Arizona's First Political Blog

E-mail Anonymous Mike at zonitics4-at-yahoo.com

By Anonymous Mike, pseudonymously.

 
Great Moments in Government Spending

Last week the Maricopa Community Colleges Governing Board voted to approve a $6 tuition and fee. One of the reasons stated in the press release for the increased was

The cost of opening and operating the new buildings approved by 76% of voters in the 2004 bond election is among the many student centered priorities that will be funded by the increase

I love the wording of that statements. It implies that since we voted for the buildings then we should go along with the inevitable tuition increase to pay for their operation. I followed that bond election fairly closely and don't remember anyone on the yes side mentioning that in addition to increasing my taxes to pay for construction that we would have to jack up tuition as well.

Wait there is more

Other programs designated as funding priorities include support of initiatives designed to help the colleges increase enrollment, new faculty....

Yep "increase enrollment" because district enrollment has been dropping since 2004, the very year the bonds were passed.

So let's get this straight:

1) We need to raise tuition because...

2) Those new buildings we taxed you to build so we could accommodate increased enrollment in the future? We now need more money to operate them in part (sorry we didn't tell you that earlier when you approved them) because...

3) Our enrollment is dropping.

We all know the secret to increased enrollment is higher tuition. Higher prices always generates higher demand.
posted by Anonymous Mike at 2:32 PM

 
Another Kind of Religious Experience, Sort Of....

I know last week was Holy Week but given that Easter candy is now half-off cannot we get some sort of determination of what kind of religious experience this is?

How long does this amazing experience last? Until the 1/2 priced peeps and Cadbury Cream eggs are all gone.

(Note this post was brought to you under the influence of 4 pink peeps and 1 Reese's Peanut Butter Egg)
posted by Anonymous Mike at 3:17 PM

 
Budget Follies, The Fun of "Investment"

Somewhere over the last 15 years or so, I began to notice more and more politicians and public policy wonks using the term "investment" as a means of justifying either current or increased levels of spending. Over time it has spread to all areas of public spending and it seems to comes from across the political spectrum, but it pops the most frequently among Democrats when talking about domestic spending.

There's a certain logic to it, spending some money now in order to forestall larger spending down the road or better yet to generate larger returns later. The latter argument is used for things such as increased spending for education or transportation infrastructure. The former argument usually takes the form of "if we spend x amount of money now to send little Jimmy to Head Start, we won't have to spend 10x down the road to put him in jail when he turns out to be master criminal."

The problem with using "investment" with public spending is that presupposes a level of precision analogous to the private sector, which just isn't true. Let me explain.

When investment is used in the private sector, it's usually used in 2 areas; to decide how to allocate scarce resources and how to monitor and manage the ongoing investment.

In the first case, a business will have to decide how to allocate scarce resources among a wide array of investment options: expand capital plant, perhaps boost wages in an effort to attract a better workforce, marketing, R & D, etc.... The decision to invest among those options is predicated upon a number of external factors such as the strategic position of the company but all investments are built around a rate of return and span of time to recapture the initial capital.

The second case, a business has to monitor and manage the investment to make sure it achieves its anticipated return. Many a good plan is mucked up in the execution or even worse, what seems to be a good plan turns out to be bad idea and needs to be abandoned.

I know I'm providing a dramatic simplification to stuff that many people who are smarter than me dedicate their lives to perfecting, but the point is that investing requires good information and solid management.

There are legions of schools of public administration and armies of government analysts who work on creating that information and developing those managers, but it's not the same. The reasons is that when push comes to shove, decisions on public investment aren't going to be made on the basis of return as much as on politics. For the same reason, it's hard to manage public investments; look how long it took to reform welfare or public housing after it was clear to many that they were dysfunctional.

I could go on and try to explain that governments, with their ability to tax, don't face the same sort of competitive pressures as do businesses but instead I want to connect the above point with what is going on in Arizona.

The Governor and her Democratic allies in the Legislature have proposed to close the FY2008 and 2009 budget deficits in part by financing school construction. The State of Arizona is responsible for the construction of public schools and the cost runs the better part of a half a billion dollars. Currently that money is paid as cash out of the budget and the Governor wants to instead change that to a financing scheme, much like you would use a mortgage for a house. The immediate financial benefit of that maneuver is clear, you take that half a billion dollars off the budget and instead replace it with a much more modest financing fee. The problem is that, much like a mortgage, after not too many years of this, your annual financing fee starts to equal what you used to pay in cash and your total cost to acquire the buildings in question goes up dramatically.

