>>>Coming up next on “Arizona Horizon,” a new book shows that the centers of power in America are shifting to cities. What does that mean for the Phoenix metropolitan area?>>>And we’ll check on the status of the retirement system for Arizona state workers.>>>Those stories next on “Arizona Horizon.”>>”Arizona Horizon” is made possible by contributions from the friends of eight. Members of your Arizona PBS station. Thank you.>>Good evening, and welcome to “Arizona Horizon.” I’m Ted Simons.>>>The acquittal of George Zimmerman in the Florida shooting death of teenager Trayvon Martin is prompting demonstrations and rallies around the country, including here in the valley. We talked to Arizona state University history professor Matthew Whitaker about his reaction to the jury’s decision. Whitaker is the founding director for ASU’s center for the study of race and democracy and the father of an 11-year-old son. Whitaker says that what happened in Florida could happen here.>>Fear of demographic change, fear of the others whomever those others are, somehow not fitting the bill for acceptable citizenship, somehow being different and not warranting the type of respect one would give someone else. And it’s that type of feeling, that type of atmosphere that creates the type of cauldron in which tragedies like this, Trayvon Martin deaths happen. And we in Arizona cannot give ourselves pius air as if it’s not possible. It is. Our leaders would be remiss if they did not acknowledge it is at least possible and start to take steps to make it less possible by working with schools, by sponsoring legislation that is inclusive and not divisive. By not sponsoring policies and programs that vilify and demonize others. It’s about sponsoring policies and programs that humanize people and bring people together. So it think it can happen here. I do think this is a conservative state, but there’s lots of good people. I know there are some folks who are meeting in living rooms, meeting in organizations throughout the state to talk about what can we do. That’s one of the first stages. What can we do to educate? What can we do to make sure that Trayvon Martin did not die in vain? What Avenues are available to us? Legal process, legal standpoint, from a political standpoint, from an educational standpoint. So I think you’re going to see lots of things happening, and that’s good. A lot of folks were saying, we hope folks don’t riot, we hope they don’t do this, they don’t do that. And there’s inherent stereo type in that. Wore just assuming. There’s historical precedent, but also there’s stereo type. I’ve seen young people in particular saying we’re not going to lie down for this. We believe this is what happened, and this is what we need to do to make sure it doesn’t happen here, and to make sure there’s some sort of justice for Trayvon Martin and his family.>>Whitaker says the center for the study of race and democracy plans to hold a healing racism forum set for September 11th.>>>”the happy revolution — How cities and metros are fixing our broken politics and fragile economy.” That’s the title of a new book that exams how power is increasingly shifting from state and federal governments to cities and metro areas. The brookings institute took those ideas and released a metropolitan business plan that adopts the discipline of the private sector to regional revitalization. Mayors in the Phoenix area have organized a high-level steering committee to guide the development of a new economic growth plan. Joining me to talk about the plan are Phoenix mayor Greg Stanton, Barry Broome, president and CEO of the greater Phoenix economic council, and Steve Seleznow, president and CEO of the Arizona community foundation. Good to have you all here.>>Good to be here.>>Mayor, we’ll start with you. What is the metropolitan revolution?>>I think it’s really a statement that our economic success here in this region is not going to emanate from Washington, DC’s and policy there. They told me they have smart policy, but it’s whether we are adopting policies here to advance our economy. We’re competing against not only other regions in the country, but regions of the world, and I think people are looking for us as city leaders, as regional leaders to get the job done. Cities are really where people still have confidence in government, I think people for the most part have lost confidence in Washington, DC and the gridlock there. I think they have less confidence on what goes in state legislature, but I still think they believe cities are functional levels of government. If we’re going to compete at an international level we’ve got to get policies right here at the local level and that’s what this is all about.>>Barry, are cities doing things right? State and federal doing things wrong? A little bit much both? What’s happening?