State of the State

Written by Craig Outhier Category: Hot Topics Issue: January 2015
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From the economy to immigration, we take stock of the state as Arizona dives into 2015.

A new governor. A new legislature. New optimism for undocumented immigrants. New frustruations for border enforcement. Arizona is certainly awash in “news” as we begin 2015. Following a historic midterm election in which virtually every state-level political office changed hands, and a year of spectacular upheaval across many socio-economic fronts, Arizonans would be well justified to look around and wonder just where we stand as a state.

For them, we offer this head-to-toe diagnostic, from the health of Arizona’s all-critical housing market to the PR shot-in-the-arm that we’ll get from the little football scrimmage in Glendale at the end of the month.

It was bad business as usual for Arizona schools in 2014, according to the influential “Quality Counts” report by Education Week magazine. Calculating the list using “six areas of educational policy and performance” such as per pupil spending and standardized test scores, Education Week ranked Arizona’s public school system 46th nationally, with a C- grade. That’s pretty typical. Over the past decade, Arizona has routinely placed in the bottom 10th- to 20th-percentile of the rankings. We’re the Jeff Spicoli of Education Week.

Not everyone holds such a dim view of Arizona education. Education reformer Michelle Rhee, famed for turning around the District of Columbia school system as its chancellor from 2007 to 2010, ranked Arizona 11th nationally in an annual report published by her StudentsFirst nonprofit. Why the disparity? Rhee – who resigned from the organization in August to work more closely with her husband, former Phoenix Suns star and current Sacramento, Calif. mayor Kevin Johnson – places a high import on school vouchers and weakened teacher unions, where Arizona does very well. Education Week puts a premium on school finance and performance, where Arizona lags mightily.

And thus is revealed a key schism in Arizona schooling – those who advocate for higher education spending, and those, like former Arizona Superintendent of Public Instruction John Huppenthal, who wish to reform the system through school choice. Of course, Huppenthal’s popular center-right position on the issue wasn’t enough to save his job during the recent election cycle; pelted with bad publicity for his online habits, he was bounced out of office by former Peoria school board member Diane Douglas, who essentially ran on one issue: opposition to Common Core and halting “federal government intrusion” into the lives of Arizonans, as she puts it.

We don’t have the space to debate the merits – or lack thereof – of Common Core, the initiative to establish nationwide competency standards in math and reading, using federal funding as the proverbial baited stick. It’s more instructive to ask: What can Douglas actually do about it?

Not much, at least initially, according to Republican State Representative Steve Pierce of Prescott. “Getting rid of Common Core in Arizona would require an act of the legislature,” Pierce says. “The lawmakers would have to pass a law to defund the program. I’m guessing there will be an effort to defund Core by [Tea Party-aligned] lawmakers, but then we’d have to find [school] funding somewhere else.”

Meanwhile, Arizona schools will continue to struggle with bottom-tier performance and unwieldy class sizes (see chart). “Everyone recognizes we need to educate our kids better,” Pierce says. “We have to do it. But how? I’m not a fan of [Common Core] entirely, but I am a fan of making our education standards more stringent. And if someone has a better way of doing that, I’m all ears.”

Outlook: Passing. Barely.  

As marquee social issues go, immigration is the ultimate Rorschach test – Arizona’s “health” in the realm of immigration is perfectly relative to one’s perspective on the matter. For example: President Barack Obama’s recent executive order in November granting deferment from deportation to 5 million undocumented aliens in the U.S. was a much-needed booster shot for Arizona’s immigrant rights community. For border enforcement advocates, on the other hand, it was further proof of a backwards, broken system.

Ultimately, one way or another, both sides wish to see fewer “undocumented” immigrants in Arizona – and over the past half-decade, we saw exactly that. According to a report issued in November by the Pew Research Center, Arizona’s pre-recession high of 500,000 undocumented immigrants slipped all the way to 300,000 by 2012 – a significant 40 percent drop. Where did those 200,000 immigrants go? They weren’t naturalized as citizens, obviously; our immigration system simply doesn’t work that swiftly. Were they driven away by SB1070, Arizona’s so-called “papers, please” law? Probably not. Most of the law’s provisions were never implemented.

