Hobbs channels Clinton -- Bill, that is
Does she have the political chops to triangulate against MAGA legislators? Her proposed budget wasn't a sound start.
Gov. Katie Hobbs’s State of the State speech and her proposed budget remind me of Bill Clinton’s triangulation strategy, adopted after a mid-term rebuke in 1994.
Clinton and his advisors wouldn’t put it this way, but I think the most useful description of his triangulation strategy is as follows: Blunt or co-opt conservative criticism, while advancing liberal governance through small, incremental measures.
Hobbs has stressed border security of late and has been echoing harsh GOP criticisms of federal government failures. In her campaign, Hobbs discussed the state’s role as one of helping border communities cope with the effects of illegal immigration. The additional $15 million her budget proposes to spend on the issue fits that motif. But it is now encased in much tougher secure-the-border rhetoric.
The budget also includes new funding to backfill a reduction in federal support for crime victim programs, a favorite of law-and-order conservatives.
A good example of advancing liberal governance through small, incremental measures is her mortgage assistance program. It would use just $3 million in general fund revenues and combine it with $10 million in the Housing Trust Fund to subsidize interest rates and down payments. There are tens of billions of dollars in mortgages originated in Arizona every year. The handful of people $13 million might help won’t affect the overall housing affordability situation a whit. Only the reduction of supply-side regulatory constraints will do that. But it would get the state more explicitly into the mortgage subsidy business.
Related is Hobbs’s proposal to extend a tax credit for building lower-rent apartments. There would be $8 million a year up for grabs for developers. But it would be cumulative, capping out at $64 million after eight years. Again, this isn’t enough to move the needle noticeably on affordability. But it would be a steady expansion of government’s role in deciding who gets to build lower-rent apartments.
The most audacious expansion of liberal governance is the proposal to establish a division in the Department of Insurance and Financial Institutions with the authority to set and cap prescription drug prices.
In fact, Hobbs has shown a proclivity for price controls, a candidate for the most widely discredited idea in all of political economy. She has also proposed price controls on private school tuition. I wouldn’t be surprised if a proposal for rent control is around the corner.
In a budget preview, I wrote that it would be interesting to see whether Hobbs offered a governing budget or a political budget. She split the difference, offering a governing budget for resolving the deficit for the current fiscal year (FY 2024) and a political one for resolving the deficit for next fiscal year (FY 2025), which begins in July.
There is a substantial difference, hundreds of millions of dollars, between the general fund revenues the governor’s budget staff is projecting for this fiscal year and the projection of the Legislature’s budget staff. The governor’s gurus are anticipating an uptick in state revenues, which have been in the doldrums, for the second part of this fiscal year. The legislative gurus were expecting the same, but abandoned that hope with the most recent projection.
This difference, although substantial, isn’t as consequential as it being made out to be.
You sometimes read that Arizona has a state constitutional provision requiring a balanced budget. In reality, there is no such provision. Instead, there is a debt limit that the courts have rendered essentially meaningless. In fact, there are a couple of constitutional provisions that anticipate an occasional deficit and offer guidance, now outdated, about what to do about it.
The real limit is the state’s cash flow. So long as checks don’t bounce, how the books tote up is more a political than a legal matter.
With only six months left in the current fiscal year, major shifts in spending are neither desirable nor, in many cases, feasible. However, Hobbs has identified over a billion dollars in capital projects that have not yet commenced, thus capable of being delayed, and sweeps from surpluses in other state accounts that could be effectuated without affecting the programs they support. It’s the same approach the Legislature will undoubtedly begin with.
The billion plus should be enough to cover even the larger deficit the legislative staff is projecting and necessary supplementals without jeopardizing the general fund cash flow.
FY 2025 is another matter. What Hobbs has submitted is a political budget, and not a particularly adroit one at that.
Hobbs has spending increases she wants to see in that budget. The big ask is $100 million for daycare subsidies. But there are other asks, such as greater oversight of nursing homes and sober living facilities. And there are formula increases in K-12 education and Medicaid to absorb.
A governing budget would have provided a politically feasible way of accommodating these asks within anticipated revenues. Instead, Hobbs balances the budget by cutting the private school voucher program by $244 million and proposes eliminating private school tax credits, saving an estimated $185 million in FY 2026.
Now this is universally conceded to be politically infeasible. GOP lawmakers will allow state government to shut down before being party to gutting universal vouchers. It is also internally inconsistent and politically maladroit.
Let’s deal with the latter first.
Not enough has been made of the fact that Hobbs’s proposed savings comes from booting off the voucher program students who are already receiving them. She wants to require that any student receiving a voucher have first spent at least 100 days enrolled in a district or charter school.
As a policy matter there is no justification for this. If all students ultimately are eligible for a voucher, what’s the point of requiring them first to spend the majority of a school year in what their parents regard as a suboptimal educational environment?
Hobbs proposes that this requirement be imposed retroactively. That means the roughly 50,000 kids who were already in private schools and who are now receiving a voucher would be kicked out of the program.
Consider the politics of that. Whatever political advantage Hobbs and Democrats might have from being anti-voucher they already had. And they could have run on going-forward constraints they would put on the program if given the majority. Hobbs could have called for some of those going-forward constraints in her budget. Instead she went after kids already enrolled in the program.
With this proposal, there are now in the vicinity of 100,000 voters – parents and other relatives of the 50,000 – who can now be told that Hobbs and the Democrats want to take away from them a measure of financial relief they had received from the cost of private school tuition. And these are not all MAGA voters. A substantial number of them probably fit the swing voter category of non-MAGA Republicans and independents that has decided Arizona elections the last several cycles.
Predictably, the conflict over vouchers dominated the budget coverage, deflecting attention away from more politically viable parts of Hobbs’s agenda.
A self-inflicted political vulnerability for a politically futile gesture.
I’ve written in favor of repealing the tuition tax credits. I’ve never been a fan, having described them as bad tax policy in support of good education policy. However, if vouchers are indeed universal, there is no remaining rationale for them. The vouchers generally are roughly twice as large as the scholarships funded from the tax credits, and students aren’t allowed to take both. There’s no reason for a family to prefer a tax credit scholarship to a voucher.
However, under Hobbs’s proposal, vouchers aren’t immediately universal. A student has to spend the majority of a school year in a public school before receiving one. So, for parents who don’t want to put their child through that, there would still be a rationale for the tuition tax credits to help them out. Hobbs clearly didn’t think through the interrelationship between the two programs.
Triangulation worked very well for Clinton, helped by impeachment overreach by Republicans. But, in part, that was because it represented a return to Clinton’s roots as what was then called a New Democrat – what today would be denominated a centrist Democrat in the mold of Mark Kelly and Kyrsten Sinema, before she was hounded out of the party by progressives.
Where Hobbs fits on the left-of-center spectrum is unclear. As is whether she has the political chops to use her post to help her party triangulate against the MAGA GOP Legislature and take over.
What is known is that she booted the chance to offer a politically feasible blueprint for next fiscal year. She has forfeited the initiative to MAGA legislators. Not a sound triangulation move.
Reach Robb at robtrobb@gmail.com.