The Farley Report from Phoenix #237: 1-27-16

Yesterday in Senate Appropriations Committee we had a rather spirited discussion about Governor Ducey’s proposed budget for universities. In his State of the State speech, he told our university presidents that, “we value your work, and I intend to be a partner in strengthening Arizona higher education.”

How’d that partnership work out? In his budget he proposed $8 million total for all three (about what they saved by refinancing some of their own debt), after cutting them $99 million last year. In comparison he proposed 2,000 new private prison beds, costing us $48 million a year for 20 years. 

Much more after this brief Farley Report pledge break…

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—> In that Appropriations Committee hearing the Regents president and all three university presidents proposed not to restore the whole $99 million cut last year, but simply to make a $32 million down payment on a new funding goal — that the state pay half of the cost of educating in-state students. That would increase the state’s payment to 38.2% (up from the current 34.3%). 

Their proposal seems more than reasonable given the requirement in our state’s constitution that we make a university education “as nearly free as possible” to our residents. 

And it seems like an especially wise investment given that an increased number of bachelor’s degrees has so many positive outcomes not just for the person who gets the degree (who will make on average nearly a million more dollars in their career), but also for our society. 

We have one of the highest rates of people in poverty in the nation. The poverty rate for those with high school degrees is 17%. For those with a bachelor’s degree, the rate is 6%. What other public investment can reduce poverty that effectively and dramatically? 

A huge chunk of our state’s budget is dedicated to services for those in poverty. Fewer people in poverty means less need for government spending on those services. And — by the way — it means fewer people in poverty, which is good in and of itself.

Economist Eliot Pollack in the Finance Advisory committee last week shared that the stalled recovery in the housing market was caused in large part by millennials delaying their decision to buy their first home. Why are they taking so long? He told us it was because of the crushing burden of student debt they must pay each month, at levels that are now higher than credit card debt, car loans, or anything else (excepting mortgage debt). 

Cutting university budgets is inflating government spending while dragging down the economy. According to the Chronicle of Higher Education, we are last in the country in how much less we pay now than five years ago. If we had paid the same per-student amount in 2014 as we paid in 2008, we would have invested over $2.5 billion more than we actually did over that time period because of legislative cuts. 

According to ASU President Crow, we now pay about $118 per citizen per year to support our universities, making us dead last in the country by more than $100. I’d say it’s time to invest in our universities and community colleges once again so they can go to work for all of us.

—> Why is the Governor being so parsimonious with our money, and why are legislative leaders pleading poverty despite our enviable cash position of nearly $1.1 billion in the black, if you include the $460 million rainy day fund? If I were cynical, I might say that it is because less money available means they can continue their long-term efforts to eliminate state government. 

But I’m not a cynic. If I was, I would have fled this place long ago. Bear with me as I briefly discuss the finer points of budget balancing. 

There are two types of balance — cash balance and structural balance. Cash balance is the amount of money we have available that is not yet spoken for. Structural balance is the difference between projected ongoing revenues and committed ongoing expenses into the future. 

In fiscal year 2017, we have a $625 million cash balance, in large part because we got a lot more money than we had expected, some of it from a delinquent taxpayer amnesty program and some of it from an economy that performed better than expected. We have only a $26 million structural balance, however in FY17. 

The shrink-government folks (like the Governor and the Senate President) are acting like we are in desperate straits because they are saying that we only have $26 million (the structural balance) to spend in restoring programs and are advocating that we hold the line on restoration to JTED, universities, K-12 programs, child safety, transportation, and other urgent needs. 

The thing they are not telling you is that according to the nonpartisan Joint Legislative Budget Committee that structural balance will grow, even with a conservative projection of revenue growth and more than $200 million more lost to phasing in corporate tax cuts. 

In fact, by FY2019, the structural balance will amount to $325 million. 