Best guess: Pew speculates the 200,000 illegals were fleeing joblessness.

“Arizona is a very construction-focused economy, and construction is a sector that tends to employ many immigrants,” Pew writer D’Vera Cohn says. “So certainly the recession certainly played a role in discouraging immigrants from living in [Arizona], since construction suffered so greatly at that time.”

There you go: Arizona finally chipped away at its undocumented immigrant problem, and all it took was the worst U.S. economic downturn in 80 years.

Though Cohn sees “no indication of [illegal immigrant] numbers going up again,” it seems likely that many would follow a rejuvenated construction industry back to Arizona. After all, they’re not that far away. Though Mexicans make up about half of the nation’s total illegal immigrant population, they constitute 84 percent of Arizona’s undocumented, according to Pew. The upshot: Our supply of cheap labor is nearby and responsive. If we build condos, they will come.  

Foes of illegal immigration in Arizona are steeling themselves. Soon after President Obama announced his executive order, Pima County Sheriff Paul Babeu hit the airwaves to deride the plan as “de facto amnesty” for all undocumented aliens, citing a Department of Homeland Security memo to law enforcement agencies across the nation that stipulated immigrants need only have entered the U.S. by January 1, 2014 to avoid arrest and deportation. Maricopa County Sheriff Joe Arpaio held serve by filing a lawsuit against the president.

After several federal smack-downs of homegrown immigration laws, Arizona officials appear less in love with the go-it-alone tactic favored during Governor Jan Brewer’s first term, which produced SB1070. Babeu, perhaps Arizona’s most articulate pro-enforcement voice, is looking to Washington for answers. “I think the Republicans, who now have an expanded majority in the House and now control the Senate – they have to provide solutions,” he told the Maricopa Monitor in November. “This Congress, instead of just referring to the president as, ‘He’s a king’ or ‘He’s an emperor,’ [need to] actually offer solutions to border security.”

Outlook: An ink blot.


The Economy
Where Arizona’s economic health is concerned, one facet tends to dominate the conversation: employment. And employment trends were generally positive in 2014. From a peak of 7.2 percent in January, unemployment in Arizona fell to 6.8 percent by November – representing a net gain of 150,000 jobs. All in all, a much more favorable jobs climate than the 10 percent unemployment chill of 2010.

The bad news: Unemployment in Arizona still hovers a full point higher than the national figure (5.8 percent); a far cry from the full-employment heyday of 2005, when our rate was a point lower than the national rate. And many of the jobs added in 2014 were low-wage and part-time jobs, according to federal data; indeed, wages have remained flat since 2005, an indicator that Arizona is lagging in technology and other coveted, high-paying industries.

The consensus: Arizona’s economy is improving modestly, but has yet to ignite in a way that would accelerate it beyond general national trends. And the main reason: single-family home-builds, the traditional driver of bullish economic conditions in Arizona, has yet to emerge from its recessionary slumber. According to Michael Orr of the ASU W.P. Carey School of Business, new home builds – which employ construction workers, salespeople, managers, engineers, truck drivers, ad infinitum – actually went down last year relative to 2013. “Home-builds haven’t been that impressive [in 2014]... certainly lower than everybody’s expectations,” Orr says. “[Permit applications] are very lumpy. Some months, nothing happens at all, others months have been great. The big picture is that we’ve seen less [post-recession] recovery in construction than any other area.”

Home-build forecasting and analysis make for good sport in Arizona; land is plentiful and cheap, and growth is hyper-elastic, suppressed only by water supply and the limitations of a commuter culture. As such, Orr has a couple of theories about lagging demand for new homes. “We’re not seeing millennials get into the market in significant numbers,” he says. “Those around 30 are really not diving into ownership like previous generations did. They’re skeptical after seeing their parents and aunts and uncles getting into trouble with foreclosures. They’re not taking that first step on the ladder.”

“And Generation X is staying away this time, too,” he continues. “That makes sense. You know: Once bitten, twice shy. The lone exception are the baby boomers. They trust home ownership more, so we’re seeing more [new home purchases] from them.”

