November 2001

It's clear that our revenue projections of about nine months ago won't be met, and so we are managing in a very careful way, week to week really, to determine what the impacts will be.

Reporters (in order of appearance):

KEN VERDOIA, KUED
ROD DECKER, KUTV
CHRIS VANOCUR, KTVX
TOM JORDAN, METRO NETWORKS
JENNIFER JORDAN, KCPW
LEE AUSTIN, UTAH PUBLIC RADIO
GREG BURTON, SALT LAKE TRIBUNE
PATTY HENETZ, ASSOCIATED PRESS
MARK GIAQUE, KSL RADIO

Transcript:

KEN VERDOIA, KUED: Governor, thanks for joining us today. Yesterday you spoke to a slumping economic picture in Utah, and that was brought about by the announcement of a temporary closure of Geneva Steel, they've had some almost 1200 layoffs over the course of this past week. Some more bad economic news today with layoffs at Novell. This seems to contribute to this slumping economic situation. The state is already facing nearly $200 million in budget shortfall. So I guess the place to begin, where do we stand right now from the state's perspective on the budget and meeting our needs?

GOVERNOR LEAVITT: It's clear that our revenue projections of about nine months ago won't be met, and so we are managing in a very careful way, week to week really, to determine what the impacts will be. We don't know at this point, is the best answer. We know that we'll have to have reductions in our budget and we're making them. We're going to do it in a way that is very careful. Our top priority will be to continue the improvement of our education system, and public safety, and then to meet the needs of those who are adversely affected by this economy.

KEN VERDOIA, KUED: You've talked about management of the fiscal situation, but is it appropriate now for people to use the word "crisis" when we look at the economic picture combined with the revenue shortfall?

GOVERNOR LEAVITT: I wouldn't use that word. We certainly have a responsibility to adjust to this. If you were to compare this, for example, with what I would have considered a crisis in 1986 and '87, where we had a very serious downturn in the economy that was substantially greater than this one, that was a crisis. What we have here is an adjustment in the economy, multiplied by an event. At least the best information we have at this moment is that both events and adjustments are relatively short term. We don't know, as a matter of certainty, when it will turn around, but the best information we have is that it will be in the third quarter of next year, and therefore we're managing in accordance to that. Right now I'm dealing with two budgets, the first is the '02 budget which we're currently operating in. That obviously is requiring day-to-day management. The second is the '03 budget which will begin in July of next year. That will obviously be affected by this. And we anticipate that there'll be very little, if any, new money to be allocated. That will mean that the budget will have to be adjusted accordingly.

ROD DECKER, KUTV: In the current year, the last number that I remember seeing is $177 million shortfall. I believe you've said it's going to be bigger. Do you have any idea what kind of shortfall we're actually looking at?

GOVERNOR LEAVITT: I don't know the number. The best and most official number we have is 177. But based on the fact that we've had Geneva, that Novell and others have had layoffs I expect that that number will likely become larger. I don't know the magnitude of it. We're watching it literally as I mentioned on a week to week basis.

ROD DECKER, KUTV: You had a deal with the legislature yesterday on how to deal with the shortfall but now you've got a bigger shortfall. Your plan exempted education. Are you going to be able to exempt education?

GOVERNOR LEAVITT: I hope so and we'll do it as long as it possibly can be done. But I have indicated to the leadership of the education community that they need to recognize that we're in a situation that is unpredictable at this point and they need to have contingency plans as well. My first priority, as I've indicated all along, has been to preserve our progress in education, and to assure that public safety is met. We also want to make certain that those who are affected adversely by this economy can be assisted. Those would be the three priorities.

CHRIS VANOCUR, KTVX: Governor, trying to put a personal face on some of these numbers, I'm curious what you would say to people who have been affected by this, perhaps even laid off, and I'm also curious whether you've ever had the misfortune yourself of being out of work?

GOVERNOR LEAVITT: I have not had that impact. Most of my life I spent actually self-employed and therefore there have been days I didn't have anything to do, but I was always at least engaged. But I've come to understand that the dilemma it puts a family in because I see it face to face, up front in a very personal way now that I've been in public service. I think my primary message to them will be, we'll be there for you, we're going to be do all we can to be of assistance. And most importantly that we're going to do all that we can long term to assure that this remains a vibrant economy.

TOM JORDAN, METRO NETWORKS: Governor, the Salt Lake County faced this issue a year ago. County Mayor Nancy Workman has just turned in a budget which lass earned a lot of praise from county council, largely because she has not only working with a significantly reduced revenue stream, but an obvious shortfall in what they were going to deal with. She has come up with, of course, a total hiring freeze, which she instituted when she came in last January, and a 25 percent reduction in energy consumption and has turned in something where everybody would get a raise, there would be no layoffs, and they appeared to weather a financial crisis inside the county. Are you intending to push for things such as a complete hiring freeze?

