Arizona's Own Espresso Pundit

Gannett to Outsource Severance

Multiple sources confirm that the Republic layoff will be this evening.  Meanwhile, the Blog "Gannettoid" has an interesting report. 

Confirming rumors, a Gannett employee who was laid off Tuesday said the company has outsourced the severance payments. The person, posting as "parson" from The Desert Sun in Palm Springs, Calif., said the company said Total Management Solutions is handling severance pay.

The post said: "Transitional pay is only paid if you are eligible to receive state unemployment benefits. You must verify your eligibility for this on a weekly basis." The poster was told early they were being laid off after informing the paper they would need to be out of town Thursday to be with an ailing parent.

Making the recently laid off jump through third party hoops...nice.

Readers often ask why I spend so much time covering the business aspect of the Republic.  My response is that "they don't cover themselves."  Readers often follow up by reminding me that Gannett is a "business" and doesn't have the same transparency requirements as government. 

Really? 

Newspapers hold businesses to a high standard.  They "comfort the afflicted and afflict the comfortable" or some sort of J School BS like that.  Whatever.

That's why it's supremely ironic that the Republic will report every Basha's store closing, and cover every other industry's travails, but simply not disclose their own problems. 

Not only do they refuse to cover their own demise, they often mislead readers about it--like failing to disclose a their plummeting weekday circulation but running ads touting one small uptick in Sunday circulation. 

Furthermore, with no one covering Gannett, the company can--and does--mistreat its employees with impunity.  The above story about Gannett outsourcing severance and making employees jump through eligibility hoops with a third party is only the latest example.  I've also posted stories about Gannett hiring third party marketers who take kids (occasionally disabled kids) door-to-door and asking people to subscribe so they can send the kid to camp.

Then there's the layoff themselves--oldest and most expensive employees first.  Don't expect any of the Cronkite slave labor interns to be shown the door.  No, it's the guys who are in their mid 50s, earn a decent wage and have worked at the Republic for 20 years who will be shown the door.  Actually, they won't be shown the door.  They are going to be called at home tonight and informed that their key card doesn't work, their email has been disconnected and they shouldn't come in tomorrow.  They won't be "shown the door;" they will never see the inside of the door again.  A third party vendor is going to mail their personal items to them and security is going to be on the lookout for their car. 

Of course, this is simply modern corporate behavior in a competitive environment--a dying industry has to compensate somewhere.  But newspapers are the ones who take credit for holding OTHER industries accountable for boorish behavior. 

So if they continue to hold others accountable while refusing to disclose their own shortcomings then I'm going to print it. 

Talk About a Tin Ear

This is an unfortunate subhead from Sunday's Insider.  Sometimes you just have to wonder what these guys are thinking. 

A Good Time to Have Caller ID

Earlier this week I reported that Gannett was planning to lay off between 1,000 and 2,000 employees over the weekend.  Although that's only 3% of the workforce, I predicted that the Republic would see about double that percentage.  That's because USA Today is going to be spared and the Republic is Gannett's next largest paper.  Add to that the depth of the meltdown in Arizona and factor in that the Citizen is already gone and it's easy to get to a figure of a 6% or 7% lay off for the Republic.

Sure enough, newsroom employees were informed today that they would be facing a 7% lay off and that employees would be receiving calls on Monday night.  That's about 150 employees. 

No one knows who the employees will be, but Gannett has a history of ruthlessly culling out the more senior (read more expensive) employees first--well, they say that life begins at 50, but I'm not sure this is what they mean. 

Today's Morning Shot

Now that the session is over, I'm going to switch most of my pure state government coverage back to The Morning Shot. 

TMS will eventually be a subscription-only newsletter but I'm going to continue the soft launch at least until this fall.  I'll put TMS on the Espresso Pundit website and distribute it free to people who are interested. 

I've had a great response from interested subscribers, so let me know if you want to be on the subscriber list once the soft launch is over. 

Here's The Morning Shot for today

Speaking of Shut Downs...Updated: Effect on the Republic

The Wall Street Journal has the lateston Gannett.

Gannett Co., the largest U.S. newspaper publisher by daily circulation, will cut between 1,000 and 2,000 jobs out of its 41,500-person work force in response to continuing revenue declines, according to a person familiar with the company's thinking.

