Arizona's Own Espresso Pundit

A Good Time to Have Caller ID

Earlier this week I reported that Gannett was planning to lay off between 1,000 and 2,000 employees over the weekend.  Although that's only 3% of the workforce, I predicted that the Republic would see about double that percentage.  That's because USA Today is going to be spared and the Republic is Gannett's next largest paper.  Add to that the depth of the meltdown in Arizona and factor in that the Citizen is already gone and it's easy to get to a figure of a 6% or 7% lay off for the Republic.

Sure enough, newsroom employees were informed today that they would be facing a 7% lay off and that employees would be receiving calls on Monday night.  That's about 150 employees. 

No one knows who the employees will be, but Gannett has a history of ruthlessly culling out the more senior (read more expensive) employees first--well, they say that life begins at 50, but I'm not sure this is what they mean. 

Today's Morning Shot

Now that the session is over, I'm going to switch most of my pure state government coverage back to The Morning Shot. 

TMS will eventually be a subscription-only newsletter but I'm going to continue the soft launch at least until this fall.  I'll put TMS on the Espresso Pundit website and distribute it free to people who are interested. 

I've had a great response from interested subscribers, so let me know if you want to be on the subscriber list once the soft launch is over. 

Here's The Morning Shot for today

Governor Vetoes K-12 Budget

The Governor just announced that she has signed the budget, but that she has "carefully and selectively chosen to line-item veto portions of the legislation..."

She then vetoed the entire K-12 budget and called the members into special Session for July 6th in an effort to increase the funding.  That's certainly a bold move.

They had better act quickly, the next payment to schools is due July 15th. 

Speaking of Shut Downs...Updated: Effect on the Republic

The Wall Street Journal has the lateston Gannett.

Gannett Co., the largest U.S. newspaper publisher by daily circulation, will cut between 1,000 and 2,000 jobs out of its 41,500-person work force in response to continuing revenue declines, according to a person familiar with the company's thinking.

So why does ASU have a fancy new Journalism School?  Seriously, those kids might as well spend $60,000 learning Fortran or Morse Code.  There are no new journalism jobs and those thousand journalists who are going to get laid off next week--together with the thousands laid off before them--are going to be chasing the few PIO jobs that are out there. 

Frankly, I think there's a bubble in higher education.  Back when full-time tuition was only a few thousand dollars a year, college was a good transition and the fact that perhaps 60% of degrees had no direct economic benefit was tolerable.  But now that an undergraduate degree costs closer to $60,000 and provides the same job prospects that high school graduates enjoy, students (or their parents) will eventually respond to price signals.  At that point, there won't be much need for that fancy J school. 

UPDATE:  The Last Days of the Republic

I spent so much time on my J School soap box that I forgot to answer a fundamental question raised by the layoff announcement--how will it affect the Republic.  I want to be somewhat conservative here, but it would appear that the effect will be rather large.

We don't know exactly what's going on because Gannett is so secretive.  (Remember that the next time the Republic calls for more "Transparency.")    

I'm estimating that the Republic layoff will be in the range of 150.  Here's how I think the numbers will play out.  If Gannett cuts over 1,000 jobs out of its workforce of 41,000 that's about 3%.  Since the Republic has about 2400 employees, a pure across-the-board cut would eliminate about 70 positions at the Republic.  So that's the base estimate.

There's some confusion among various sources, but most sources agree that USA Today will be spared any layoffs.  That's bad news for the Republic because while USAT is Gannett's largest paper, the Republic is second. 

The Republic is also in one of Gannett's hardest hit markets.  Compounding the misery is that Gannett has already closed down the Citizen, so the corporate office can only further reduce its Arizona exposure by going after the Republic.

Arizona is also Gannett's hardest hit location.  The real estate cycle is longer than the traditional business cycle so the Arizona advertising market collapsed earlier, sank deeper and will be down longer than other markets.  Those factors don't bode well for the Republic.  So my guess is that we are going to see about 150 layoffs. 

