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In the clip, my office is inspected by the Daily Show's Jason Jones and there's a lot of discussion about Arizona's classy plan to fix the deficit.

Arizona G.O.P. Divided Over Budget

Original article from the New York Times:

PHOENIX — In theory, Republicans in Arizona should be the happiest Republicans in the nation. Democrats failed in their insurgent bid last November to flip the Legislature — even as Democrats in other states succeeded — and the governor’s office is now occupied by a Republican on a fluke when Gov. Janet Napolitano, a Democrat, left town for the Obama administration.

But hard fiscal realities can put a strain on any marriage, and the new governor, Jan Brewer, is finding that life with the Legislature and a $3.4 billion budget deficit is several feathers shy of paradise.

Republican lawmakers have insulted the governor in the local news media and rejected her budget proposals, and on Tuesday some even refused to vote on her latest budget. The governor’s plan includes tax increases for shoppers, cuts in the personal income tax and the corporate tax, and sharp reductions in state spending.

At the center of the conflict is the governor’s proposalthat the state dig out of its shortfall — equal to a third of Arizona’s operating budget — with a 1 cent sales tax increase, to be put before voters on the November ballot.

This request enraged Republican lawmakers, whose leaders have been unable to reach a budget deal with Ms. Brewer. She vetoed most of the bills in an earlier budget package, saying the cuts were too injurious to the poor. (The Democratic minority in the Legislature remains disenchanted with all of the budget proposals.)

The House passed a budget largely in line with the governor’s request, but the plan has stalled in the Senate, where four crucial lawmakers have refused to go along. One of them, Senator Carolyn S. Allen of Scottsdale, said she disliked the cut in the income and corporate tax that was negotiated by her fellow Republicans in the House in exchange for the sales tax increase.

“I think the governor has made a drastic error in judgment,” Ms. Allen said in a telephone interview. “I like her, but I think she is too desperate.”

On Tuesday, Senator Pamela Gorman resigned as majority whip, saying in an e-mail message to the Senate president, Robert Burns, that the tax battle was “taking on a life of its own that is not healthy for our caucus, nor our party.”

The entire budget process has been two parts pain and one part folly, including a moment in June when lawmakers, facing a midnight deadline, tried to metaphysically halt the fiscal year by taking the clock down from the Senate wall. They are also considering mortgaging the state Capitol as well as a historically significant limestone cave system owned by the state.

Ms. Brewer’s reputation as a conservative has been damaged by her proposal to raise the sales tax, and some of her colleagues in the party, which is dominated by conservatives, have whispered about challenging her in the 2010 Republican primary.

“The economic downturn has created a very difficult scenario for any elected official who is a fiscal conservative,” Paul Senseman, Ms. Brewer’s director of communications, said in an interview.

Arizona finds itself in a worst-case scenario among states that have been hammered by the foreclosure crisis. One of the fastest-growing areas in the country for years, the state has seen its population — and needs — explode over the last decade, and development has more than helped cover the costs.

The state’s principal revenue source is its 5.5 percent sales tax (with city tax added on, the average tax is about 9 percent), followed by the personal income tax and the corporate tax. Counties and school districts collect property taxes.

With the number of new building permits plummeting, revenues from the big-ticket items associated with new homes, which had fueled much of the state’s budget in recent years, also fell.

As secretary of state, Ms. Brewer was first in line to take over when Ms. Napolitano left to become homeland security secretary in January. Ten days after her ascension, Ms. Brewer had to face her first budget crisis, and she made it clear that big cuts to schools and health care were not going to fly, and that she thought the state would need to raise the sales tax.

Thinking they could avoid a governor’s veto of their plan, which had deep cuts, by running out the clock, Republicans wrangled over the budget for the 2010 fiscal year until the last minute. But the governor vetoed most parts of the budget except those needed to keep the state running, and then called legislators back for a special summer session to clean up the rest.

Ms. Brewer has found no succor among Democrats, whom she largely edged out of budget negotiations in the spring. They, too, are upset about her proposed cut to personal and corporate taxes, which they say will wipe out almost all the money gained with a three-year sales tax increase. Democrats say they are baffled by the inability of the majority party to make a deal with the Republican governor.

“They have shown complete and total failure to govern,” said Representative Kyrsten Sinema, a Democrat and the assistant leader of the party’s caucus in the House. “They have had seven months, and they can’t get this done.”

If any of this spells trouble for the Republicans, their leaders are not saying so. “That just speaks to how diverse our state party is,” said Matt Roberts, a spokesman for the Arizona Republican Party.

Photo from the original article, taken by Ross D. Franklin (Associated Press). 

Arizona Budget Update: What Happened and What Comes Next?

So many of you have asked me for more details about our state budget situation, wanting to know what happened yesterday, what it took to get there, and what comes next. 

This will tell you all that I know - please feel free to post it and pass it along as you see fit.

