- Associated Press - Monday, January 12, 2015

PHOENIX (AP) - New Arizona Gov. Doug Ducey moved Monday to make good on a campaign promise to shrink state government, announcing a hiring freeze and promising new systems for cutting waste and inefficiencies in schools and state operations.

The Republican also promised in his first state of the state address to reject tax increases and not delay previously approved corporate tax cuts that have yet to be phased in.

Ducey took the steps despite a projected $1.5 billion state budget deficit in the coming 18 months, an amount that exceeds 10 percent of current spending.

“Instead of demanding more revenue from the people, I suggest we demand more fiscal responsibility from our government,” Ducey said.

He said delaying planned tax cuts would be bad for business and go back on a promise that has helped expand the economy by bringing in more jobs.

“If we change our plans, they’ll change theirs,” Ducey said. “It’s a high price to pay for going back on your word and that is why I say: Not on our watch.”

Ducey also called for a long-running school funding lawsuit to be settled. The state Supreme Court has ruled that schools were shortchanged by the Legislature during the recession, and a judge then ordered the state to boost funding by $331 million this year and similar amounts going forward.

The same judge is now considering back payments of about $1 billion. The two sides are considering settlement talks and planned to meet on Monday with a panel of appeals court judges.

“Here’s the short of it, elected leaders acted in good faith during the Great Recession to keep statutory commitments to education, while also keeping this state afloat,” Ducey said. “And now the courts have given us a choice - between a fiscal crisis or a constitutional crisis.”

Ducey drew the largest applause of his 30-minute speech when he criticized court decisions that interpreted a voter-approved law as requiring all school funding components to be increased each year, not just a portion that the Legislature funded.

“The words of the statute are clear. ‘And’ means ‘and;’ ‘Or’ means ‘or,’” Ducey said.

Sitting just feet in front of Ducey were the five state Supreme Court justices who upheld a lower-court ruling disagreeing with his analysis.

Ducey spokesman Daniel Scarpinato said the governor is focused on the settlement, although he asked the attorney general in his speech to review the case law that led to the unfavorable decisions.

Three other major parts of Ducey’s speech dealt with schools. One called for the immediate passage of a bill requiring a civics test before high school graduation.

Another proposal would eliminate waiting lists at the state’s top-performing schools, a key Ducey election theme. Ducey proposed a new authority that would allow those top schools to use empty classrooms or schools.

“These are educational assets, funded by the taxpayer, meant to benefit our children, and they are going to waste,” he said. “It’s time to put these assets back to work.”

Another component of that proposal would allow schools to use state resources to finance their expansions. That could include charter schools that are considered public schools but owned by private companies.

Ducey also said he believes state schools spend too much money on administration and support services and too little on classroom instruction. He said he appointed a team of educators and finance professionals to look at school funding formulas and identify ways the state can trim overhead.

House Minority Leader Eric Meyer of Scottsdale, who served on a school board for eight years, said schools have laid off teachers, support staff and others to cut costs, but the expense of maintaining buildings and getting students to school remain static.

“We’ve made those efficiency changes, and administratively we spend the least of almost any state in the country, so we’re left with these fixed costs,” Meyer said. “These are kind of re-hashing of old Republican policy talking points but not a lot of substance in how that’s going to save a billion dollars in our budget.”

At least one Republican questioned the amount of savings that could come from trimming schools’ administrative costs and the number of empty school buildings available. Ducey said there are as many as 400,000 empty seats in the state.

Arizona schools spent 54 percent of available operating cash on classroom instruction in the 2013 budget year, more than 7 percentage points below the national average, according to the most recent state auditor general’s report.

The remainder of the school money goes to administration, which is lower than the national average, transportation, food service, building maintenance and IT systems.

“I don’t know that’s really the case that there’s a lot of empty school buildings out there,” said Rep. Bob Robson, R-Chandler.

The governor has promised to provide more details when he releases his budget proposal on Friday.


Follow Bob Christie on Twitter at https://twitter.com/APChristie .

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