Of course, this is simply the latest in a long series of layoff stories.  The Republic's business model is unsustainable, so it's not like it's ever going to stabilize at a profitable number. 

"Lack of Gray Matter" or "How the Senate Rs Plan to Open Up a Can of Regime Change"

The most important Committee that you've never heard of is the Rules Committee.  Every bill goes through rules and it's critical for the governing majority to have a solid rules Committee made up of member whom you can count on in a crisis. 

After nearly 20 years in office, Senate President Bob Burns understands the importance of Rules and constructed a bulletproof Committee--he appointed himself as Chairman and filled the rest of the Republican seats with other members of the Senate Leadership team--Senate Majority Leader Chuck Gray and Senate Whip Pamela Gorman. 

Senate leaders are elected by their peers and a Leadership post comes with more than a fancy office and great floor seats.  It brings with it the responsibility of supporting the majority program and watching the Senate President's back. 

That's why the Capitol Community was stunned today when the Senate Rules Committee voted down the Governor's Sales Tax bill by a 5 to 1 vote with President Burns as the lone yes.  Not since Uriah the Hittite was cut down by the Canaanites has one man been so thoroughly abandoned on the field of battle. 

The Senate Republican caucus was aghast and the only speculation that I heard from Senators this afternoon was whether to remove them from leadership before the end of session--like the next caucus--or after Sine Die.

How's it Going to End?

I made it clear in a previous post that I believe Conservatives would be smart to put Governor Brewer's tax increase on the ballot.  In addition to being permanently labeled "Governor Brewer's Tax Increase", the 18% increase in the sales tax is likely to go down in flames.  Then, once voters have made it clear that they want less government instead of more taxes, Conservatives will have the moral "high ground"--so to speak.

I'm sure you will be shocked to learn that my "strategery" has been ignored and the proposed tax increase has maybe 12 votes in the Senate and perhaps 28 in the House. 

So what next?  Well, the Wall Street Journal has an observation.

Ten states were scrambling Monday to pass budgets before a Tuesday deadline, with a handful -- including Arizona, Indiana and Mississippi -- facing the possibility of partial shutdowns if their legislatures don't act in time.

(I've always wondered why we are on so many lists with Mississippi, but that's probably for a different post.)

What happens next?  My guess is that  Bob Burns is going to send her the budget that the legislature passed on June 4th, and she's going to veto it.  

Dude, that would be so awesome.

In order to avoid a government shutdown, Appropriations Chairmen Russell Pearce and John Kavanagh will have to write a series of ongoing resolutions to fund "essential" services.  Of course, "essential" services--DPS, the lower courts and prisons--are the only thing that some Conservatives think government should be funding anyway.  So every month or so, Pearce and Kavanagh will get together over lemonade and decide what's "essential" for the following couple weeks. Since I think that Pearce and Kavanagh have a pretty good outlook, I'm sure I'll be happy with the results.  

Senator Steve Pierce told an ATRA meeting a a few weeks ago that the legislature should pass a "monthly" budget.  It looks like he might get his way. 

Meanwhile, Governor Brewer could take a page out of the Team Napolitano playbook and veto the June 4th budget over and over at a series of mock veto sessions.  You remember those sessions in front of the Teacher's Union, SEIU and gay rights organizations...you know, the guys who will be circulating Terry Goddard's Gubernatorial nominating petitions in a few months. 

The other option is for Bob Burns to go to the Democrats...Ha, I slay me. There are a bunch of reasons why that won't work.   First, there are certain anatomical differences between Bob Burns and former Senate President Tim Bee that make it unlikely that Burns will pass a budget with the Democratic Caucus and a few moderate Republicans.

Second, nearly all the Republicans who joined with Democrats in previous budgets got wiped out in their very next primary.  That's one reason why the legislature is so Conservative now.  So there are fewer moderates available to cross over, and those who do consider it know that they are likely to be reactivating their real estate license if they take the plunge.

The final reason the Burns and Adams can't use Democratic votes to put the Governor's tax increase on the ballot is that the Democrats hate the Brewer tax increase more than the Republicans do.  It's not like Burns can take a few moderate members of his caucus and join with the Democrats to put a one cent sales tax on the ballot.