The Governor and her legislative buddies, notably Steve Gallardo, justify this maneuver by using a twin barreled notion of investment. The first is that current levels of investment/spending must be continued because radical budget cuts would set Arizona back, to what effect it would be set back or how many years is not clear. The second is to point to the fact that no level of government and very few businesses pay for buildings out of cash, but instead either finance or lease. The argument continues that it's better to use the cash to keep operational spending up than use it for capital projects.

First look at the decision whether to pay cash or finance the purchase of school buildings. The reason why K-12 school districts used financing in the form of bond issues to pay for new schools is that they had neither the tax structure or cash flow to buy buildings outright. An individual district simply cannot absorb the occasional, yet large, costs of school construction. However the State of Arizona does have the necessary revenue base to allow it to choose to either pay cash or finance.

A business faces some of the same cash flow issues as a public entity on how to pay for its buildings but with the added complication that it is forced to generate a certain return on the capital invested in the budget. It is accountable to its investors on whether each and every dollar paid in the form of a building purchase couldn't generate more revenue if invested in some other way.

So the idea that a public entity has to finance its buildings is nonsense. Yes it might be a good idea under certain circumstances but the question that the Governor and the Legislature was facing these past several months was whether those circumstances were now in existence. By proposing to finance rather than cut State spending, the Governor is in effect using debt to pay for operational costs. More relevant to this dicsussion she is using the financing cost as an investment to achieve some sort of return from the preserved State spending. The question is whether those services are worth the costs of financing that debt and the short answer is we don't know the Governor has not shown any justification whether it's better to spend those marginal dollars in that way.

The school finance issue as political matter is moot anyway since it appears that given the length and depth of the budget crisis, the Republican leadership in the Legislature is going to cave on the issue. The Governor has stalled and vetoed on any alternative and yet another chance to do battle on the myth of "public investment" has passed.
posted by Anonymous Mike at 11:41 AM

 
Ooops

It looks like it's time for the Arizona Republic to correct me.

Buried in the Valley & State section, I find that...

Arizona's budget deficit for FY2009 is not 12%, it's 16%. That's the biggest gap among all states.

Take that California.
posted by Anonymous Mike at 12:57 PM

 
Budget Follies, The Tolling Bell

Well the good news is that the State of Arizona will not run of money by late May as I have written earlier.

The bad news is that with tax revenue continuing to fall, the State may run out as soon as late April.

That's 6 weeks from now. That means the FY2008 budget is going to fall short by 1/6 of its planned year

Now as everyone knows, that doesn't necessarily mean the State will be completely out of money by then. With legislative approval, the State can tap cash reserves like the Rainy Day fund and do a sweep of other special monies. It could also pull some of the usual accounting tricks, such as pushing off the June payment for K-12 schools to July which means it would fall in FY2009 (robbing Peter to pay Paul) We may, and I emphasize may because I don't have the exact numbers, get through this fiscal year.

However as I have written before this isn't just about this fiscal year because the next one, FY2009, is projected to have an larger budget gap. Ideally you would plan to deal with both budget deficits at the same time through a mix of budget cuts, cash taps, and yes some creative accounting. However 6 weeks or so of spending left in this year, which is what Treasurer Martin is essentially saying, means that options for cutting for FY2008 are dissipating. The more you tap the cash reserves this year means the less you can use them next year. Even if you finance all of school construction for FY2009, you are still left with a budget deficit approaching $1.5 billion.

What is that? A deficit of about 12%?

Now what is the Governor's plan to deal with this? The State is prohibited from borrowing, yes I know financing school construction is borrowing but that's a fiction used for capital costs not the operational deficit. So you either raise taxes, cut spending, or pray that the local economy performs far better than anyone is predicting. To raise taxes or cut spending to meet a 12% budget deficit is going to be a bloodbath.