So why does ASU have a fancy new Journalism School?  Seriously, those kids might as well spend $60,000 learning Fortran or Morse Code.  There are no new journalism jobs and those thousand journalists who are going to get laid off next week--together with the thousands laid off before them--are going to be chasing the few PIO jobs that are out there. 

Frankly, I think there's a bubble in higher education.  Back when full-time tuition was only a few thousand dollars a year, college was a good transition and the fact that perhaps 60% of degrees had no direct economic benefit was tolerable.  But now that an undergraduate degree costs closer to $60,000 and provides the same job prospects that high school graduates enjoy, students (or their parents) will eventually respond to price signals.  At that point, there won't be much need for that fancy J school. 

UPDATE:  The Last Days of the Republic

I spent so much time on my J School soap box that I forgot to answer a fundamental question raised by the layoff announcement--how will it affect the Republic.  I want to be somewhat conservative here, but it would appear that the effect will be rather large.

We don't know exactly what's going on because Gannett is so secretive.  (Remember that the next time the Republic calls for more "Transparency.")    

I'm estimating that the Republic layoff will be in the range of 150.  Here's how I think the numbers will play out.  If Gannett cuts over 1,000 jobs out of its workforce of 41,000 that's about 3%.  Since the Republic has about 2400 employees, a pure across-the-board cut would eliminate about 70 positions at the Republic.  So that's the base estimate.

There's some confusion among various sources, but most sources agree that USA Today will be spared any layoffs.  That's bad news for the Republic because while USAT is Gannett's largest paper, the Republic is second. 

The Republic is also in one of Gannett's hardest hit markets.  Compounding the misery is that Gannett has already closed down the Citizen, so the corporate office can only further reduce its Arizona exposure by going after the Republic.

Arizona is also Gannett's hardest hit location.  The real estate cycle is longer than the traditional business cycle so the Arizona advertising market collapsed earlier, sank deeper and will be down longer than other markets.  Those factors don't bode well for the Republic.  So my guess is that we are going to see about 150 layoffs. 

Of course, this is simply the latest in a long series of layoff stories.  The Republic's business model is unsustainable, so it's not like it's ever going to stabilize at a profitable number. 

"Lack of Gray Matter" or "How the Senate Rs Plan to Open Up a Can of Regime Change"

The most important Committee that you've never heard of is the Rules Committee.  Every bill goes through rules and it's critical for the governing majority to have a solid rules Committee made up of member whom you can count on in a crisis. 

After nearly 20 years in office, Senate President Bob Burns understands the importance of Rules and constructed a bulletproof Committee--he appointed himself as Chairman and filled the rest of the Republican seats with other members of the Senate Leadership team--Senate Majority Leader Chuck Gray and Senate Whip Pamela Gorman. 

Senate leaders are elected by their peers and a Leadership post comes with more than a fancy office and great floor seats.  It brings with it the responsibility of supporting the majority program and watching the Senate President's back. 

That's why the Capitol Community was stunned today when the Senate Rules Committee voted down the Governor's Sales Tax bill by a 5 to 1 vote with President Burns as the lone yes.  Not since Uriah the Hittite was cut down by the Canaanites has one man been so thoroughly abandoned on the field of battle. 

The Senate Republican caucus was aghast and the only speculation that I heard from Senators this afternoon was whether to remove them from leadership before the end of session--like the next caucus--or after Sine Die.

How's it Going to End?

I made it clear in a previous post that I believe Conservatives would be smart to put Governor Brewer's tax increase on the ballot.  In addition to being permanently labeled "Governor Brewer's Tax Increase", the 18% increase in the sales tax is likely to go down in flames.  Then, once voters have made it clear that they want less government instead of more taxes, Conservatives will have the moral "high ground"--so to speak.

I'm sure you will be shocked to learn that my "strategery" has been ignored and the proposed tax increase has maybe 12 votes in the Senate and perhaps 28 in the House. 

So what next?  Well, the Wall Street Journal has an observation.

Ten states were scrambling Monday to pass budgets before a Tuesday deadline, with a handful -- including Arizona, Indiana and Mississippi -- facing the possibility of partial shutdowns if their legislatures don't act in time.

(I've always wondered why we are on so many lists with Mississippi, but that's probably for a different post.)

What happens next?  My guess is that  Bob Burns is going to send her the budget that the legislature passed on June 4th, and she's going to veto it.  