So the sales tax increase isn't going onto the 2009 ballot and if Governor Brewer wants to veto the June 4th budget bill and then meet with Russell Pearce every couple weeks to decide what is "essential," she's welcome to do so, but there's nothing that Burns and Adams can do about it.

Meanwhile, what about next year?  Republican leaders will admit privately that they have no idea how to balance the 2011 budget.  They are out of gimmicks and they don't have 16 and 31 to refer a tax increase to the ballot or to cut enough spending to legitimately balance the budget.

So what happens in the next 24 hours?

The best that the Governor can hope for is to demand a series of fixes in the trailer bills, sign the budget that Republicans have already passed, establish some sort of study committee to solve the 2011 crisis, give the legislature a month off and then call them into special session to begin work on 2011. 

It ain't pretty, but it's all that's left.

Meanwhile, Having Just Arrived from Mars...

The Republic Editorial Board--AWOL when Napolitano, every legislative Democrat and a few Republican enablers took over the budget process and passed last year's budget fiasco without any hearings--is predictably piling on the Republican budget proposal. 

Hear's a howler for you...

The most troubling is the proposed shift to a flat-rate income tax of 2.8 percent starting in 2012. Popping out of nowhere, it was in neither the Legislature's nor the governor's plan.

The last refuge for those who can't argue against the merits of a policy is to claim that it hasn't been studied enough. 

However, the flat tax proposal was studied extensively by Governor Napolitano's Blue Ribbon tax panel otherwise known as the Citizens’ Finance Review Commission.  You will recall that in January of 2003, Governor Napolitano assembled a who's who of the Arizona business, government and non-profit communities and instructed them to spend a full year traveling the state to get public input an make recommendations about Arizona's tax code.

In October of 2003, after hundreds of meetings, thousands of pages and months of research, the panel issued its recommendations.

Here's what they said about the flat tax.

The commissioners considered applying a flat tax rate, rather than a graduated progressive income tax rate, on personal income tax, but retaining all other standard deductions and exemptions. The appeal of a flat tax is its simplicity and greater incentive to earn more income than exists under a progressive tax system.

However, the Commission had a constraint that the current legislature doesn't have.

Ultimately, the commission rejected the flat tax because figures from the Department of Revenue showed that to remain revenue neutral, the flat tax rate would have to be near 3.54 percent, raising the tax rate on all individuals who earn adjusted gross income of less than $100,000 per year and lowering the tax rate on all individuals who earned $100,000 or more per year.

The Blue Ribbon Panel was forced to consider a revenue neutral flat tax which would have raised rates for the lowest income brackets.  However, the legislature's plan is to DROP all the rates to the lowest rate--flat and low.  

If the Republic doesn't like the plan, that's fine.  But don't try to claim that it hasn't been studied, or is somehow  "Popping out of nowhere."

Cap and Trade Offs

Congressman Flake is taking some heat for missing the Cap and Trade vote.  He just sent me a quick note and it looks to me like he made the right choice.

Greg,

I hope all is well with you.  I continue to enjoy your blog.  I don’t know how you have the time, now that you’re a high-flying lawyer and all.

I know that many are questioning why I missed the cap-and-trade vote tonight.  I don’t blame them.  It’s a terrible bill.  I doubt it will survive the Senate, but if it does I look forward to voting against it when it returns to the House.

My daughter, Alexis, was competing tonight in America’s Junior Miss Scholarship Program in Mobile, AL as Arizona’s Junior Miss.  I’ve let my daughter down enough over the years.  I just couldn’t do it again tonight.   She had a tough night.  I needed to be here.

Jeff

Early Shot

The Republic is reporting that Phoenix City Manager Frank Fairbanks is retiring.

For two decades, City Manager Frank Fairbanks steered Phoenix through periods of unprecedented growth. His departure comes at a moment of unprecedented upheaval.

Of course, I reported the same thing on May 26th in The Morning Shot.

