May 2002

Utah is among a large number of states as high as 46 states that have significant economic downturns affecting us. Many of these downturns, much of this downturn occurred some months ago there's a lag that occurs naturally between revenues and employment and upturns in the economy.

Reporters (in order of appearance):

KEN VERDOIA, KUED
GREG BURTON, SALT LAKE TRIBUNE
CHRIS VANOCUR, KTVX
TOM JORDAN, METRO NETWORKS
ROD DECKER, KUTV
LEE AUSTIN, UTAH PUBLIC RADIO
VINCE PEARSON, KUER
BOB BERNICK, DESERET NEWS

KEN VERDOIA, KUED: Governor, thanks for joining us today. The most significant news this week is what some view as confirmation that the state of Utah is continuing a downward economic slide and that you and legislature must now again deal with shortfalls of revenues. How do you view this at this point in time as the most viable alternatives for addressing this shortfall?

GOVERNOR LEAVITT: Utah is among a large number of states as high as 46 states that have significant economic downturns affecting us. Many of these downturns, much of this downturn occurred some months ago there's a lag that occurs naturally between revenues and employment and upturns in the economy. So while nationally we are seeing some optimistic tones in the economy and there are some reasons to think that things are beginning to solidify here in the state, our tax revenues have fallen off dramatically; it's a very serious problem. We have an immediate problem; the budget for 2002 which will end on June 30th appears to be as much as $155,000,000 out of balance. That follows having already made $256,000,000 in reductions over three different periods. So it is a shortfall unlike any we have ever seen in the state. Both in terms of its proportion and in the way it came upon us, very rapidly. We have an intermediate problem in that beginning in July the budget for '03 will begin. The economists believe that this shortfall that occurred in '02 will also occur in '03 because it carries over. Which means that we have to take a budget that was already austere and find ways to reduce $155,000,000 from it. It will require a great deal of collaboration and it will require us to, I think to use our best thinking.

GREG BURTON, SALT LAKE TRIBUNE: You were optimistic last year, or I mean earlier this session, that third quarter turn around would be, you know, a surplus again. And you reiterated that to me just a couple of weeks ago. Are you now more skeptical of that? It's going to be 4th quarter before we see a turn around or even the next year?

GOVERNOR LEAVITT: The revenue estimates that the legislature ultimately ended up using did make some assumptions that we'd start to see an economic upturn in the 3rd quarter. I think what we are finding, a two things, first of all that the downturn that occurred shortly after 9/11 was far more severe than we understood it to be. Because there's a period of time through which those have to work. For example, those who make, who contribute their taxes only once a year and not quarterly it was hard to estimate. And therefore, that was a contributor. I still have optimism that we're going to see economic recovery as a state and a nation, this year. I don't think that we'll see an immediate turn around in our tax revenues it takes time for those to work through there's a, as I indicated, about a nine month, or 12 month lag in both employment and in tax revenue collection, when a recession starts to turn into a recovery. So my optimism still remains high, but I'm not at all unrealistic in terms of the severity of the problem that we have face. Its both severe and dramatic in the way its come about and its come about frankly at a very sensitive time. As all the legislators begin to run for election. It adds a dimension that we have not had to deal with in the last couple of decades. Even the last major downturn we had where the legislature faced a similar situation. They faced it right after an election, opposed to right before. And that clearly has some impact on all of this.

KEN VERDOIA, KUED: Governor, we jumped the gun a little bit and didn't give you the opportunity to speak about your areas of preference for dealing with the current fiscal year short fall and I asked you that at the outset and we kind of jumped in. I want to return to that question. You've gotta make cuts, how do you do it?

GOVERNOR LEAVITT: I don't think there are many options on the '02 current year. It will have to be some form of use of the rainy day fund and bonding for matters we paid cash for, for items we paid cash for. There may be some reductions but we only have five weeks left in the year. So any reduction is going to be minimal in its effect. Those will have to be considered more clearly for the '03 budget. But we'll work with the legislature, I- - it's my personal belief that the legislature would be well advised and I would request that they consider doing this at their interim meeting in May. And I'm prepared to call a special session if they would like to have one called. I say that because it would save us about $300,000 to make whatever changes need to be in May as opposed to June. We have bond ratings coming from the bond ratings agencies just in advance of issuing a substantial number of bonds. The bond rating agencies are going to want to know that we've solved this '02 problem before they give us our bond rating. And I just don't want to do anything that would jeopardize our bond rating. Which is as high as one can get, and it saves us millions of dollars. So whether they will or not I don't know. They're still talking about that but I think there some serious advantages and some financial advantages. And there are frankly very few options that any of us have been able to come up with to solve the '02 problem short of what I've said.