Dude, that would be so awesome.

In order to avoid a government shutdown, Appropriations Chairmen Russell Pearce and John Kavanagh will have to write a series of ongoing resolutions to fund "essential" services.  Of course, "essential" services--DPS, the lower courts and prisons--are the only thing that some Conservatives think government should be funding anyway.  So every month or so, Pearce and Kavanagh will get together over lemonade and decide what's "essential" for the following couple weeks. Since I think that Pearce and Kavanagh have a pretty good outlook, I'm sure I'll be happy with the results.  

Senator Steve Pierce told an ATRA meeting a a few weeks ago that the legislature should pass a "monthly" budget.  It looks like he might get his way. 

Meanwhile, Governor Brewer could take a page out of the Team Napolitano playbook and veto the June 4th budget over and over at a series of mock veto sessions.  You remember those sessions in front of the Teacher's Union, SEIU and gay rights organizations...you know, the guys who will be circulating Terry Goddard's Gubernatorial nominating petitions in a few months. 

The other option is for Bob Burns to go to the Democrats...Ha, I slay me. There are a bunch of reasons why that won't work.   First, there are certain anatomical differences between Bob Burns and former Senate President Tim Bee that make it unlikely that Burns will pass a budget with the Democratic Caucus and a few moderate Republicans.

Second, nearly all the Republicans who joined with Democrats in previous budgets got wiped out in their very next primary.  That's one reason why the legislature is so Conservative now.  So there are fewer moderates available to cross over, and those who do consider it know that they are likely to be reactivating their real estate license if they take the plunge.

The final reason the Burns and Adams can't use Democratic votes to put the Governor's tax increase on the ballot is that the Democrats hate the Brewer tax increase more than the Republicans do.  It's not like Burns can take a few moderate members of his caucus and join with the Democrats to put a one cent sales tax on the ballot.

So the sales tax increase isn't going onto the 2009 ballot and if Governor Brewer wants to veto the June 4th budget bill and then meet with Russell Pearce every couple weeks to decide what is "essential," she's welcome to do so, but there's nothing that Burns and Adams can do about it.

Meanwhile, what about next year?  Republican leaders will admit privately that they have no idea how to balance the 2011 budget.  They are out of gimmicks and they don't have 16 and 31 to refer a tax increase to the ballot or to cut enough spending to legitimately balance the budget.

So what happens in the next 24 hours?

The best that the Governor can hope for is to demand a series of fixes in the trailer bills, sign the budget that Republicans have already passed, establish some sort of study committee to solve the 2011 crisis, give the legislature a month off and then call them into special session to begin work on 2011. 

It ain't pretty, but it's all that's left.

Meanwhile, Having Just Arrived from Mars...

The Republic Editorial Board--AWOL when Napolitano, every legislative Democrat and a few Republican enablers took over the budget process and passed last year's budget fiasco without any hearings--is predictably piling on the Republican budget proposal. 

Hear's a howler for you...

The most troubling is the proposed shift to a flat-rate income tax of 2.8 percent starting in 2012. Popping out of nowhere, it was in neither the Legislature's nor the governor's plan.

The last refuge for those who can't argue against the merits of a policy is to claim that it hasn't been studied enough. 

However, the flat tax proposal was studied extensively by Governor Napolitano's Blue Ribbon tax panel otherwise known as the Citizens’ Finance Review Commission.  You will recall that in January of 2003, Governor Napolitano assembled a who's who of the Arizona business, government and non-profit communities and instructed them to spend a full year traveling the state to get public input an make recommendations about Arizona's tax code.

In October of 2003, after hundreds of meetings, thousands of pages and months of research, the panel issued its recommendations.

Here's what they said about the flat tax.

The commissioners considered applying a flat tax rate, rather than a graduated progressive income tax rate, on personal income tax, but retaining all other standard deductions and exemptions. The appeal of a flat tax is its simplicity and greater incentive to earn more income than exists under a progressive tax system.

However, the Commission had a constraint that the current legislature doesn't have.

Ultimately, the commission rejected the flat tax because figures from the Department of Revenue showed that to remain revenue neutral, the flat tax rate would have to be near 3.54 percent, raising the tax rate on all individuals who earn adjusted gross income of less than $100,000 per year and lowering the tax rate on all individuals who earned $100,000 or more per year.

