterday.

>> Michael:
Barry, another measure actually has been kicked around at the legislature as you know, require ballot measures that mandate spending to identify a funding source to support it. One of the problems is that oftentimes a funding source gets identified but it's wholly inadequate for the purpose. How do you control that?

>>Barry:
Well, tobacco tax is a great example of that. That was supposed to take care of the healthcare ballot proposition that the late Andy Nichols put on the ballot. Governor Napolitano talked about that when she gave her lunch and addressed the town hall. It was one of her seven points. I think whether you are from the right or from the left, I think probably five of them would say that's a pretty good idea. That was one of them. The other two were, yeah, it's a matter of extent. I think the problem that you run into is if you're going to mandate spending by ballot proposition, you are going to tie a revenue source, what you are doing is creating further barriers to flexibility. I can't tell you today whether a particular funding source is going to be effective five years from now or two years from now or perhaps even a year from now. With the changes in technology and changes in communications and our information age, who knows what the next technology is going to bring that's going to invalidate a tax on something that's no longer used any more. I think while we think about these things, it's another one of those barrier circumstances that we have to be real cautious with, but I think it is a good idea to try to identify some funding so we don't automatically create a problem.

>>Michael:
Barry Aarons, thank you for joining us.

>>Barry:
Always a pleasure.

>>Michael:
Richard Meyers, great to see you. Casey Prochaska, thanks for making the drive.

>>Michael:
If you would like to learn more about the town hall recommendations, please visit our channel 8 web site at www.kaet.asu.edu, click on "Horizon" on the left side of the page. You'll find a link to the town hall recommendations. You can also read "Horizon" transcripts.

>>Michael:
Here is a look at what is on "Horizon" tomorrow night.

>>Reporter:
Arizona's high school dropout rate is among the highest in the nation, but one program is helping potential dropouts stay in school and learn to become the business leaders of tomorrow. Plus lawmakers are in the third week of a special legislative session. We'll have an update on those stories and more Wednesday on "Horizon."

>> Michael:
Governor Janet Napolitano will join me to talk about the Mexican president's visit, special legislative session will probably delve into other issues as well, and on Friday, please don't miss the Journalists' Roundtable at this very table where we talk about the week's news events. Thanks very much for joining us on this Tuesday evening. I'm Michael Grant. Have a great one.

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