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2011 look ahead: What the new year holds in store for Arizona
Filed under: General, Business
Posted by: Lillian Wong @ 1:31 am

As the country enters 2011, it is emerging from a depressed housing market and a historic recession. It remains engaged in a pitched political debate. It also has its sights set on a future of ever-changing technology that will increase opportunities.

Today, The Republic looks at what 2011 is likely to hold for Arizonans as we navigate the freeways, send students to our schools and consider our votes. We look at what’s likely to happen to medical care and the prospects for out-of-work Arizonans. We also examine the thing that defined the experience of the past year: the economy.

Race for the White House: Jockeying poised to intensify

The 2012 presidential election is still 22 months away, but what happens in 2011 will likely have a lot to do with who wins. After all, Sen. John McCain essentially won the 2008 Republican nomination by dominating the race in late 2007.

The good news: For political junkies, this is when issues are hatched and stars are born. All eyes will be on Sarah Palin, the GOP vice-presidential nominee in 2008, as well as on that year’s other veterans, such as Mitt Romney and Mike Huckabee.

But others, like Mississippi Gov. Haley Barbour, Minnesota Gov. Tim Pawlenty and South Dakota Sen. John Thune also could prove formidable candidates.

Meanwhile, President Barack Obama will try to win back independents for the Democrats.

His re-election task is complicated by 2010 census results, which show shifts of more electoral votes from the Rust Belt to the South and West.

The bad news: The race for the presidency is always big news, which means political non-junkies, still weary of talk of hope and “tea parties,” should brace themselves for a fresh onslaught of campaign coverage.

The divisive nature of primaries means Republicans will skewer each other for months, while Democrats must accept nearly anything Obama does in the name of party unity.

The bottom line: Whether it’s taxes or the border, who occupies the White House can have a large impact on your life.

It’s never too soon to measure the candidates’ priorities against your own.

- Ronald J. Hansen

Economy: Local and national outlooks upbeat but cautious

Arizona’s economy showed some improvement in 2010, particularly as retail sales and job growth finally picked up toward year’s end. The economy is expected to continue its slow improvement locally and nationally in 2011.

The bad news: Arizona faces a deficit of $2.25 billion over the next 18 months, and legislative leaders plan to come up with a budget over the next two months to deal with it. The expected cuts in spending will almost certainly result in job losses. Concerns about the national debt and deficit also could prompt cutbacks in federal spending and more job and contract losses. As the economy improves, gas prices rise because of increased demand, but gas prices that rise too much and too fast hurt consumer confidence. Experts have predicted prices could rise to $3.30 a gallon or even $3.75 in 2011. A third brake would be continued anemic population growth. Residents in other states who would like to migrate to Arizona are still having trouble selling their homes.

The good news: Stock markets have risen, indicating that investors feel good about where the economy is going. Claims for unemployment insurance have fallen. Hiring and retail sales have picked up. If good news like that continues, consumers will feel better about spending, and hiring will improve.

The bottom line: The economy in 2011 is expected to be the best in three years, although improvements could come slowly. But for those unable to find a job, the recession lingers.

- Betty Beard

Housing: Beleaguered Valley market could start to recover

Metro Phoenix’s housing market could finally start to recover in 2011, but not during the first half of the year.

The bad news: Foreclosures are expected to continue to climb through at least March because of the now-ended Bank of America moratorium. The lender had put a freeze on Arizona foreclosures for two months so it could check for paperwork errors alleged in other states. But BofA began foreclosing on Phoenix-area homes again in early December, and its backlog is likely to push foreclosures to nearly record numbers during the next few months.

The region’s home prices have been falling since last June and are poised to dip below their previous low. Metro Phoenix’s median home price hit $119,900 in April 2009, the current low for this housing crash. But, in November, the area’s median price fell to $121,500 and was expected to drop further in December.

The good news: Another significant drop in home values after the dip is not expected. Home prices could start to climb again as early as April as long as foreclosures fall and investors continue to buy.

The bottom line: Homebuilding has slowed to a crawl and won’t pick back up until there are a lot fewer inexpensive foreclosure homes for sale in the Valley.

- Catherine Reagor

Jobs: Economists see early signs of an uptick in hiring

After losing nearly 300,000 jobs during the recession, early signs of a job-market recovery are in the air.

The bad news: It could take Arizona three years to regain the estimated 275,000 jobs lost during the recession, ASU economist Lee McPheters has said. Although mass layoffs have slackened off, some companies are still shedding workers. Most of Arizona’s estimated 299,000 jobless have been out of work six months or longer. Arizona’s official unemployment rate of 9.4 percent is a count of those who are actively looking for work. It doesn’t include thousands more underemployed or who have given up their job search. Arizona’s official unemployment rate will likely linger in the 9 percent range for the rest of 2011, McPheters projects.

The good news: Arizona, which added 30,800 jobs as of November, leads the nation in private-job growth. State economists expect the state to gain another 16,500 jobs in 2011. The state’s official unemployment rate appears to be declining, probably permanently, economists have predicted. Employers are hiring more temporary workers, and there is a bit more competition among companies to hire top talent, recruiters say.

The bottom line: Arizona is finally starting to gain jobs, but the momentum is far from enough to put everyone who lost jobs during the recession back to work.

- Jahna Berry

Tourism: Hotel rates could stay flat in 2011

Arizona’s tourism industry was blasted in the past few years by the economic recession, the so-called “AIG effect,” when businesses avoided holding meetings in luxury markets, and associations and corporations withdrawing conventions after SB 1070, Arizona’s immigration measure that makes it a state crime to be in the country illegally, was signed into law.

Although occupancy began to grow in 2010, hotels’ average daily room rates fell below the rate for 2009.

The bad news: Some convention business, which traditionally books months in advance, locked in on 2010 rates, prolonging deflated room rates in the Valley.