I'm still experimenting on the format and content for The Morning Shot, and I'm going to start sending out regular issues next week.

I've had a great deal of interest, and if you haven't requested a copy already, let me know if you are interested in being on the distribution list. 

Ultimately, TMS will only be available by subscription, but I plan to keep it free at least until the fall.  

 

One of These Things is Not Like the Other...

A fundamental principle of Conservative thought is the belief that ordinary people spend their money better than the government does.  I know that sounds like a trite stump speech, but it's true.  It's not just that it's morally right to allow people to spend more of their own money, it's economically more efficient. 

When millions of people decide to invest money in a small business or stocks, buy products that they think are cool, send their kids to school, buy braces or put the money in the bank, they are acting in their own self interest and are allocating the money more efficiently than the members of the House Appropriations Committee, or a Congressional "Stimulus" team.

Of course government still needs to be funded and ordinary people aren't likely to donate money to build prisons, fund the courts, pay for CPS, DEQ or the rest of state government--some taxes are clearly necessary.  However, ordinary people are actually quite generous and will often donate to causes that they think are worthwhile.

That's why in the mid 1990s, the legislature came up with a clever plan--let people chose where a small portion of their tax dollars go by giving them a 100% credit for a modest donation.  Under current law, a single filer can donate $200 to a charity that serves the working poor and get all of the money back on his taxes.  This is a classic win/win.  Instead of hiring lobbyists, charities search for donors. 

The results can be remarkable.  In the mid 1990s, doctors and dentists from my church hooked up with a south Phoenix charity that serves the Hispanic community.  The docs donated their time and the contributions that our congregation sent to the clinic were used to buy supplies.  Government could never be that efficient.  More recently, my wife and I donate (should I say "earmark"?) our combined $400 to the Foundation for Blind Children, and they use the money to train blind adults to get back into the job market. 

Critics of the program point out two flaws:  first, there isn't much regulation on what qualifies as a "charity," so there's the potential for fraud, second, the original legislation has a technical flaw that forces contributors to refer to their 1996 tax returns--that was fine in 1997, or even 1998, but neither taxpayers or DOR keep records for 12 years, so the number is now impossible to look up. 

Rep. Yarbrough sponsored HB 2286 to tighten the requirements as well as eliminate the reference to 1996, and the bill passed the House 55 to 1. 

Then Tuesday the Senate killed it.

I won't even guess why the Democrats voted against the bill.  All of the money is spent on the working poor so it's unlikely that the funds would be appropriated to a "better" cause if they came in to state coffers.  Meanwhile, folks like St. Vincent de Paul and Catholic Social Services are left in a lurch.*

Then there are the Republicans who voted no---Allen, Gould and Harper.  What the heck?  Allen I can understand.  She's a classic "moderate" Republican who thinks she can spend your money better than you can.  Let the state keep this money and she'll run it through a committee or two and fund a call center or build a Spring Training facility in the name of "economic development." Whatever.

However, Gould and Harper surprise me.  For me, the next best thing to a tax cut is the opportunity to spend my tax dollars the way I want to spend them.  After all, I like to think of the money that I earn as "my money."  I'm selfish that way. 

I asked Harper about his no vote and got this response..."Ron and I do not believe it is the proper roll of government to be involved in charity and welfare.  Cool, maybe we should let the churches and other private charities handle that...D'oh, that's what this program does. 

Harper then went on to discuss the bill's "fiscal impact."  That's code talk for "less money for the state to spend on stuff Legislators think is cool."  That's straight out of Carolyn Allen's playbook, the moderate mantra "send us your money so we can improve your life with it."  Now I understand.

Allen, Gould and Harper--one of these things is not like the other.   But after enough time in state government they start to look the same. 

Piling On

It's been six weeks since Republican Party Executive Director Brett Mecum was arrested without a warrant at work for a month-old traffic ticket.  These types of tickets are routinely dropped and Mecum's case was not an exception--yet the Republic has used any news related to the incident as an excuse to re-run Mecum's mugshot. 