GOVERNOR LEAVITT: Well it sounds as though Mayor Workman's done a very good job in managing through a difficult situation. Just to give a little more detail on the circumstance we find ourselves in, in July, when our fiscal year started, it became immediately evident that the estimates we had made would not be met. So I immediately instituted about 45, $48 million worth of reductions. It became evident a short time later, just before we were going into September, that those numbers would be even larger, and we began to measure against a $78 million deficit. At $78 million I thought I was being fairly conservative. I built a little margin into it and we were referring to them as hold backs. That is to say I was holding the purse strings saying if the money shows up I'll release it later, but I'm managing my by holding back. We had $12 million on top of that. So between the $78 million that I had cut, or held back, the $12 million that we had left over from last year, and $5 million that had not been appropriated, I thought we're bullet proof on this. I mean we're $93 million or there abouts that we have that will be as a buffer for any kind of reduction. Well, September 11th then happened, and literally within a couple of weeks that number had more than, or at least doubled. So we were now dealing with $177 million. We now find ourselves looking at even greater potential erosion, and so the way I'm managing it is basically to say to each department head, here's how much money you have to manage, you tell me how best to manage within that amount of money. Now, will that mean that we'll be able to do so without affecting any people? I doubt that, because there are very, there are significant number of departments that are in large measure made up of personnel. And when you're managing against that much of a reduction, there will undoubtedly be impacts. Now we're doing it first of all by not filling any unfilled vacancies. Is that a freeze? Well, I don't think- - I don't like to manage with, by saying this is the way it'll be unilaterally. I prefer to deal department by department because there may be a place where you just simply have to replace someone. On the other hand it may be another department where they would choose to squeeze it out of some other budget. So it's- - I've always found that the better thing to do is to deal with it overall, let the local managers make the best decisions, and then manage with good communication and I think that's how we'll do it. We don't really know what the number will be until July.

JENNIFER JORDAN, KCPW: Governor, getting back to your commitment on education, Utah Education Association just released its new survey which says Utah has the lowest expenditure per pupil in the elementary and secondary schools as well as the highest number of pupils per classroom. How will you address those numbers given the current budget shortfall?

GOVERNOR LEAVITT: We've been through a period over the course of the last eight or nine years where we made considerable progress in all of those areas. We have been able to reduce class size overall by nearly four. We've been able to increase teacher pay on average by nearly 56 percent. We've made good progress. We're in a period right now where frankly no one is going to be making very much progress. There's not a state in the country that's going to be able to be dramatically reducing class sizes because, well, we're not alone in this dilemma. I was with my colleagues recently, and I think there are 46 or something of that number of states that are currently in substantial deficit. We're all suffering through this one together and my guess is that if you wanted to use just the averages, that this will probably improve Utah's standing, because one of the things that they did not enumerate there is that we're a state that spends the highest percentage on education of any other state. So the bottom is it's the same old dilemma. We have more children than anywhere else in the country per capita and as a result it stresses our system.

KEN VERDOIA, KUED: Governor, we're going to turn our attention now to Logan for a question from Lee Austin of Utah Public Radio. Lee?

LEE AUSTIN, UTAH PUBLIC RADIO: Thank you. Two related questions, if I could. First of all, when you talk about hoping to insulate education from these budget problems, do you include in that higher education, or are we talking K-12? And secondly, as we examine government services, and realize that we may not have the money that we would like to, to fund these programs, how do you, how do local managers decide or evaluate which services maybe aren't as important, aren't as necessary to the public, and therefore may take a larger hit?

GOVERNOR LEAVITT: Let me deal with the second question first. Those are judgment calls. And there's no magic way to do it, there's no formula, it's simply a judgment call as to where you can affect the least number of people in the least difficult way. And that's the measure. Every department will be different, and we're monitoring with our budget office, their decisions and I feel good about the heads of our departments, my cabinet, I think is made up of very experienced, able people who are able to make those decisions. With respect to your first question, yes, I am working very strenuously to mitigate the impact on higher education. Why? Well, higher education this year will have nearly 8900 new students. That's a good-sized university in new students. That's not something that would surprise us, given the fact that the economy is not doing well and there are a lot of people returning for retraining. But I'm anxious to minimize the impact on those people, as well as recognizing that the key to long-term economic vibrance is a strong education system. And I would like to avoid in whatever way we can impacting them, particularly mid-year. Now, we're dealing, again, with two budgets, the '02 budget, where I've indicated to the extent possible I want to hold our progress steady in education, and the '03 budget. Obviously in the '03 budget everybody's going to have to bear their share of the burden. But education is particularly, it's particularly difficult mid-year to affect education spending cuts. I talked to superintendents and I've asked them about it. And the truth is there's really, education is highly personnel and class-size sensitive. If you go to a superintendent mid-year and say we need to make x-percent cut, well somewhere in an elementary school there's going to be three fifth grade classes that are made into two and part of them go into a fifth-sixth grade split. Now that affects a lot of children. You can do that very easily in the summer, but it's very difficult to do it mid year. And so I'm anxious to affect them as little as possible and frankly that is the area where I've had a disagreement with legislative leaders as to how to balance the budget. We've been working very collaboratively, and we've narrowed our differences of opinion, and I've indicated to them that I want to present them with as many options as possible When the time comes for them to set the next budget and they're ultimately the body that sets the budget. It's the Governor's responsibility for manage during the interim.