>>I think cities are on the ground and are connected to their constituents. The difference between being a mayor and a councilman versus a member of Congress as you live with your constituents. One of the things we do, we work with 21 mayors at GPEC, and we tell newly elected mayors, you’re going to be one of the very few public officials where you’re going to hear from your constituents when you’re in a grocery store, at church. That doesn’t happen so much for people in Washington, DC. So there’s a greater disconnect from D.C. to the constituency. State more so than D.C., but still very disconnected. But whether it’s fixing parks, recreational programs, youth intervention, keeping streets clean, public safety, the municipal leaders are on the ground with the constituents, and I think they’re closer to them and are more apt to make capable decisions that are in the interests of the community.>>Is this a gradual changes, something sudden? What’s happening?>>I think the shift has been occurring for some time. I think over the last few years when we have seen Very little happening in Washington, DC, we realize we have to take charge of our own economic destiny. We can’t wait for the signals of the leadership from D.C. to tell us what we need to do economically. We have as cities great experience in running services and programs for the people who live in our communities. We know how to do that, we know how to do that better than anybody in D.C. does. Now we’re transferring that kind of knowledge and skill set and wisdom and say, can’t we control our own economic destiny? It’s not that we haven’t been engaged in our economic future, but building the infrastructure, creating the incentives, creating the kind of economic ecosystems that we need to really drive what we think will work here in our unique place.>>With that in mind, the definition of a city, is it somehow changing?>>That’s important to note. The metropolitan revolution is about two things. Number one, that we’re going to sink or swim as a region, not with Washington, but we have to act as a region. City of Phoenix can’t be adopting self-defeating tax policies to steal jobs from another city and region. That’s a waste of our time. We have to be operating as good teammates and that’s incredibly important that we as regional city leaders get together and be on the same team that we’re chasing after the right companies, the right jobs, higher wage jobs, higher educated work force and not engaging in intracity, intraregion competition. That’s not smart.>>It almost sounds like we’re talking city states, pseudocity states developing, these metropolitan regions that are getting more powerful by the day. Are we talking something along those lines?>>Two-thirds of the people in the United States live in a metropolitan region. 75% of all the economic output in the U.S. is now in these metropolitan regions. And you live with and are connected to your leadership. So I do think it’s a city-state initiative. I also think as mayor Stanton is saying, this has long been a very effective region. How do you gain more leverage around that regional model? I think mayor Stanton and other mayors understand if an employer, state farm puts 4,000 jobs in Tempe, they’re probably going to hire 1500 people from the city of Phoenix. And maybe 500 from Scottsdale. And 300 from Gilbert, and 250 from Chandler. So they understand that these economic benefits go beyond political jurisdictions and working as a team is going to accelerate the benefits, increase wealth and drive higher performance.>>So again, is it’s just the fact that you are on the ground with your constituents? Is that the big — Why isn’t this happening at the state level? We can understand the distance with Congress, but there’s certainly a difference here in Arizona between what’s happening state, what’s happening local.>>There certainly is a clear role for the state to play to enable regions of the state to kind of actualize their economic futures. But I think what we’re able to do at the regional level is collaborate. And if you look at the new economy and you look at business today and successful companies, those companies are forming all kinds of unique alliances. Both within their industries and across industries, and across nations. And so we have the capacity to collaborate as we have seen, the three major mayors here, mayor Stanton, mayor Smith, mayor Rogers, all coming together, not competing with each other, but collaborating and forming alliances. Because we’ll have all boats rise that way. Really selling the region for economic development as opposed to one town, or one city.>>We’re trying to build a modern economy that works for everyone up and down the socioeconomic scale. But we’re in hyper competition. Hyper competition for talent. And that means us as a region, city of Phoenix and all the other cities, need to be at the top our game providing the very best quality of life. You’ve got to be committed to supporting the arts, historic preservation, protecting great neighborhoods. You want to be a place that the tough entrepreneurs, the people that we’re competing for against other cities across the country, you want to be a place they want to come to and so investment in the right things makes a big, big difference if we’re going to win this competition.