Although occupancy is expected to grow in 2011, some hotel analysts fear average daily rates will remain flat or fall slightly below 2010 levels. It could be five to six years before Arizona’s room rates rise to where they were at the industry’s peak in 2008, assuming that political matters don’t interfere with its recovery in the meantime, some analysts say.

The good news: Research firms Rubicon, Smith Travel Research and Warnick and Company predict that occupancy will see year-over-year gains of as much as 10 percent in 2011. That could lead to a resurgence of room rates in 2012 and beyond.

The bottom line: Although Arizona’s tourism industry could be on an upward trajectory in 2011, industry insiders remain cautiously optimistic, awaiting a judge’s final decision on SB 1070 and the effect of any future bills.

- Megan Neighbor

Transportation: Programs may face more cuts

The new year brings uncertainty about core transportation programs at every level of government.

Transportation agencies will try to hang on to the money they have and seek new ways to generate revenue, whether through advertising on transit or private partnerships. The Valley’s highways will see continued improvements, including the opening of the first new highway in a decade.

The good news: The Maricopa Association of Governments reports that sales-tax receipts climbed in October for the first time in 38 months. The agency said the worst of the recession may be past. At the same time, the stagnant economy has kept construction prices down, allowing the Arizona Department of Transportation to build more with the limited money it has.

The bad news: The mid-term elections left Arizona with nobody on the key House Transportation and Infrastructure Committee and left Congress talking about cutting transportation funding. The state budget will again face deep deficits, which make continued legislative raids of state transportation funds likely again. MAG will once again need to postpone, downsize or eliminate highway and transit projects in the Proposition 400 plan.

The bottom line: Driving in the Valley should be smoother with major work wrapping up. Bus riders can expect more service cuts in some places. Depending on ADOT cuts, roads will be more littered and repaired less quickly, and services such as rest stops and Motor Vehicle Division office hours are at risk.

- Sean Holstege

Health care: Insurance costs rising, less covered

Arizonans who get health insurance through their jobs learned they will pay more for less coverage in 2011. Arizona’s consumers, hospitals, doctors, health insurers and other health-care stakeholders are adjusting to existing cuts to the state’s Medicaid program and bracing for more severe cuts in 2011. Federal health-care reform was passed in 2010, but the biggest changes that extend coverage to 95 percent of Americans do not take effect until 2014.

The bad news: Health costs continue to rise, and consumers are feeling the pain. Arizonans who have health insurance through their employers will pay more for premiums next year, and many will pay higher co-payments to access doctors, hospitals and drugs in 2011. A survey of major Arizona employers found the typical health-insurance premium increased 6.8 percent last year, to an average of $9,493 per employee.

Those who lost jobs during the recession and landed on the state Medicaid program received leaner benefits in 2010. While the state gained national attention for eliminating some organ transplants for the poor, the state also trimmed coverage for health services such as medical devices and wellness exams.

The good news: The state’s Medicaid rolls swelled by nearly 250,000 from July 2008 through January 2010, but that growth has tapered. Consumers received some initial perks from the federal health-care law, including provisions that bar insurers from denying coverage to children with medical issues and mandate free coverage for preventive care.

The bottom line: Health care is becoming a major financial concern for more Arizonans. Health costs continue to rise, and government-provided health-insurance programs are stressed by increased demand and lower tax collection.

- Ken Alltucker

K-12 schools: Students apt to feel cash crunch

Big changes expected to revolutionize K-12 education are on hold for many schools, given dwindling resources. A push for innovation was buoyed by the expectation of new federal grant money, but the state failed to receive the funds.

Now, reinventing education will move ahead at a much slower rate.

The good news: Federal stimulus money helped schools absorb cuts in state funding this year. Some cuts already made by schools are not obvious to most parents, including reducing maintenance workers and secretaries and sharing art and physical-education teachers among schools.

At the same time, business leaders, education leaders and politicians are coalescing around a new set of education goals: Move up to more demanding national and international learning standards, and reward teachers who move kids ahead.

The bad news: Stimulus cash will soon be gone. Education makes up 38 percent of expenditures in a state budget facing a huge shortfall. Schools face cuts, but lawmakers have only guesses at how much. The amount of money schools make on property and sales taxes isn’t rebounding. Changes that could make education cheaper in the long run, such as more online courses, still need upfront investments many schools can’t afford.

The bottom line: New policies and technologies are being put into place to help students learn. But more parents and students will likely feel the funding crunch. About 85 percent of every school’s budget goes toward salaries. Schools are already thinning staff and now more teachers are expected to be let go. Parents are being asked to provide more classroom supplies, make more donations and expect fewer frills.

- Pat Kossan

Universities: Budgetary ax could cut deeply

Arizona’s three state universities have faced a rocky couple of years.

Systemwide, they’ve seen their state funding cut by 18 percent, or $100 million, while student enrollments have continued to grow.

The Arizona Board of Regents, which oversees Arizona State University, the University of Arizona and Northern Arizona University, has imposed sharp tuition increases in the past few years, a move that has been unpopular with parents and students.

The good news: Unlike the University of California system, Arizona’s state universities haven’t had to limit freshman enrollment.

An influx of federal stimulus money also has helped offset some of the state funding cuts.

The bad news: Given the state’s budget deficit and the likelihood of further cuts, it’s likely that parents and students will be on the hook for a greater portion of their college education.

This could translate into higher student-loan debt or students taking longer to finish their degrees in order to spread out the cost.

It also is possible the universities could shut down what are viewed as underperforming or duplicate programs.

The bottom line: Changes would mean future students who want to stay in-state and go to a public university may have fewer choices on which school to attend.

- Anne Ryman

by The Arizona Republic Jan. 1, 2011 12:00 AM

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