KJZZ’s Friday NewsCap revisits some of the biggest stories of the week from Arizona and beyond.
To talk about the start of the legislative session, its first policy dispute and more, The Show sat down with Marcus Dell’Artino of First Strategic and former state House Minority Leader Reginald Bolding.
Conversation highlights
MARK BRODIE: Let me start with you, Reginald. Governor’s State of the State speech — what stood out to you from what she had to say this week?
BOLDING: Well, I think the governor hit on what everyday Arizonans are talking about, which is affordability. I don’t think it was a secret that she was going to talk about housing and health care and childcare and really positioning that with the fact that Arizona has revenue issues right now.
And I think that it was really important for her to talk about her own personal story, her own personal struggles of how everyday Arizonans have to make these decisions. And for her agenda this year, hopefully working with the Legislature is going to be to make sure that everyday Arizonans have the ability to live and thrive here in the state.
BRODIE: Marcus, what were your impressions?
DELL’ARTINO: I think we all knew affordability was going to be top of the ticket. I thought it was interesting — keep in mind, this is a Democratic governor in a state that’s a Republican majority. She’s in an election year, so she’s got to bridge some gap and be bipartisan, right?
But she took what I call — and they’d probably disagree with me on this — but a populist message, picking on a couple things that are popular across the aisle to pick on. One’s data centers. And we already know Rep. Neal Carter, very conservative Republican from Pinal County, is running a bill to get rid of the tax credit for data centers.
The governor’s on board and promoted that. And so now she didn’t call out Neal specifically, but they’re on the same page. That’s very popular in Arizona right now. She challenged the data centers on water consumption, very popular in Arizona right now.
And then the other one, I thought — I mean, I’m a fan — but picking on Airbnbs. So that’s a populist message in Arizona right now. I mean, we’ve really reached this threshold of how far are we going to go on this Airbnb thing.
So I thought that that was interesting, that the political spectrum is not a flat line, it’s a circle. And we’re starting to see her meet up with the Republicans on a few issues.
BRODIE: Well, and she also didn’t really talk as much about, for example, ESAs, the school vouchers, as she had in the past. Remember her first year, she called to basically totally undo the universal voucher expansion, which I’m sure she knew at the time was not going anywhere at the state Capitol.
Each year, she’s tried to do some things to sort of rein it in a bit. This year, it seemed like less of a big deal in the speech.
DELL’ARTINO: Yeah, I think she’s really focused on tax conformity right now. At least I think she does recognize the fact the chances of that getting reformed in this Legislature, somewhere in between zero and impossible. And so she hit it. And largely for PR but not for legal reasons, is probably going to rely on her Democratic colleagues in the legislature to keep pounding that message and launch bills.
BRODIE: Reginald, which issues stood out to you? I mean, Marcus talked about the Airbnb and the data centers, and she obviously talked about affordability, as you mentioned, as well. Like, were there specific things that maybe surprised you that she talked a little bit about or that you’re glad that she specifically hit on?
BOLDING: I mean, no. I think what Marcus talked through is absolutely what people every day are talking about.There’s significant issues. You have Prop. 123, which is a big issue, that legislators have to make sure —
BRODIE: The education funding measure.
BLODING: The education funding initiative that they have to make sure that they get passed.
There has to be some consensus there, which I think is extremely important. I mean, you can’t open up a newspaper without seeing a school that’s shutting down or teachers that are being laid off. That that’s a real thing. So making sure that they’re able to fill those deficits is going to be important.
But again, those key issues in talking about water, talking about housing, these are conversations that Republicans and Democrats are having. Even in D.C. you have Donald Trump talking about limiting corporations from buying homes.
This is a bill that Democrats in the state Legislature have been running over the last five years. So you’re starting to see some convergence on these issues that are centered around affordability.
BRODIE: All right, here’s the cynical question for you guys: How much of the speech was laying out policy for this year, and how much of the speech was campaign speech?
BOLDING: I don’t know if there’s a difference. I don’t know if you can separate the two, right? I don’t really think you can. I mean, at the end of the day the governor’s job is going to be to show Arizonans that she can deliver for them.
And I think if you look over the last several years, she’s had a pretty good case. And the Legislature, they’ve worked collectively together. There’s been a number of vetoes, but when they’ve been able to come together on a budget, they’ve been able to get good things done.
Now, at a federal level, that’s been a total mess, but they’ve been ultimately able to get some things done together.
BRODIE: Marcus, what do you think? Campaign speech? Policy speech?
DELL’ARTINO: I agree with Reggie on this one. I think I’ve seen a State of the State, both from the federal level or state level, that hasn’t had some tone of politics in it. But politics is policy, too, right? You’re highlighting your strengths, and you’re limiting your weaknesses.
So to that end, yeah, it’s a political speech. Yeah, it’s about policy. But both of them are intertwined.
BRODIE: OK. So,Marcus, you mentioned tax conformity, which in most years is one of those subjects that you say it and people’s eyes kind of glaze over. But this year we might be looking at our first veto, possibly even today.
The governor called for sort of a more limited set of conforming the state’s tax code to what the federal government did in the One Big Beautiful Bill Act. The Legislature has approved a bill that had more of what Congress and President Trump put into it.