The Blue Ribbon Panel was forced to consider a revenue neutral flat tax which would have raised rates for the lowest income brackets.  However, the legislature's plan is to DROP all the rates to the lowest rate--flat and low.  

If the Republic doesn't like the plan, that's fine.  But don't try to claim that it hasn't been studied, or is somehow  "Popping out of nowhere."

Early Shot

The Republic is reporting that Phoenix City Manager Frank Fairbanks is retiring.

For two decades, City Manager Frank Fairbanks steered Phoenix through periods of unprecedented growth. His departure comes at a moment of unprecedented upheaval.

Of course, I reported the same thing on May 26th in The Morning Shot.

I'm still experimenting on the format and content for The Morning Shot, and I'm going to start sending out regular issues next week.

I've had a great deal of interest, and if you haven't requested a copy already, let me know if you are interested in being on the distribution list. 

Ultimately, TMS will only be available by subscription, but I plan to keep it free at least until the fall.  

 

One of These Things is Not Like the Other...

A fundamental principle of Conservative thought is the belief that ordinary people spend their money better than the government does.  I know that sounds like a trite stump speech, but it's true.  It's not just that it's morally right to allow people to spend more of their own money, it's economically more efficient. 

When millions of people decide to invest money in a small business or stocks, buy products that they think are cool, send their kids to school, buy braces or put the money in the bank, they are acting in their own self interest and are allocating the money more efficiently than the members of the House Appropriations Committee, or a Congressional "Stimulus" team.

Of course government still needs to be funded and ordinary people aren't likely to donate money to build prisons, fund the courts, pay for CPS, DEQ or the rest of state government--some taxes are clearly necessary.  However, ordinary people are actually quite generous and will often donate to causes that they think are worthwhile.

That's why in the mid 1990s, the legislature came up with a clever plan--let people chose where a small portion of their tax dollars go by giving them a 100% credit for a modest donation.  Under current law, a single filer can donate $200 to a charity that serves the working poor and get all of the money back on his taxes.  This is a classic win/win.  Instead of hiring lobbyists, charities search for donors. 

The results can be remarkable.  In the mid 1990s, doctors and dentists from my church hooked up with a south Phoenix charity that serves the Hispanic community.  The docs donated their time and the contributions that our congregation sent to the clinic were used to buy supplies.  Government could never be that efficient.  More recently, my wife and I donate (should I say "earmark"?) our combined $400 to the Foundation for Blind Children, and they use the money to train blind adults to get back into the job market. 

Critics of the program point out two flaws:  first, there isn't much regulation on what qualifies as a "charity," so there's the potential for fraud, second, the original legislation has a technical flaw that forces contributors to refer to their 1996 tax returns--that was fine in 1997, or even 1998, but neither taxpayers or DOR keep records for 12 years, so the number is now impossible to look up. 

Rep. Yarbrough sponsored HB 2286 to tighten the requirements as well as eliminate the reference to 1996, and the bill passed the House 55 to 1. 

Then Tuesday the Senate killed it.

I won't even guess why the Democrats voted against the bill.  All of the money is spent on the working poor so it's unlikely that the funds would be appropriated to a "better" cause if they came in to state coffers.  Meanwhile, folks like St. Vincent de Paul and Catholic Social Services are left in a lurch.*

Then there are the Republicans who voted no---Allen, Gould and Harper.  What the heck?  Allen I can understand.  She's a classic "moderate" Republican who thinks she can spend your money better than you can.  Let the state keep this money and she'll run it through a committee or two and fund a call center or build a Spring Training facility in the name of "economic development." Whatever.

However, Gould and Harper surprise me.  For me, the next best thing to a tax cut is the opportunity to spend my tax dollars the way I want to spend them.  After all, I like to think of the money that I earn as "my money."  I'm selfish that way. 

I asked Harper about his no vote and got this response..."Ron and I do not believe it is the proper roll of government to be involved in charity and welfare.  Cool, maybe we should let the churches and other private charities handle that...D'oh, that's what this program does. 

Harper then went on to discuss the bill's "fiscal impact."  That's code talk for "less money for the state to spend on stuff Legislators think is cool."  That's straight out of Carolyn Allen's playbook, the moderate mantra "send us your money so we can improve your life with it."  Now I understand.

Allen, Gould and Harper--one of these things is not like the other.   But after enough time in state government they start to look the same.