Well first she has vetoed legislation which would have frozen state spending, calling it "piecemeal." This is despite the fact that she has presented no public budget plan for 2 1/2 months. When Treasurer Martin issued his statement on the State running out of money she stated he did it solely to "get a headline."

In short she has done nothing and ridiculed anyone who has tried, this is coming from the leading elected official in the state. Usually when you reject other people's actions or statements, you either come up with a better idea or state why they are incorrect. She hasn't and that's not leadership folks, no matter what the Arizona Republic and others want you to believe. Instead she is trying to avoid the political responsibility for helping fix a mess that she helped create.

A real newspaper, not a paper like the Republic which has served as her lap dog, would be asking the following questions as the State marches on toward fiscal meltdown if only to educate the citizens of Arizona on what is involved. After all the Governor implies she knows more than the rest of us, maybe she can enlighten mere mortals:

1) If a budget deal could be reached tomorrow, how much money does she think the State could cut from the FY2008 deficit?

2) If no budget deal is reached between now and the end of April, when the State Treasurer projects that the State will run out of money, does the State have sufficient cash reserves to keep operating for the remainder of the fiscal year? Since the Rainy Day fund is only $700 million and the deficit is $1.2 billion, where would the difference come from?

3) If the State is forced to tap cash reserves to make it through FY2008, whether by late April or later, will those funds be used up and therefore unavailable for FY2009?

4) FY2009 starts in a little more than 3 months and there has been little to no public progress toward a budget that will deal with the projected $1.9 billion deficit for that year. When can we expect a revised budget from her that deals with the higher deficit? Does she have a comprehensive plan for dealing with both the FY2008 and 2009 budgets?

The State budget, through its direct expenditures and its transfers to other political subdivisions such as K-12 school and cities, affects every citizen to some degree. The budget crisis threatens that relationship and therefore requires some form of public leadership from the highest elected official in the State.

The fact that she hasn't offered any such leadership and has offered no recent public statement outside of criticizing those who have tried, suggests a personal agenda incompatible with her duties.

I'll leave a discussion of that agenda for later.
posted by Anonymous Mike at 10:54 AM

 
Raising the Stakes

A few thoughts on the Obama speech from yesterday from the vantage point of my Vegas hotel room...

When you are backed into a corner like Obama was on the Reverend Wright folly what do you do? If you are Obama you change the subject and raise the stakes. You change the subject from Reverend Wright to being about race in general. You say yes what Wright said was despicable but you know even my grandmother has problems on race, it's all something we need to get through. So you can say you dealt with the issue at the same time you change the subject.

A common criticism about Obama is that he's all talk and few specifics, I didn't see that change in this speech. Obama kept talk about race and how we need to meet the challenges but he has spent 20 years in the congregation of a man who has said the most disgusting and despicable things this side of Don Imus. Some claim that Wright's church is no different than other black-led congregations but that point is irrelevant. From his wedding, to the baptism of his children, to the large amounts of donations he has made; Obama has locked into the community of a church led by a hateful man.

Obama is trying to claim the mantle of of the agent of racial change and reconciliation; his speech is being lionized by the media for just that However ask yourself, what has Oabama done either in his political career or personal life to further that goal? Ask yourself whether any of the great Americans who did so much to heal the racial divide of this country, MLK and Lincoln, had as spiritual guides and surrogate fathers somebody who was filled with such hate.

Wretchard said that a man who is willing to pay a fair price is very hard to con; conversely those who get conned are those who are blinded by their greed, who are trying to get something for nothing. There is nothing in Obama's personal life or political career which has indicated that he will offer anything of substance in this regard. Instead he offers his political candidacy as a vessel of redemption, to vote for him is the chance for the American electorate to show its moral evolution and absolve the sins of the national past. Ignore the important choices the man has made in a wife and spiritual leader, the choice you need to make is in him

Obama has thrown down the gauntlet, doubled down his bets. Pursue the Reverend Wright story only at the peril of reopening the racial wounds of the country. Who will take up the challenge?

One person has, who will follow?
posted by Anonymous Mike at 7:00 PM

 
The Joy of AIMS

Vox has a great post following up on yet another attempt to weaken the AIMS test. At the end of the piece she states what in my view every kid needs to learn:

"Success only has value if failure is an option"

In the comments section, ExUrban Jon writes:

We were both perplexed that any parents would attempt to dumb-down the test instead of pushing their kids to do better. I want the AIMS test to be challenging so that my kids will learn how to study and work hard.