>>Does that make — You deal with these people that are looking to transfer out here and expand out here. Does that make a difference?>>It makes a big difference. I think part of a good business environment is how people cooperate. But best companies and the most sophisticated companies, they’re asking things like, what’s your sponsored research for technology? Let’s spend a lot of time evaluating what your real educational picture is. And of course as the mayor is saying, a lot of the most creative professional classes, they have the humanities infrastructure in their body of work, and the arts is very important to these companies and to these industries.>>With that in mind, the metropolitan business plan, what are we talking about here and how does that impact the Phoenix metro area?>>We’re really talking about putting together a very clear strategy that builds off the assets of this region. That looks at what is here right now in the Phoenix metro area, that can be expanded, that can be accelerated, you know, we have some amazing industries and we lead the world in a lot of different areas. For example, online learning. We are probably the most important city in the world around online learning. If you look at not only the large companies like Apollo and University of Phoenix, but all up and down the Tempe to Scottsdale corridor, there are enormous and growing numbers of education software companies. We lead the nation in that. How do we Biddle that out? How do we create an infrastructure there? So I think we need to kind of capture what the assets are in this region, what’s the infrastructure to support it, what are the incentives to support it, and to craft out a strategy for business, for philanthropy, and for government in terms of how do we build the new Arizona economy?>>We are just digging out from the worst recession since the great depression. And Phoenix got hammered this economy, almost as hard as any other city in the country because of overreliance on real estate. We’ve asked Steve to chair our metropolitan business planning process to make sure that we have the attitude of never again. We have to build a more diverse, sustainable high-wage economy with a higher educated work force that can better withstand the ups and downs. We can’t have this roller coaster we’ve had. We’ve got to look in the mirror and say how can we up our game snits what we owe the next generation. This plan process that we’re going through right now is going to pay dividends for decades down the line.>>The planning process and upping your game as opposed to demand and what is really needed out there and maybe projected demand, how do you work that balancing act?>>A lot of this starts with great data and great evidence. One of the things I think that’s plagued the valley and Arizona, we’ve operated too much on anecdotal information and evidence. So we tend to follow trends instead of set and lead trends. As Steve is saying, we are without question the digital center of excellence for educational I.T. Now we have evidence to that effect, now that’s a sector in which we can lead. What are the intentional behaviors of the marketplace to take that sector to the promised land so we lead globally in that very important space? So it’s going to start with great information and data, and then there’s going to have to be an intentional plan which we execute against that. That plan is going to have to include everybody. We’re going to have a very broad-based coalition of people to work and develop on that plan, people like GPL, the Arizona chamber greater Phoenix chamber, we’re going to need our partners mag, the metropolitan planning organization to work with us. Both University presidents, Dr. Hart and Dr. CrowE are at the table for this. So it’s got to be a serious coalition, it’s got to operate on evidence, we have to have very high standards and it’s time for to us make a big move. One of the things in the data we’re recovering more independent on housing than we were prior to 2007. Our recovery is more housing dependent than it was in 2007. Of the 10 jobs we lost in 2007, six were related to these construction fields. Our recovery of the 10 jobs that are recovering, seven are related to the same construction fields. So we have a major need to diversify and change our economic future.>>With that in mind, talk about — we see here in the Phoenix area planning, goals, unique assets, these strategizing — Compared to what they’re saying in San Diego, in Denver, what they’re saying on the East Coast.>>Well, we don’t need to do what they’ve done in New York or in San Diego, or in Denver, any other city. We need to be strategic and they were, we need to build a plan around data, but we need to built it around unique assets that are here in Arizona. We’re in a really unique spot when you have many, many assets, there it’s an international border, whether it’s great health and technology companies, whether it’s great online learning companies. Whether it’s great Universities and say what is it that we need in this region that will work for the Phoenix metro area that will work for Arizona? It may not be the same as the other cities, but it will be predicated on a set of ideas driven by data, driven by existing assets, and new assets we need to bring to the table here.