Here's what I wrote  about a story that appeared a full two weeks after the incident. 

Sure, I complain about the bias and the inaccuracies, but it's the outright bullying that bothers me the most.  In Sunday's political insider, the reporters used the fact that Randy Pullen has decided to RETAIN Brett Mecum as an excuse to re-run the incident together with his mug shot.

Now that the incident is six weeks old and the charges have been dropped, one would think that the item is no longer news. One would be wrong.  Flash forward to Sunday's Insider, where  Matt Benson and Mary Jo Pitzl find an excuse to re-run Mecum's mugshot by creating a lame "Quote of the Week"

Get the chairman!" - Arizona GOP Executive Director Brett Mecum calling for Chairman Randy Pullen last month during Mecum's arrest at state GOP headquarters.

The arrest, documented in a state Department of Public Safety report, came weeks after photo-enforcement cameras caught Mecum driving 109 mph on Loop 101.

Justice of the Peace John Keegan has since tossed the ticket on Constitutional grounds.

What's interesting about that quote?  Is it supposed to be funny?  Notice that the "Quote of the Week" came from an incident that occurred "last month"?  Notice that the arrest came "weeks" after the incident, and notice that the paper points out that the ticket has been "tossed."

So why run the quote and the mug shot?  Because they can.  That's what bullies do.  Once they have someone's lunch money, they go after him again and again.  The other kids don't step in because they don't want to be picked on next. 

Of course bullying isn't reserved to kids and journalists, there are examples in the animal kingdom as well.

Speaking of things getting tossed, here's a video from an article about "Assholes of the Animal Kingdom."  The video shows two dolphins killing a baby porpoise.  The principle is the same.  Separate a victim from the group and then just pummel him for fun.  Dolphins and journalists may look cute and cuddly...but don't let them get you away from the herd.

National Attention

Governor Brewer is getting national attention, but perhaps not the kind she had hoped for.  Congressional Quarterly is highlighting the tension between the Governor and the legislature over the budget and her proposed tax increase.  This guy at least tried to give a decent quote.

The proposed sales tax increase has made her politically weaker and could draw a primary challenge, said Greg Patterson, a former Republican state legislator who writes the political blog Espressopundit.com. “That pretty much is the elephant in the room,” he said.

Hmm, maybe I should stick to written commentary.

A Story About Nothing

Check out this powerful lede.

Since the FBI began asking questions this spring about Maricopa County Sheriff Joe Arpaio, there has been no clear indication where the inquiry is headed.

An Arizona Republic review of how and why the FBI would investigate the operations of a county sheriff reveals no single pattern or procedure. Such an investigation could take months before any charges might be filed. Or an investigation could quietly fade away if nothing is found.

The article is A1 above the fold on a Sunday, has two authors and goes on for over 1,000 words in order to point oug that...we don't know where the weeks old Arpaio investigation is going. 

Since the authors have no information about the investigation, they provide us with a mind-numbing account of the procedures that the FBI uses in similar investigations.

While details about the Phoenix interviews remain sketchy, information on how and why the FBI conducts this type of inquiry provides a better sense of the kinds of issues that may be involved.

The FBI conducts interviews as part of a preliminary inquiry to see if a full, formal Department of Justice investigation is warranted.

After a procedural history, we are entertained by recent history of the FBI itself...

In fiscal year 2008, the FBI said it had 421 color-of-law cases that were pending.

Dude, who cares?

The Arapaio story is on A1 for two reasons.  First it's a great example of a rehash story.  It gives the Republic an opportunity to repeat years of allegations in the guise of an update piece--the article repeatedly concedes that there is nothing to update.

Second, the story is a great example of a "sunk cost" piece.  That's were a team of reporters spends weeks scouring through old records and interviewing potential source and...doesn't find anything.  However, since they were scheduled to have a story on A1, they just run it anyway. 

Classic Seinfeld...a story about nothing. 

Or perhaps Shakespeare...a tale told by an idiot, full of sound and fury and signifying nothing.