For from my experience in education, parents like ExUrban Jon are few and far between and I believe his perplexity comes from his uniqueness. I'm willing to bet that while most parents are willing to talk a good game in terms of demanding that their children receive an excellent and demanding education, those same parents would not be willing for their children to risk poor grades in the course of that education. Better a watered down curriculum and an "A" than a rigorous curriculum and get a "B" or worse.

Back when Lisa Graham Keegan was developing the AIMS testing program, the great moment of decision would be what would happen if large numbers of students did not pass and were therefore in danger of not graduating from high school? Would the State of Arizona stick to its guns, stating that the standards were developed in good faith, or would it crumble and water down either the standards or the testing requirement?

We know the answer.

The problem with AIMS was that while it dealt with education, it was part of public education which made it inherently political. In the political arena, small motivated groups can wield tremendous power within a focused area . There was no way with the political tools available that parents and the public school system were going to allow large numbers of students to fail the AIMS test. However the twist is that instead of a solution that perhaps ExUrban Jon would be proud of where the curriculum was made rigorous enough to prevent such wide-scale failure, the preferred option is to eliminate the chance for failure within the test.
posted by Anonymous Mike at 1:31 PM

 
Budget Follies, Energy in the Executive

"We cannot congratulate ourselves and think we have made progress by piecemeal attempts like House Bill 2857. We fool no one," Napolitano wrote in a letter explaining her veto. "Arizonans deserve a comprehensive fiscal plan that resolves the expected budget deficits of fiscal year 2008 and 2009."

A basic principal of government is that it is far easier for the chief executive to lead than a legislature. Pick the reason you want; a tendency toward decisive action versus deliberation, the need to get a working majority through compromise within a legislature... whatever.

To top it off this Governor has been lionized by the media for her leadership. Whether it was boosting state spending, by double digits every year, preparing Arizona for the challenges of the knowledge economy through all-day kindergarten, or solving that intractable Squaw Peak naming controversy. So you would expect her to be in the forefront of tackling the sticky budget problems through the rest of this fiscal year (FY2008) and in the next (FY 2009)

A quick recap of the budget problems.

FY2008, which has a little more than 3 months to run, is a projected $1.2 billion in the red. If nothing is done the state will run out of money by mid-May or so. Keep in mind that the projected deficit has been growing larger, not smaller as time has progressed and since it doesn't look like the economy has actually improved over the last month or two, it's a good bet that the deficit will increase by the time the Suns get knocked out of the playoffs.

The projected deficit for FY2009 is $1.9 billion. Two critical parts to that statement. The first is "projected"; that is if nothing is done to change the projected levels spending and levels of revenue collection. The spending part is critical because the budget will increase by more than $700 million from FY2008 to FY2009 without any legislative intervention; that spending increase means base revenue needs to keep growing at an annual rate of about 8%. The gap between spending and revenue growth is the structural deficit.

The second critical part is that $1.9 billion figure; notice it's about $700 million higher than the FY2008 figure, thanks in part to the structural deficit. The JLBC wonks are not forecasting the closing of that structural deficit until about 2011 so between now and then something needs to be done to balance revenue and spending; or else the deficits will keep piling up.

One last thing, unlike other states and especially the feds, in Arizona you cannot borrow to cover a budget shortfall. You have to make ends meet every year.

Last December when both the Legislature and Governor saw the FY2008 as something below $1 billion, there were two strategies. While both the Legislature's Republican leadership and the Governor would rely on some one-time accounting tricks and tapping cash reserves in the form of special accounts sweeps and the rainy day fund, the Legislature's proposal would have deeper spending cuts than the Governor with the latter making up the difference by relying on "financing" instead of cash to build K-12 schools.

Fast forward 3 months. The projected deficit is larger and the amount of time in the fiscal year is shorter; by any stretch the situation is even more dire. Spending cuts are less effective because most of the money in the FY2008 is already spent.

Now I'm sure the budget geeks at the Capitol and 9th Floor have better numbers than I do, but it seems if the worst scenario happens and the budget goes bust in mid-May we can still get through the rest of the fiscal year on that accounting gimmericky and cash reserves. Maybe I'm wrong, but let's assume I'm right, then what for FY2009?