>>Last question. Mayor, can this last, can this proceed, can this develop without part son gridlock, which we see at certain levels, without the state coming in and saying, oh, no, no, no, we have control here. When things start going well, all of a sudden you’ve got a lot of friends.>>We want to it go well and we want more friends. They call it the metropolitan revolution for a reason. We operate at the local level naturally in a less partisan environment. We as local leaders get judged by whether we get things done, not whether we crush the other side, whether we win the debate of the day, whether we deliver to the City people in the city. I’m confident this plan just like when Pittsburgh leaders got together after the fall of the steel industry, they put together a plan that stood the test of time and now Pittsburgh, their economy is much more based on a higher educated work force and higher education. Similarly I see the same thing happening here. The business community, the nonprofit community coming together with the political community put together a plan that’s going to stand the test of time. I think we’re headed in the right direction.>>Gentlemen, we’ll stop it there. Good to have you here. Thanks for joining us.>>Thank you.>>>We want to hear from you. Submit your questions, comments, and concerns via email at [email protected]>>>The Arizona state retirement system is a $28 billion pension fund with over half a million members. The trust fund posted a 12% gain in investment last fiscal year, but the system is still catching up to cover investment losses during the recent recession. Joining us now is Paul matson, chief executive of the Arizona state retirement system. It’s good to have you here.>>My pleasure. Thank you.>>Let’s get some — What is the Arizona state retirement system? Define the terms here.>>Excellent. Excellent. The Arizona state retirement system is the largest pool of assets in the state of Arizona. It’s approximately $30 billion of assets, we have approximately 535,000 members. Which approximately 115,000 are retirees. So we look after the money for state employees, teachers, municipal employees, and county employees with the exception of city of Phoenix, city of Tucson, and police and fire.>>OK. Is the state pension plan underfunded as we speak?>>Yes. Most pension plans are underfunded. The funding ratio at the last measurement period was approximately 74, 75%. And then the contributions, that’s why you see contribution rates have risen over the last since 2003. And the reason you’ve seen them rise is predominantly to pay down the deficit.>>When you say the contributions have increased that means more workers are paying more into the system. No cost of living raises again this year?>>Correct.>>Because of that still trying to catch up.>>Yeah. The cost of living, technically the Arizona state retirement system it’s not a cost of living per se, it’s an excess earnings payment. So in the portfolio that is managed by the Arizona state retirement system has excess earnings, a percentage goes out to retirees. I respective of whether or not there’s inflation. So there has not been such excess earnings for — Since 2006 and as such no excess — As such no excess payments.>>this is different from P.D. and fire and correction and elected officials. They are getting the payments but they’re not quite as healthy as your system?>>They have a different funded status and different payment mechanism. If you look across the United States you have different pension plan structures. And some pension plans actually pay no excess payments to retirees, some pay a fixed amount based on inflation. In Arizona you have two models. Some pay a fixed amount on excess earnings, some pay a fixed amount based on a long-term series of potential excess earnings. We look at a 10-year horizon and we’ll only pay for excess earnings over a 10-year period or beyond what our targets were.>>And indeed, recent stock market gains good news for the last couple fiscal years. Correct?>>Absolutely. Our long-term rate of return is approximately 9.8%, and that starts from 1975, so we collect data from 1975 going forward, just under 10%, about 9.8% rate of return. The short-term rate of return for one year will be about 11.9% for two years or three years about 11 or 12. It’s the short medium term period between five and seven that we’re hovering around six, 7.5% rate of return. That’s what time will have to push up before there’s an excess payment.>>You’re hovering there because of as much of an 18% floss ’08-’09?>>Correct.>>The numbers go crashing when the market goes crashing.