CHRIS VANOCUR, KTVX: Governor, doubtful this year, because it's an election year, but next year do you expect any calls or suggestion to raise taxes?

GOVERNOR LEAVITT: Well I, you know in our budget situation I suspect their will be a thousand different solutions proposed and lots of different ideas and combinations. But it's probably premature for anyone to take anything off the table because we don't know at this point what the options will be. So I wouldn't I- - wouldn't rule anything out nor do I think there will be lack of imagination in how to go about this.

TOM JORDAN, METRO NETWORKS: Are there any options that are off limits? Things that you absolutely wouldn't consider?

GOVERNOR LEAVITT: Well I think that we're in a point where we really can't put things completely off limits. I've begun to formulate a set of principles in my mind as to how we ought to go about it. First I think we need to ask the question, does this compromise the integrity of our education system? We are counting on our education system to train our work force, which we think is our most important economic assets because it's growing in a time that well educated tech savvy workforces are what drives the economy. So I think that's the first question. I think the second question is during times of serious economic rough seas does it provide us with the capacity to care for the basic health and safety of children and of people who might be seriously damaged by these rough seas? And third, I think we have to ask the question, does this solution do anything that would compromise our capacity to recover economically? And last, is it a financially responsible in the brainstorming that will go through in the next several months. There will be proposals that will range from the sublime to the absurd and we need to be able to sort through those in terms of the long haul not just the short run. And I think that's where we get down to those the responsibility of our long-term view.

ROD DECKER, KUTV: Let me see if I understand, you've got $150,000,000 additional this year and you hope to solve that is it next week or the week after when they come in for there May --

GOVERNOR LEAVITT: It would be next week.

ROD DECKER, KUTV: Next week and for them to address this $150,000,000, though there isn't much they can do about it. Essentially you will finish out of balance with a bond because of the late time you found out about it. But then you have another $150,000,000 for '03. Will you ask them to address that next week or will you ask them to address that later?

GOVERNOR LEAVITT: I don't think it's logical for them to approach the '03 budget next week. It's going to take more conversation. I do think there would be value in addressing it soon, because the budget starts in July and the capacity to act is far better in advance of that than after the fact. It's not going to be easy, it's going to be difficult and its going to drive a lot of very poignant decisions and priorities and in a way I think it will force us to have some conversations that we've all been able to avoid because our economy has been so strong. We'll have to get down to the things that are truly important to us as a state.

ROD DECKER, KUTV: Will you have a plan for next week if they address the current year? Will you have a plan in June to address '03?

GOVERNOR LEAVITT: As I indicated on '02 I think that the options are fairly limited and it won't take much for any of us to come to that conclusion. With respect to '03 I'm going to be working collaboratively with the legislature to find solutions. This is a different budget situation than we've every been in before, at least during my service -- where we have an existing budget and we're going to have to find ways to amend that budget. The legislature will have to decide whether or not they want to go through a full legislative committee process. This is not going to be one on which there is rapid agreement. Over time I'm finding that my leadership is often best exercised in response to their suggestions on cuts. But I'll work with them to determine how best to do that. I want to solve the problem. I don't want us to get sidetracked on to issues that might be tangentially related but turn out to be symbolic of nothing. My purpose is to get us a budget in to place that meets those four principles. Does it compromise our education system? Does it allow us the capacity to take care of those who are needy and children with basic health and safety? Does it compromise our ability to recover economically? And is it responsible? Those are the four principles that I will continue to drive forward as the legislature does its work to propose a new budget.

KEN VEROIA, KUED: Governor we'll continue our conversation by turning our attention to the campus of Utah State University and the question from Lee Austin in Logan. Lee?

LEE AUSTIN, UTAH PUBLIC RADIO: Yes we may want to get back to the budget, but if I could just first briefly ask you Governor, about the initiative petition concerning Envirocare. A lot of people are getting telephone calls from telemarketers at home and mail urging them to stop unfair taxes. A lot of other people have signed petitions that would put this on the ballet. Would you like to share with us your thoughts on the Envirocare petition?

GOVERNOR LEAVITT: Well I'll just say generally that I think as respects to both initiatives. Initiatives are difficult and often sloppy way to make tax policy because they don't contemplate often a lot of the subtleties and if I weigh in at all in that debate it will be much later than today.