The deficit for FY2009 will be even higher and most if not all of the one-time budget fixes will be used up. Rather than using the FY2008 budget as a stepping stone to surmount the FY2009 budget by reducing spending (spending cuts in FY2008 will help reduce spending in FY2009), we will be back at square one in trying to tackle that $1.9 billion deficit.

That's what makes the Governor's veto of the Legislature's spending freeze so frustrating. The Republican leadership in the Legislature has been meeting with the Governor's staff in order to try solving the FY2008 but no agreement has been reached and time is running out. Soon there wouldn't be any spending cuts because the agencies would have spent all of their money. To freeze spending is to at least leave spending cuts as an option for FY2008, but the Governor vetoes and the deficit band plays on.

I find all of this breathtaking, yes I find the state budget breathtaking, because what we have is a Governor playing chicken with the State of Arizona's fiscal health in order to preserve both her legacy and her future political options.

Back in January, when the deficits for both FY2008 and 2009 were much smaller, Governor Napolitano's priority was clearly the maintenance of spending. Not only through minimizing any spending cuts but also by converting school construction to financing (making it much more expensive in the long run) but also by overestimating revenue. As the deficits have worsened, her public projections have remained unchanged as if she can defy economic and fiscal reality.

Slowly things are turning her way. Opposition to the financing of school construction is crumbling in the Legislature, mostly it seems due to the fact that even the die hards are beginning to realize the depth of the problem. Napolitano, despite the fact of showing little to no public leadership on the budget deficits, has been able to claim that she vetoed the spending freeze because the initiative was not comprehensive or bipartisan. So more than likely she will end FY2008 with both construction financing and minimal spending cuts...

...and then comes the hard work of climbing Mountain FY2009.

Tackling budget deficits has been the death knell of many politician, after all the two options of tax increases or spending cuts are both unpopular with the electorate. I used to joke that Napolitano's long term fiscal strategy was to avoid either unpopular decision until she could take her seat in President Obama's cabinet and leave the problems to Governor Brewer, but I'm not sure that's funny any more.

Somebody, besides her enablers in the media and the other side of the aisle in the Legislature, needs to ask when she's going to start doing her job as the top elected official in the state and help figure out how to bridge a $3 billion shortfall over the next 15 months... because none of her effort to date shows how that problem gets solved.

Prove me wrong.
posted by Anonymous Mike at 10:59 AM

 
Spit(z) Take

So about the whole Eliot Spitzer prostitute scandal, what I want to know is...

Did she tell him "You are a f*****g steamroller!"?

For a reputed $5,500 per session, that is the least she could say.

Okay back to the PG programming....
posted by Anonymous Mike at 5:56 PM

 
Obama Delenda Est

I think Obama is going to look at his failure to win the Texas and Ohio primaries last week as a major missed opportunity. He wins both and perhaps Clinton drops out, he didn't win either and Clinton loves to fight probably all the way to Pennsylvania next month.

The 7 weeks between Ohio/Texas and Pennsylvania may be a political lifetime. I thought Obama would come down to earth at some time, nobody's honeymoon goes on forever. However the fact that in the last few weeks Clinton's campaign bounce coincides with Tony Rezko, NAFTA gate with the Canadians, and various kerfluffles involving his advisor's "monster" comment and the way America seems to anger his wife... well that's not good.

Not good in the sense that the Clinton campaign is looking for any excuse to fight all the way to the convention. I know Zonitics alumnus Special Agent Johnny Utah is wondering how far Hillary Clinton is willing to take this considering there is no way she can win overtake Obama without the superdelegates. I think Clinton's strategy is this:

Fight it out to a stalemate in the pledged delegates so that is she cannot win without the super delegates, neither can Obama.

At that point, the nomination is in the superdelegates' hands and make no mistake about it, while we can argue till the Cardinals make it to the Super Bowl what moral obligation those superdelegates have in terms of voting, they can vote for whomever they want and my guess is the predominant criteria is who has the best chance of winning in November.

