Tuesday, January 12, 2010

Farley Report: "Economic Armageddon" Ahead

Posted By on Tue, Jan 12, 2010 at 6:50 PM

Rep. Steve Farley sends his first weekly summary from the Arizona Legislature:

Howdy, Friends O'Farley…

It's Opening Week of Regular Session, but this legislative reunion doesn't quite have the same excitement to it after meeting more or less constantly for the previous year.

What does add to the excitement is the vastness of our fiscal crisis, and the persistent lack of leadership from the Governor and the legislative Republicans as we seek to address the crisis.

Here are the facts:

—> $1.5 billion deficit for this fiscal year, which is half over already
—> another $3 billion deficit for next fiscal year
—> We've already in debt to our necks, so there's very little left to borrow against.
—> It's too late to increase revenues by a vote of the people.
—> The state could simply run out of money by February or March.

Here are the Republican responses to the crisis:

—> The Legislative Republicans want to make the deficit bigger by enacting a huge package of corporate tax bailouts and a massive shift of property taxes off of big businesses and onto homeowners, including retirees on fixed incomes. They also want to cut

another couple of billion dollars from education, health care, and universities, eliminating tens of thousands of additional jobs.

—> Governor Brewer wants an unspecified revenue increase to pay for future tax cuts for big corporations and the rich while making another billion in cuts. She announced this in her State of the State while blaming every Democrat from Governor Napolitano to the Attorney General to Congress to the President for "stealing our freedom". She did not say what we would have done without our $5 billion in stimulus money provided by these freedom thieves.

The governor did not tell us many details, but did unveil her plan to throw 300,000 Arizona citizens off their healthcare.

She wants to ask voters to rollback the eligibility level to qualify for AHCCCS health insurance from 100% of the federal poverty level to only 33% of the federal poverty level. Voters in 2000 decided to expand that coverage to cover all those in poverty, and we specifically rejected a competing initiative that would have done what the Governor now wants to do.

Let's parse this proposal a little more closely.

Senate President Bob Burns said yesterday that he believes that poor people were choosing to buy other things besides health insurance, so kicking them off AHCCCS would help them prioritize better.

The federal poverty level for a family of 3 is $18,310 in income per year. If that family were able to buy the same health insurance available to state legislators, without any subsidy from the state, they would have to pay $14,400 a year just in premiums, not including co-pays. That leaves $325 a month to pay for those non-essential luxuries like food, clothes and shelter. I wonder what choices President Burns might decide to make in that situation.

These 300,000 will no longer get regular preventive care, so they will show up terribly sick at emergency rooms with no way to pay. Hospitals will have to turn them away to get sicker and possibly die, or take them in with no source of reimbursement and risk their own fiscal health.

That's why even the Republican- and business-friendly Arizona Chamber of Commerce opposes this terrible idea — we will all pay for that in reduced availability of hospitals and clinics, and skyrocketing insurance premiums and medical costs.

Governor Brewer claims this will save us $700 million a year to kick these 300,000 people off healthcare. But as I learned this morning, we would also lose up to $1.5 BILLION a year in lost stimulus funds.

I am a member of a new committee to examine more closely the federal stimulus money and how it has worked in Arizona. We learned that there is another stimulus bill working its way through Congress that would offer us a desperately needed lifeline for this fiscal year and next. It could mean that we would get up to $1.5 billion or more over that period of time to help shrink our deficit.

But if we changed AHCCCS eligibility, we would violate that bill's eligibility requirements and lose that lifeline completely.

Which bring us to what will happen if the state does simply run out of money. There has been a lot of discussion of IOUs and vouchers for state employees and vendors and contractors.

I asked Treasurer Martin yesterday about how the IOUs will work, and he told me that state checks aren't really the same as checks from other sources. They are warrants that the state will pay a specified amount of money if the money is available at the time they are presented for payment.

In simple language, when you deposit a check from the State of Arizona, your bank fronts you the money while it waits for reimbursement from the State. If the banks start to suspect that the State does not have the money to reimburse them, they will no longer honor your state check. No IOUs necessary, simply no money for you. Or for the people that you pay, like your mortgage company, your supermarket, or your health insurance company. Yes, economic armageddon.

For those in the Legislature who believe that businesses and individuals will thrive when government fades away, the effects of this withdrawal of billions of dollars from our economy (and the shutdown of schools and prisons) will hopefully be very instructive. For the rest of us who already know the chaos that would be unleashed, we should be focused on doing everything we can to avoid this outcome. We do not want this to happen.

It does not have to be this way. I will continue to do everything I can to bring reasonable minds together to save jobs and find ourselves revenue fast, with 2/3 majorities in both houses. We Democrats have proposed many viable options, but time is running short. We are not yet at the table with Republican leadership to negotiate solutions, but we are banging down the door to get there because we understand the urgency.

Stay tuned till next week.