CHRIS VANOCUR, KTVX: Governor, I think one of the unfortunate ironies here is with the Olympics just a few months away, these were supposed to be the good economic times for Utah, and we're still facing almost $200 million shortfall. I guess I'm curious is where would the economy be without the Olympics, and where will it be after the Olympics?

GOVERNOR LEAVITT: I've asked myself the same question. Thank heaven we're in a period where we do have all of this happening. I guess there's no way of calculating or at least I haven't taken the time to calculate a best estimate of what they would be because we are going to have them. We've always worried a little bit about what would happen post games and hopefully we'll be able to manage through that as well.

PATTY HENETZ, ASSOCIATED PRESS: Governor, you spoke earlier of aiding those who are feeling the pinch of the economic erosion. What assistance would you like to provide for them? Where would the money come from and what would be the qualifying criteria?

GOVERNOR LEAVITT: The first of course is the worker compensation, or I'm sorry, the unemployment compensation funds that the state has accumulated over time, I've spent some energy in evaluating the solvency, or the adequacy of our unemployment compensation funds, and they're very strong. We would have, among the strongest unemployment compensation systems in the country. And that's very important when you go into a period like this. Second, we've investigated every way in which we can seek special funds from the federal government related to September 11th, and there are special funds that either are now or will be made available, and we are preparing applications so that when that money is made available through the stimulus package that the President is offering or through existing funds that we can offer them, to help people with things like paying for their health premiums and transition and retraining and so forth. The third is, to help people find employment where it's available now. We've talked a lot about the fact that this is a declining economy. But we have not recognized in our conversation today the fact that it's still a net positive economy. We're still growing in jobs. We have about one percent growth in jobs. That's not very much, but it beats the heck out of a negative anything. We're still seeing our high tech sector grow at about three times the national average. Now, we have to see job growth in this state at around three percent in order to assure that our children and our young people, our grandchildren, have the capacity to find employment as they enter the work force. So we are seeing a deficit in the amount of employment that we need right now but we are seeing increased jobs. Yesterday there were a little more than 3200 jobs currently being recruited for at the Job Service, about 850 of those were jobs that would be considered substantially better than average jobs that is to say that they would pay more than $35,000 per year. We're working to identify people who are unemployed, to place them in those jobs. We're also establishing means for people to gain services and to find help easily. We've set up employment centers throughout the entire state where you can get every service that we have available in one place. In circumstances like Geneva and like Novell, we're organizing job fairs, where we're inviting employers who have needs toss come there, where we can set up tables and they can get services all in one place. Our job is to do what we can to help people during this period. It's these funds that were set up, were set up to deploy in these kinds of circumstances and we want to deploy them. Because right now is when people need help and right now is when we need to use the money.

KEN VERDOIA, KUED: Governor, you speak of Utah being better off in many respects than other states. With the lure of the Olympics, with us still having a net positive job picture, is there a possibility, is this something you're planning for where people may, in fact, come to Utah, driven by bad economic tidings in California or in the east, seeking the opportunity that might be here in a limited degree, and that might exacerbate the challenges faced by the state?

GOVERNOR LEAVITT: I don't know the answer to that. I don't think things are that good. We still have a job deficit here, we are seeing net growth in the number of jobs, but we still have more people who need jobs than have them. So it's not like we're in a situation where we're out looking for people to come to the state. That's simply not the case. There may be places, frankly, you take the state of Iowa. Iowa has a diminishing work force. It has fewer people. In the short run that might work to their advantage in a time like this. In the long run it's a serious disadvantage. So it ebbs and flows, and I believe that this is a relatively short run experience. I don't think we could have expected our economy to stay absolutely vibrant in the way that it was for ten years without some kind of adjustment. None of us planned on September 11th, it's been the combination of that adjustment and that event that has caused this rather severe and rather steep decline. I've felt over the course of the last months a little like a pilot trying to land an airplane on a runway. You keep your eye on the gauges, and you keep your eye on the runway, and you have to constantly be adjusting, and we'll get the airplane landed and we'll ce able to take off again when it's time.