ROD DECKER, KUTV: Governor, you mentioned taking care of poor people and children. Could you talk about the CHIP program what's happened in the past were we stand today and what you foresee for the future in light of the budget.

GOVERNOR LEAVITT: We have reached the point of having 27,000 children covered under CHIP. We were able to achieve that level much faster than we anticipated. We originally thought we'd have around 20,000 we got 27,000 very quickly. We ran out of money, so we restricted access to the program from new entrance until enough children had left the program to go to other insurance or whatever their purpose for leaving the program was, until we got to 20,000. We have announced its reopening it uses tobacco funds to fund this portion of it. I've indicated to them that I think given the fact we are in times of unemployment and a high number of those children are from families that are unemployed or underemployed that we ought to do what we can while we can at least for the near term we are going to be reopening CHIP until we don't have the capacity to do so.

VINCE PEARSON, KUER: Is it fair to say that the new budget situation will mean dozens or hundreds of layoffs of state employees?

GOVERNOR LEAVITT: Well I don't want to characterize it yet. It's, having a particular effect; I mean it's a big problem. And it's a big number and it's when you consider the '02 budget that we've already reduced $250,000,000 and we are adding another $155,000,000 that totals to $412,000,000 or in that neighborhood. That's 10.8% of the entire budget -- of the state portion of the budget that is. As far as I can see that's the fastest deceleration of tax revenues that has ever occurred in the state. We've gone back at least 70 years and can't find anything like it. So it's a very complicated problem. But I have optimism that we'll work our way through this. It will drive some changes that won't be entirely bad. There will be some hard ship and will weather it, but more importantly I think our economy will come back. We'll be able to get back on track. This may fuel some very interesting conversations about some of our tax policies. We'll have to ask ourselves hy are we doing this and why aren't we doing that. Things that often put values at conflict. Water is an interesting one that I've raised before. We are in the middle of a drought. We are working every day to get a consciousness of conservation. And yet we continue to subsidize with both sales tax and to some extent property tax, water rates. We know that the very best way of spurring conservation is to make certain that when people leave the hose running down their driveway, that that end up paying something for that. It makes them more conscious of it. So we'll have to- -we're going to have to think about those things in the context of both the drought and the shortfall. I have said many times I find it odd that in a state with a shortage of water and abundance of children, that we subsidize water and under support education. I mean it doesn't make any sense. And I think that now that we have this difficult financial situation we're probably going to have to wrestle some of those questions.

CHRIS VANOCUR, KTVX: You know Governor in recent years specially at the legislature people have floated ideas about taking a look at the food tax and maybe shifting the income tax. It almost sounded like you were sending a bit of a political signal there that maybe those are or this would be a good time, if you and others were so inclined, to change these things.

GOVERNOR LEAVITT: I wouldn't have been clever enough to send a political signal. But I will tell you that I think we are in a time when there's going to be a lot of original thinking, because, I mean, it sounds just like a number $155,000,000. And everyone's initial reaction is well we'll just have to make the cuts, and then we get down to it its very hard cuz your talking about real people, real things, real interests, and I think this is going to spur a lot of conversation and I don't know what they will all be. But my experience tells me that this kind of hardship creates a lot of dialog and I'm not prepared to predict it because I don't think we're any of us able to do that.

BOB BERNICK, DESERET NEWS: Are you doing anything right now, I spoke with house speaker Marty Stevens this morning he said "I would hope the Governor would put in right today a hiring freeze". If people leave state government, you don't replace them.

GOVERNOR LEAVITT: You know the hiring freezes are a good cosmetic and we're clearly restricting funds immediately to say. But they often times cause problems. If you lose a correctional officer, that's probably different than if you lose an administrative worker somewhere. And if you've just said no hiring freeze, or no hiring, were just freezing it. Than you could end up with a situation where you could do without an administrative worker and the freeze would be fine there, but having a correctional worker may not be. We are looking in administrative processes to make certain that there's, but driven at a cabinet level to say lets, every dollar we save now is a dollar we have next year.

KEN VERDOIA, KUED: Governor you clearly pointed out that Utah's not alone in this economic downturn. Forty six states at your estimation are also suffering these blows. Those other states did not have what was anticipated to be the lift of the winter Olympics and so I wonder about the Olympics have we in fact kind of lost the opportunity to benefit from that exposure because of this economic downturn? Not just externally representing ourselves to the world and to the nation but perhaps emotionally internally? The high is now replaced by a rather crushing reality of an economic downturn that was not offset by the Olympics.