Orr also acknowledges the theory that the Valley has hit some kind of suburban ceiling, that ever-longer commutes are suppressing demand for new subdivision homes on the Valley’s outskirts. “That’s certainly holding people back – the idea that the only home I can afford is in Buckeye and I don’t want to commute from Buckeye. And home builders are the same way. Many would prefer to do infill projects near the Valley center because those homes sell so quickly, but builders can’t find those parcels at agreeable prices.”

Nonetheless, Orr believes a resurgence in the home-build market is not a matter of “if,” but “when.” “Unemployment is getting better and better,” he says. “Gas prices are down and that helps, too. Consumer confidence is up. And from charts I’ve seen from other economists, the Valley’s economy is generally healthy. Medical jobs are coming back quite nicely, as are the service industries. And the same goes for the financial services industry. A lot of companies are basing the regional headquarters down here. State Farm is one that comes to mind.”

Despite the high-profile addition of Mesa’s Apple manufacturing plant, technology is one sector where the Valley could undoubtedly improve, Orr says. “From my point of view, I’m disappointed that the tech sector hasn’t been more active here. Those are the kind of high-paying jobs we want. But we’ve seen some promising moves in that sector. I think that might be the key for the Valley going forward. Being a more active player in technology.”

Outlook: It could be another tepid year for home-starts, but otherwise: bullish.

National Profile
It seems Arizona has always enjoyed attention disproportional to its population and political clout. From the moment we sprang into statehood in 1912, Arizona’s wide-open mystique has loomed large in the national consciousness. We’re the Grand Canyon state, the land of Navajos and sunshine, the inspiration for such modern marketing gizmos as Arizona Iced Tea and the Chevrolet Sedona, et al.

Of course, over the past three decades, we’ve also garnered a reputation for maverick politics and radical policy-making – with oft-times costly results. Arizona lost the chance to host Super Bowl XVIII in 1993 when voters rejected a ballot initiative to reinstate Martin Luther King Jr.’s birthday as a holiday – the NFL later awarded Super Bowl XXX to Tempe after voters reversed course – and lost some $141 million in tourism dollars in 2010 following the passage of SB1070, according to the Center for American Progress. Subsequent laws led TV pseudo-newsman Jon Stewart to famously dub us “the meth lab of democracy.”

The good news: Arizona has seemed to cool somewhat on the national controversy heat-map. Last summer, after Governor Jan Brewer vetoed SB1062 – a bill derided by critics as discriminatory against LGBT people – talk of another Super Bowl embargo simmered down. On the eve of Super Bowl XLIX in Glendale on February 1, Arizona may have the national rep it wants: emerging Southwestern powerhouse and agreeable wintertime playground for cold-addled Easterners.

“I definitely think we dodged something [when Brewer vetoed SB1062],” Tempe pollster Michael O’Neil of O’Neil Associates says. “Mind you, the chamber isn’t empty. Arizona lawmakers will always do things their own way, because it gets them reelected. But I think our reputation is safe for now.”

Outlook: Ready for our close-up.

Arizona Kids: Getting Schooled?
Arizona has the second-most crowded classrooms in America.

Pupils per teacher:
Arizona: 21.3
National average: 15.5

Arizona ranks 47th in per-pupil spending at $7,666 annually.

Child Welfare in Arizona
Making Progress Since 2005
Teen births are down (19.2 per 1,000 teenage females).
Fewer uninsured children (13%).
Fewer high school dropouts/delayed graduation (25%).

Losing Ground Since 2005
More children are living in poverty (27%).
More children living in households
with high housing cost burden (41%).
Single-parent families trending up (40% of all children).
Source: Morrison Institute for Public Policy

AZ Environment at a Glance
Breathing Easy?
According to the American Lung Association’s annual State of the Air report, Phoenix/Mesa/Scottsdale had the 11th highest ozone levels of any American city in 2014. It also had the eighth-highest levels of particulate matter.
It was a more destructive than average year for wildfires. Thanks to the 18,500-acre Slide Fire in Sedona and the 7,000-acre San Carlos Fire, Arizona surpassed its 2013 figure of 95,105 acres by early June. The 2014 total will be greater than 150,000 acres, according to officials.