So that means that in reality we can restore up to $325 million in ongoing expenses now and stay structurally balanced by FY2019 if we use $477 of the cash balance available in FY17 and FY18 to keep us structurally balanced over the next three years. And that still leaves us with $148 left over for one-time expenses for things like putting people to work fixing our roads. And we don’t touch the rainy day fund. 

That’s presuming the Governor can restrain himself from more corporate tax giveaways. Imagine how our schools, kids, and economy could have been thriving if we hadn’t already given away more than $4 billion a year in tax cuts over the last 25 years!

—> Finally tonight I want to highlight a few bills of mine that are in the hopper:

SB1171 (Adoption, married couple, preference) With nearly 20,000 kids in the care of the state, it's time to end discrimination in Arizona law over who can be a foster or adoptive parent. My bill will do just that, allowing single people and same-sex couples equal rights to adopt or foster a child. As Governor Ducey himself said last April, "All loving families should be able to serve as foster parents and adopt." Let's hope he can personally help convince Senate Health Chair Nancy Barto to hear the bill. 

Here is print coverage, and TV coverage.

If you agree that loving families -- single or married, gay or straight -- are better for kids than group homes, please write Sen. Nancy Barto (R-Phoenix) nbarto@azleg.gov and ask her politely to hear SB 1171 in her committee. 

SB1355 (housing trust fund; funding sources) Just dropped today, I am very excited about this bill. I have been inspired by the Utah model to end homelessness, which is to give them homes. Social services can then be brought to them more efficiently and they can transition into society at large. Homeless agency heads told me that the best way to do this in Arizona, and potentially end homelessness over time, is to fully fund (and stop sweeping) the Housing Trust Fund, which can be used to build housing for the homeless (creating lots of construction jobs along the way).  

At the same time, for the last couple of years I have been working with a constituent, CPA David Cohen, president of BeachFleischman, to find a way to eliminate a loophole by which out-of-state real estate investors have been avoiding payment of income tax on large commercial deals, resulting in the loss of tens of millions of dollars in state revenues. 

I realized a couple of months ago that these ideas were made for each other and the result is SB1355. The bill requires that income taxes due on large real estate deals include be withheld during the escrow process. Then that money is deposited in the Housing Trust Fund to build housing for the homeless. Because it is not a new tax, the bill does not require a two-thirds majority and the governor will not be violating his pledge of no new taxes when he signs it.

If Utah can end homelessness, we can. If we can get out-of-state investors to pay taxes they already owe to fund it, so much the better. 

SB1349 (sentencing; aggravating factor; texting) As you know, I was the first person in the country to introduce a bill to ban texting while driving in January 2007. We are now one of only two states to not have any statewide law against the practice. I have met too many families who have lost a loved one to a texting driver for me to ever give up fighting to make sure no more families have to experience what they did.  

President Andy Biggs was the one person who has stood in the way of this bill for the last ten years. So this year, I sought to work with him.

To his immense credit, he agreed to work with me. At first. We sat down and brainstormed, and he came up with an idea he told me he might be willing to support: Make the commission of an injury or fatality while driving and texting an aggravating factor in sentencing –- just like using a gun in a crime is an aggravating factor. This will create a strong disincentive for texting while driving since anyone who picks up that smartphone while driving will now know that they run the risk of going to prison for serious time if they injure or kill someone. 

I spent several weeks going back and forth with staff developing the bill and sending drafts for his review. This morning I brought in the bill to ask for his signature as a co-sponsor. I was surprised when he told me he had changed his mind and had decided to neither sign nor support the bill we had developed together. 

I went ahead and filed the bill anyway, and now I hope he will have another change of heart in his upcoming decision about how many committees to which he assigns the bill. 

I had jumped at his idea, enjoyed working with him, and really think this will come at the problem in a way that could be very effective at stopping people from driving while texting in the first place. Again, I’m not a cynic. I believe people of good will can have the courage to change their minds and do the right thing. Especially when it was their idea in the first place. I will keep you posted.

Thanks for your continuing faith in me as your Senator. 

Steve

Steve Farley

Senator, District 9, Tucson

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