So Clinton's second objective between now and the convention in Denver is to show that she is the better choice than Obama in that regard. She'll not only show it by demonstrating momentum, but by also ripping down Obama. That's where NAFTA gate comes in and the 3 AM phone call, showing that Obama isn't ready for the big time. That's where proxy attacks on Rezko come in to show that Obama is just another Chicago pol. She'll fight to seat the Michigan and Florida delegations but my guess is that if the momentum swings her way she'll go for a re-vote.

I cannot see either of them accepting a joint ticket. This is a battle to the finish. For the Clintons, a Hillary presidency is about a Clinton restoration and enhances Bill's legacy. I'll leave this ultimately to her biographer, but my guess is that she's been working for this moment for all her life and there's way some upstart from Illinois is going to get in her way.

Would Hillary do scorched earth and ruin Obama in an effort to gain the nomination if that meant weakening the ticket for November? This is the woman who managed bimbo alerts, to discredit and destroy the women that her husband cheated on her with, just to keep his political star alive. A woman who would do that to her marriage and her self-esteem sold her soul a very long time ago

For her to be fulfilled, Obama delenda est

There is just no other way.
posted by Anonymous Mike at 2:09 PM

 
A Failure to Communicate

You may be forgiven for thinking that the whole Tony Rezko affair, the dealings of a Chicago political bag man, and its connection to Barack Obama is some new, shiny object on the national political landscape. After all, Senator Obama has been an official candidate for President for over a year and a national object of infatuation for longer than that.

Surely, a reasonable citizen may conclude, if the man who seems destined for the White House has a less than stellar past in the grubby world of Chicagoland politics, surely the national media which likes to call itself the "fourth branch of government" would have investigated him on this score and rendered its judgment a long time ago; certainly before he was considered the prohibtive favorite for the Democratic nomination.

Right?

Yeah right.

I first read about Tony Rezko and his connections to Barack Obama in the various Chicago papers a good 16 months ago after Rezko's indictment. Not only did Rezko and Obama own neighboring plots of land and engage in what looks like to be sweatheart deals on that land, but Obama also wrote letters in support of Rezko's attempt to gain city funds for a development project.

Now Obama hasn't been accused of any wrong doing, but he is by definition a "Chicago Democrat." To be an idealist climbing through the world of Chicago politics is much like a man who walks to church in his Sunday best through a pig sty, you cannot help but carry some of the stink. To contrast and compare, look at the NY Times breaking a story on John McCain concerning the appearance of impropriety with a lobbyist 8 years ago. On Obama, hardly a peep.

Media cover-up? Hardly. Media bias? You bet.

The media, especially in political campaigns, works on story lines and narratives. For the 14 months, Obama was cast as the outsider idealist, David fighting the Goliath of the Clinton political machine. Forget his lack of policy specifics, gaffes on details, or his grubby Chicagoland past. "All the News that is Fit to Print" is because there isn't enough room to print all the news, so reporters and their editors decide what is "fit."

You the voter, you the media consumer may have a different opinion on what is fit, but the freedom of the press is the freedom to own one. Get your own paper and find your own narratives.
posted by Anonymous Mike at 4:39 PM

 
Throwdown!

Should recipients of government-provided health care pass an obesity exam in order to continue receiving benefits? Zonitics alumni Special Agent Johnny Utah and I discuss....

Yes, I know I am pointing to a comments thread instead of writing original material on my own blog, sue me.
posted by Anonymous Mike at 12:02 PM

 
The Man Who Would be King

From The Current on Prince Harry's post-Afghanistan future:

...Perhaps the real trouble is that men of royal blood, by their nature, need new lands to conquer. Why not give Prince Harry a crack contingent of Gurkha fighting men and set him loose on some war-ravaged region, where he can establish his own princely state as a latter-day white rajah? Consider Canada, a nation torn by ethnic strife and religious hatred, where daily life has become a miserable struggle to survive amidst endless gun battles waged by rival gangs of crazed ice-dancing rebels and the soaring loonie has sent the economy into a tailspin. Only Prince Harry can restore order, and so he must.

It's tough to be the "spare" so this is probably Prince Harry's best move. Unless one of the Exurban boys want the job, I would be more than happy to volunteer for the role of Peachy on this expedition.

(h/t Weekly Standard)
posted by Anonymous Mike at 2:01 PM