GOVERNOR LEAVITT: I think there's no question that the Olympics and the high we had caused us not to fully internalize at the time the economic situation the state was in. But it has in no way comprised our capacity to benefit from the afterglow of the games. Speaking yesterday with a member of my staff who reported having been in line at Disney World next to a person from London. Where you from? I'm from Utah. Where you from? I'm from London. Well you did such a wonderful job with the Olympics. A lawyer that went to Africa told me about being in the, I think, Congo and having to in the past to explain where Utah was from -- that we were in the United States. No more. They knew exactly where Utah was. We sent a trade mission with our agriculture people off to market Utah products. Again they used to have to explain where Utah was. We are now a global brand. Now I mentioned that principle three in my belief as to how we deal with this budget problem is: Are we doing anything that will compromise our ability to have economic recovery? Because when the bottom line comes that's the way ultimately find your way out of this -- is that you have an economy that grows. We have to not be timid in using the asset that we created for ourselves in February. And take our Utah business to the world and expand our markets and not lose our optimism. This is not a time for us to lack optimism. There's not a place in the country in a better position to take advantage of this economic recovery that will come than we are. In fact, this kind of a downturn often throws the cards in the air and new leaders emerge. Its like a bunch of race cars going into a tunnel and everything gets moved around and when they come out sometimes there's a new leader. Well we are in the position to do that. We've got this thousand-day plan. Every day things are happening. We add 500 jobs from Sebel. We've had 1300 new jobs in rural Utah. Our smart sites are starting to take hold. On Monday well make another substantial announcement about a company coming to Utah. Yes this is a hard time. But it's unusual. We've had 9/11; we've had national downturn we've had 15 years of economic prosperity. We couldn't have expected not to go through something. We had a few things pile up on us in a way we hadn't expected but we are going to be all right. And we'll work our way through it. I feel confident that in the long term were still well positioned as a state.

ROD DECKER, KUTV: Governor your just back from Washington D.C. where you talked with Secretary Rumsfeld, partly about bringing nuclear waste to Utah. Could you report on that conversation and talk about Congressman Hansen's bill to make, to blocking wilderness.

GOVERNOR LEAVITT: Well I spoke. With Secretary Rumsfeld about the Utah Test and Training range. It is integral to the value of Hill Air Force Base, which is of course our most prominent Utah employer of 25,000 people. More important even than that is its role as an asset to national defense. I pointed out to him that one of our major concerns about the nuclear waste proposal being made PSF is it will take very little time for people to recognizes that you've got 40,000 metric tons of high level nuclear waste standing in a test and training range where they fly jets with bombs and cruise missiles and we've already had two accidents with cruise missiles and two with airplanes crash in that very area. And I called on him to support Congressman Hansen's effort to create wilderness that would protect the viability long term of the test and training range. And also provide us with an opportunity, frankly, to assure that nuclear waste isn't carried into that area. Now its one of several different ways in which we are working without apology and without restraint to prevent nuclear waste from coming here. We don't want it.

VINCE PEARSON, KUER: What are the prospects of that keeping that rider in the bill and getting it passed by the Senate?

GOVERNOR LEAVITT: I think they're pretty good. The senate likely won't pass the bill in that way. Its not even proposed there. But Title 14 where it is now held is in the House bill and we anticipate at conference that congressmen Hansen will be there as chairman of the resources committee and ranking member of the armed services committee. I feel based on both that and the fact that is in the national interest from a defense standpoint that it may well happen.

ROD DECKER, KUTV: Did Rumsfeld say anything?

GOVERNOR LEAVITT: I didn't ask him for a commitment, but it was pretty clear to me that it's in the national interest for defense to support it.

GREG BURTON, SALT LAKE TRIBUNE: You said you called on him to support it, he didn't answer that?

GOVERNOR LEAVITT: He did not give me an answer. I didn't expect him to answer it then, but it's clear to me that the Air Force is very anxious for the test and training range to be protected. And that they would see it in their interest, but I did not receive from Secretary Rumsfeld nor did I expect him to answer that day, but it was a very fruitful meeting.

VINCE PEARSON, KUER: Would passing this law definitely mean that PSF could not have their waste facility in the west desert?

GOVERNOR LEAVITT: I don't know the answer to that. I know that it's clearly an obstacle. And at this point our goal is to make certain there are plenty of obstacles.

KEN VERDOIA, KUED: Governor we are out of time for this exchange. We leave an invitation for you to join us for the governor's monthly news conference each month on KUED. And also visit us online for a transcript at www.uen.org. Until we meet again, Good Evening.

 

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