>>there were a number of things that happened in the late ’90s and early 2000s. Number one, the benefit design was enhanced. So the benefit structure in the late ’90s was enhanced so more payments went out to retirees. In other words the benefit structure was increased. Almost at the same time as you went into a period that you had two negative stock return periods. Or two bear markets in the 2010s. We’ll call it A-1.com, 01.com and 2008 predominantly real estate and financial institutions. Two negative bull — Bear markets at the same time, benefits had been increased and that’s why you saw a drop in the funded status, and an increasing contribution rates.>>And what we’re seeing now is trying to recover and get back to, what, the 20-year level or something along those lines.>>Our strategy is to increase contribution rates, and then get the funded status back toward>>Are you seeing that as far as projections?>>Yeah. We’ll be at approximately — We estimate to be approximately 80% funded in approximately eight years. And then a slow increment thereafter. You don’t want to increase or decrease a funded status from 100% very quickly because of contribution rates move too high and too low. So we smooth things through time to get us slowly toward the hundred percent.>>There’s a plan I think it’s in the senate, the U.S. senate, the idea of private insurance companies paying benefits through annuity and contracts and these things. What are your thoughts on that?>>This is such an important issue in the United States. Nationwide and with the state of Arizona. The proposal you have seen in the senate now is really funding a defined benefit plan in a manner that you would fund an annuity. And that loses most of the benefits of a defined benefit plan. If you look at the portfolio that backs up a traditional defined benefit plan, it’s constituted with a series of investments including U.S. stocks, international stocks, access to emerging market equities. The result is you have a very significant rate of return. And that lowers the cost of the retirement benefit. If you no longer fund them through that diverse investment pool, simply through annuities, which are essentially invested in fixed income securities, you lose the higher expected rate of return and you cost for the pension benefit go up. So you want to create a system with the highest output expectations at the lowest cost. I think that a defined benefit plan does that better than –>>the annuities, for those that support this plan, they say the impossible to underfund such a pension plan which is such a concern. The underfunding of these plans. Respond to, that please.>>I think it is generally accurate, it would be virtually impossible to underfund such a plan. But the cost of that is to significantly increase the cost of that plan. So if this — If a pension plan was a business, our goal would not be to minimize the volatility and our income and make no income. It would be to accept reasonable volatility in incomes so we can have greater income. And if you operate a pension plan in the same way, you accept interperiod volatility, so you can maximize the pension payments to retirees at the lowest cost to the taxpayer.>>I know a lot of people want a yes-or-no answer — Is the retirement system sustainable?>>Absolutely yes. And the Arizona state retirement system health insurance system as well.>>All right. It’s good to have you here.>>Thank you. My pleasure. My pleasure.>>>Tomorrow on “Arizona Horizon,” a local commercial airline expert tells us what’s next now that U.S. airways shareholders have approved a merger with American Airlines.>>And we’ll look at the status of Arizona’s tourism sector. and 10:00 on “Arizona Horizon.”>>>That is it for now. I’m Ted Simons. Thank you so much for joining us. You have a great evening. Captioning Performed By LNS Captioning www.LNScaptioning.com>>”Arizona Horizon” is made possible by contributions from the friends of eight. Members of your Arizona PBS station. Thank you.>>>When you want to be more informed, eight delivers news and analysis with multiple perspectives. Thanks to financial support from you and –>>friendship village Tempe. A retirement community for over 30 years. Offers independent living with residency options, lifelong learning classes, as well as continuing care. 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Arizona,” eight’s Emmy award winning restaurant review show is now accepting restaurant nominations from anywhere in Arizona. So if you live in Flagstaff, Yuma, kingman, Prescott, Holbrook, payson, Phoenix or anywhere in between, we want you to nominate your favorite hometown restaurant. Apply to be a guest on “Check, Please! Arizona.” Go to www.azpbs.org/checkplease.>>>Coming up on eight HD. Eight life. And eight world.>>I love teaching. It’s just so rewarding. You’ve got to make it exciting and fun, and that’s one of the things I always try to do. Those light bulbs start turning on in the room and they go, I get it, I get it! PBS teacher line has been a lifesaver for me as a teacher, because I was able to take the class online and get college credit. I learned a lot of strategies which I’m implement income my classroom. PBS teacher line has helped me to be a better teacher. 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