January 20 - June 30: Brewer refuses to negotiate with Democrats, and Republicans ignore Democratic calls for a bipartisan process. Democrats ask Brewer repeatedly to call all 4 leadership teams to her office to start a 5-party negotiation process to solve the largest budget crisis in our state's history. Those calls go completely unheeded - we don't even get a response to our letters! Democrats create and publish a budget solution, available at www.strongerarizona.com. Democrats oppose Brewer's call for a sales tax increase because it's too expensive for middle class families and isn't fair. Instead, we offer several other ways to increase taxes in a fair way that spreads the burden fairly across the state. Democrats continue to call for comprehensive tax reform to prevent future crises.

June 30 - Republican leadership and Governor Brewer had an agreement to (1) pass that horrid budget containing deep cuts to education, health care, social services, and public safety; and (2) pass a one cent sales tax referral to the ballot that, if approved by the voters, would somewhat lessen the severity of the cuts mentioned in (1) above. The Speaker and President vowed to get as many R votes for this package as possible, the Governor committed to getting Democrat votes for the tax increase referral. The Speaker collected 29 votes for the tax increase, the President collected 13. The Governor was unable to deliver the 2 votes needed in the House and the 3 votes needed in the Senate, despite attempts to buy off Democrats (we don't work like that!). So, the budget passed without the sales tax increase.

July 1 - Brewer vetoes about 70% of the budget, saying that legislative leaders didn't fulfill their end of the deal because the sales tax referral didn't pass. Her vetoes place Arizona out of compliance with all federal requirements for stimulus money, jeopardizing about $2.7 billion in federal money. She also vetoes the entire K-12 education budget, which means no funding for schools as of July 15.

July 2 - Legislative leaders, Republican and Democrat, come together to discuss: (1) how to solve the immediate crises created by Brewer's vetoes - no stimulus money and no public education system; and (2) working together to create a new budget for 2010. We agree to act on July 6th, the first day of special session. Nothing was "given" on either side to make this agreement - we just all recognized that this had to be done to save public education in our state, and to save our chances to get stimulus money from the federal government.

July 6th - 4 bills are passed unanimously by the Legislature. #1 - we fund K-12 education at the 2009 level, plus a 2% inflationary rate required by state law. This means schools stay open, class sizes stay reasonable, and teachers are rehired. #2 - we agree to negotiate on 5 smaller "chunks" of funding for K-12 education, with resolution required by October 1st. Until we negotiate an agreement, schools can spend what they've already budgeted in these areas: soft capital, desegregation, career ladder, early kindergarten, excess utilities. The October 1st deadline was self-imposed - if we don't have an agreement by then, schools automatically get full funding in each of these 5 areas. #3 - we make a technical change to state law regarding how local governments pay the state for health care. This was a federally required change in order to qualify for stimulus money to pay for health care. The Governor's veto last week eliminated this "fix" - so we put it back in law. Now we meet the federal requirements for stimulus money. #4 - we adjourned the special session so that "rank and file" members don't have to come to work every day while no formal action is taking place. To have them come to work every day when we don't have an agreement yet simply wastes state money. This change says that legislators will only get paid on the days that we come to work (duh, right?).

Tomorrow - Republican and Democrat leaders in the House and the Senate will meet to set a schedule for our work. We have to negotiate about 70% of the state budget from scratch, and that takes time. We have to redo the budget in several key areas: higher education, health care, social services, and some portions of k-12 education (see above). These areas are the top concern for Democrats, so this is very important to us. This is going to be hard - we have a deficit of about 2 billion right now, and that's a hard hole to fill. So leadership will work on crafting an agreement that everyone can live with. I anticipate that this will be the hardest thing we've ever done at the Legislature.

In the coming weeks - As we work, House Democratic leadership will communicate with our "rank and file" members via phone conferences to make sure that everyone agrees with what we're working on. Once we have a resolution to this budget shortfall, all members will be called back to the Legislature by the Speaker of the House and the Senate President and we'll vote on a budget package.

House Democrats are happy that - finally - we are working in a bipartisan manner to solve this massive problem. We have always said that this problem is too big for partisan games, and we have always called for all 5 parties to work together to solve this problem. I am sad that it took 6 months of failed leadership by the Governor and the Republican leadership to get to this point - the Governor would have made things a lot better for the state if she'd called us all together months ago, like Democrats repeatedly asked. But we can't change the past. Instead, we have to focus on the present and the future. 

The coming weeks are very important - the four leadership teams in the Legislature will have to continue working together to get this done. It won't be easy. In fact, it'll be incredibly hard. But our state depends on our ability to get this done.

House Democrats commit that we'll negotiate in good faith, holding true to our values and priorities. We believe that we must protect our state's vital infrastructure for the future - education, health care, and programs that serve and protect middle class families. This is the frame of mind that we take into this process.