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Transcript from Nightly Business Report

Location: Unknown

May 8, 2003 Thursday

HEADLINE: Nightly Business Report

GUESTS: Janet Napolitano, Allan Sloan

And in Phoenix is Arizona's Governor Janet Napolitano.
Thanks so much for joining us.
O'BRYON: Governor, let's begin with today's news that the Senate Finance Committee is set to approve a tax plan that would include $20 billion in financial aid to financially strapped states. How would this affect Arizona?
NAPOLITANO: Well, I think any assistance from Washington, D.C. is helpful. It's unclear to me how that $20 billion would be split among the states. And as I've said since the beginning of my term, the key thing I think for the states' perspective is not an aid package so much as getting the federal government to pay its full share and fair share of the mandates that's requiring the states to complete.
O'BRYON: Let's take a look at what is actually happening in Arizona. You took office in January, so you have inherited a lot of budget problems. But how did Arizona wind up more than a billion dollars in the red?
NAPOLITANO: Well, I think it was a combination of several things: one is some decisions made by legislatures past when times were good, not to set aside enough for a rainy day; two is the growth and unfunded federal mandates; three is the downsizing or the downturn in the national economy, which we experienced here in Arizona as well; and then fourth and very importantly for our state, just tremendous population growth. So that, you know, four years ago - I'm dealing with about the same revenue stream we had four years ago in Arizona. We have more than 100,000 more children in school. We have more than 5000 more inmates in prison than we did four years ago. And we have a half million more people on our Medicaid program, which is called Access. A combination of all those things has led to a billion dollar deficit.
O'BRYON: But would you think with that population growth would come increased tax revenues.
NAPOLITANO: Well, one would, but the combination of the economy going down, per capita income going down, for example, while our population overall was increasing, the number of our taxpayers who report incomes of $1 million or above went down dramatically. And that was all an aftereffect of the tech wreck and the downsizing of the national economy and the like. We're start to go see it come back again. And Arizona has a very, very bright future. But we're going to go through a rough year this year.
O'BRYON: So what are your plans this year to turn things around?
NAPOLITANO: Well, I think we have to do a couple of things: one is, we - I put together a plan that will enable us to bridge to 2005 without cutting vital services, like public education, like vital services for families and children. And the way we do that is a combination of spending cuts. We take a whack out of our Department of Transportation, for example. Bonding for capital construction, we've been paying cash for buildings. It's time for us to be in the bond market. And then some temporarily fiscal measures, which allow us to stretch out some payments, redo some payments that will allow us to bridge to 2005 where we fully anticipate the Arizona economy to be chugging along.
O'BRYON: Well, with regard to some of your borrowing plans, in a recent story in the "Arizona Republic" the state senate president, Ken Bennett, was quoted as saying that your borrowing plan is a little like buying groceries with your credit card, the day-to-day expenses won't outlast the terms of the loan.
NAPOLITANO: Well, it turns out that the legislature's plan in that regard is not all that different from mine. And you know, would that I were in Washington, D.C. and I could just run up a deficit, because that's exactly what the federal government is doing, is borrowing against the future. But in a growth state like ours, we have to invest in education, we have to invest in infrastructure. You know, in Maricopa County alone, we have 280 people who move here every day. And so we don't have the luxury of balancing this budget simply with spending cuts. We have to accommodate the growth.
O'BRYON: But isn't it a mandate to balance the budget?
NAPOLITANO: It is, and that's why we - but we can do it through a number of different ways. And a lot of it is bonding, using, you know, as we build roads and we build schools and so forth, not pay cash, but to bond. We can do things, we're stretching out payments without violating our balanced budget requirements. And we can do a combination of spending cuts. And that's how we're going to get at it.
O'BRYON: Given the concerns of a Republican legislature in Arizona, can your plan pass?
NAPOLITANO: We will get there. They don't yet have a budget. They've got a lot of arrows being slung at mine because it's easy to shoot as at a budget as a target. They don't really have a budget yet, and they're still negotiating amongst themselves, even within the Republican caucus, we have a Republican majority in both houses. They still don't have a plan. So I'm in the capital, I've put out a plan. I'm waiting for their plan. But my overall strategy is to say, look, Arizona has a great long-term future. We're not going to sacrifice it for what I believe to be a one- or two-year budget deficit and then we'll be coming back.
O'BRYON: Thank you for joining us.
NAPOLITANO: You bet. Thank you.
O'BRYON: Arizona Governor Janet Napolitano.

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