REN VERDOIA, KUED: Governor, we're going to return one more time for another question from Lee Austin in Logan. Lee?

LEE AUSTIN, UTAH PUBLIC RADIO: Thank you. Congress right now, particularly the US Senate, is engaged in a debate about an economic stimulus package, largely centered around tax policy. Would you like the Utah legislature to engage in this sort of debate, and should we talk about tax incentives for corporate business in Utah? Can we afford any kind of tax incentives at this point?

GOVERNOR LEAVITT: I don't- - I'm not a believer that in a moment like this that a state government is able to lead an economic recovery. I think we can certainly make it worse, and I think we could assist it. But I don't think we necessarily lead it. The federal government has a bigger impact in that way, and certainly monetary policy does. I don't anticipate we'll be seeing any decisions made strictly on the basis of economic stimulus in our state legislature.

ROD DECKER, KUTV: Where do you stand on knowing state deficit? What I'm asking is this. You get knowledge quarterly. Have you got the report already that covers July, August, and September? Is that the $177 million shortfall, and then you have to wait until maybe end of January before you'll have any more hard information?

GOVERNOR LEAVITT: I received the first draft of a report that'll be revised and we don't make it public because it often changes from the time that I see the first draft of it and the time that it ultimately is released because our numbers get better or because someone makes a different judgment. But it is in part on that information that I feel some confidence that our numbers will likely erode even more than they are now.

CHRIS VANOCUR, KTVX: So we're talking more than $177 million?

GOVERNOR LEAVITT: Yes, I believe that the number will be bigger than 177.

ROD DECKER, KUTV: And that is July, August, September. So it gets- - it doesn't get the full effect of September 11th- -

GOVERNOR LEAVITT: Actually I'm looking at numbers that would take me up through the end of October, so I'm dealing with rather current numbers, and one of the things I've been watching for is nationally there's been a sort of surge in sales because of the zero interest loans on cars. At least we haven't seen that impact our numbers yet. So we're literally monitoring this week by week.

ROD DECKER, KUTV:When will you get more hard data that you can- - when will you have a revenue estimate that's publicly releasable?

GOVERNOR LEAVITT: Likely right after Thanksgiving.

CHRIS VANOCUR, KTVX: Given what you've seen, do you think the State's now looking at a $200 million shortfall?

GOVERNOR LEAVITT: I've learned over time never to use a number I'm not willing to live with forever. And I don't know the number so I won't use one. I personally, it is my instinct, given what I see in early indicators and what's happening in the news, that the number's going to be bigger than 177. What that number will be, I don't know.

GREG BURTON, SALT LAKE TRIBUNE: The draft didn't include the Geneva and Novell Layoffs?

GOVERNOR LEAVITT: It did not.

MARK GIAQUE, KSL RADIO: Do you have a price tag, Governor, on what September 11th has done to Utah's economy, specifically. You mentioned that since September 11th the revenue prediction shortfall nearly doubled. What's your price tag?

GOVERNOR LEAVITT: I don't know what the number is but it's huge.

ROD DECKER, KUTV: Are you going to be able to have an education initiative or other initiatives? You've had an education initiative almost every year you've been in office when the legislature's met. But almost every year you've been in office you've had a growing economy. Are you going to be able to afford an education initiative for this coming session?

GOVERNOR LEAVITT: Yes, and one of my most exciting.

GREG BURTON, SALT LAKE TRIBUNE: You talked about layoffs briefly yesterday in state government. Have you targeted an area? Are there directives to your managers to seek out some positions they can cut back?

GOVERNOR LEAVITT: I've given my cabinet members latitude to make those decisions. Our process basically is that I allocate the pain and they find the ways to mete it. And I have a staff of very able budget professionals who work with the budget professionals in the departments, they report back to us their feelings and we basically then have the option to say that's not a good idea from our view, let's negotiate and talk about it. But I'm a, by philosophy, a fairly decentralized manager when it comes to managing through situations like this. We set principles and they're making decisions, and I think doing a very good job of it.

KEN VERDOIA: Governor we're out of time. About 30 seconds, and we've talked about very serious subjects. And on this our last opportunity to speak with you before Thanksgiving maybe it might be appropriate to spend a few seconds to thinking about what makes you thankful this time of year.

GOVERNOR LEAVITT: I would. This is a difficult time. It's a time when we have had national crisis, we find ourselves at war, but this is still the most secure place in the world to live, and there is no place in the world with greater optimism and greater opportunity than we have in Utah. And I'm thankful to live here.

KEN VERDOIA, KUED: Governor, thank you very much. A reminder that a transcript of this and every Governor's News Conference is available on line courtesy of the Utah Education Network, http://www.uen.org. Until next month, Good Evening.

 

Return to home page