She hasn’t said specifically, “I’m going to veto this,” but she’s kind of made it clear that she’s not a fan.
DELL’ARTINO: I think what probably would give you the clearest indication was the vote coming out of the Legislature yesterday, which was a fully partisan vote — all Democrats against it, all Republicans for it. So to that end, if I were going to guess, I’m going to guess that we’re looking at a veto.
I would agree with you — like I gotta tell you, there has never been an issue with tax conformity in 30 years of watching this stuff. It is the most boring bill that could ever pass and usually is unanimous and just gets moved along. The governor obviously wants the deduction for tips, overtime, etc., etc.
But the bill in the. In the totality comes to about $240-250 million. What the Republicans have done is limited. They took out the SALT deduction, and I’m not going to geek out and talk about what that is. They took out accelerated depreciation — I’m not going to geek out and talk about what that is is.
But that could be generally portrayed as helping the more wealthy. And so the Republicans of the Legislature have taken that out and then retargeted those cuts to the more middle and less fortunate in the tax code. But to that problem, it creates a bigger hole. So now we’re up to $450 in the Republican bill.
BRODIE: $450 million.
DELL’ARTINO: $450 million. So really, at the end of the day, the fight is not about necessarily — there are a couple issues, and one revolves around education, but there’s a couple issues. But largely this argument is coming down to how much it is going to be less than it is about the policy.
BRODIE: Reginald, do you agree with that, that it’s less about who is benefiting maybe from these tax breaks and more about trying to decide how big a hole this is going to put in the state budget?
BOLDING: Yeah, I think it’s a couple of things, right? I do think when you look at if you conform to federal changes and you look at the bill, we’re talking about nearly a, a little bit over $1 billion over three years that would be lost. So you can cut revenue today, but that shows up as fewer classrooms, larger fees, deeper deficits for tomorrow.
So I do think that is a real thing, right? One of the things that is going to be extremely important right now is to make sure that either plan, they can actually talk about how they’re going to pay for it. And I think the governor as she released her budget today, she’ll kind of talk through that.
But you can’t cut $450 million today and say we’ll figure out how we’re going to pay for it tomorrow. It just doesn’t work that way.
BRODIE: It’s tough to cut $200-something million out of the budget today and say we’ll figure out down the road how to pay for it too, though, right?
BOLDING: Absolutely. Absolutely. And I think going into the question is there has to be some hard decisions that are going to need to be made, and it’s going to ultimately line up with where are your values and priorities. And I think the governor, she’s looked at some places where you can get revenue as she looked at the target: Airbnb and looking at data centers and ending some of these subsidies.
And so she’s trying to find opportunities for revenue. But more or less, I would say the big thing regarding this tax conformity is — I’m going to use the word leverage. This is something that’s at the top of the list for the Republican Legislature. And I think the governor also will have some really big things that she won as well.
And I think this provides her an opportunity to leverage some of her goals with the goal of the Republican Legislature.
DELL’ARTINO: I just want to make sure every Arizonan understands this because she hit a little bit on this point, but most people don’t know that this exists. And I’m specifically talking to any Republican congressman from Arizona. The federal government owes us over $700 million, and that is due to immigration enforcement in Arizona, where we spent Arizona state taxpayer money on a federal responsibility.
They’ve agreed that they owe states that have done that money. There’s over $700 million that the feds have not cut back to Arizona. We need to get that money. It’s not my responsibility as an Arizona taxpayer to fund a federal responsibility. It equates to double taxation. And I am not a fan of taxes in the first place, much less double taxing me.
So let’s go get that money back. And that would ease a lot of the issues that we’re talking about at the state of Arizona.
BRODIE: Marcus, when you talk about trying to fill in the gap, we heard from House Appropriations Committee Chair David Livingston this week, who essentially said, “Look, maybe one way to do this is to pass a fairly clean version of the Prop. 123 extension.” The state of course had to backfill that, had to pay general fund money in the current fiscal year’s budget.
$300-some-odd million, that would cover the governor’s proposal, not entirely the Republican’s proposal. But I wonder: Wasn’t that money that in theory was going to be going to schools anyway, assuming that they sent something to the voters and voters approved it? Like, is that really filling a hole?
DELL’ARTINO: Well, it’s filling a hole from the general fund. And I guess that’s probably where the technical part of this exists. So the question is, if you pass 123 with the voters, then that money’s coming out of state land. So the proceeds are on sale of state lands, leases from state land. Versus not doing it means that $300 million is coming out of the general fund.
So passing it gives you $300 million more in the general fund to play with. And frankly, it just makes fiscal sense.
BRODIE: But they only had to pay it last year because they didn’t send something to the voters in the first place, right?
DELL’ARTINO: Correct. That is correct. And there doesn’t — I thought it was odd. I would be a little bit more exercised, I think, if I were a legislator about getting $300 million. But I guess in the grand scheme of thing, $300 million is not as much as I seem to think it is.
BRODIE: In a $19-some-odd billion budget. Interesting.
DELL’ARTINO: But yeah, I expect it — and also it’s a lesson in the totality of fiscal discussions, right? Yes, right now we’re focused on tax conformity, but it is part of a state budget and Prop 123 is part of a state budget.
So we’re going to have to have an exercise in a little give and take.
