June 27, 2016
DOUG DUCEY’S BOOMING, BLOOMING DESERT
A look at the Arizona governor’s record and goals
JOHN J. MILLER
Phoenix – When Doug Ducey arrived at the campaign headquarters of Proposition 123 on the night of May 17, he hoped to celebrate. By ten o’clock, however, the Republican governor of Arizona knew that nearly a year’s worth of negotiation and politicking lay in jeopardy. The polls had closed a few hours earlier and election returns showed voters evenly divided on the ballot initiative, which sought to change how the state funds schools. “We were winning,” says Ducey, “but we needed more information.” He left the office, drove home, and went to bed, unsure about whether he’d eke out a narrow victory or suffer a huge defeat — and perhaps a bit worried about his political future.
The next day came and went without a result, as election officials kept counting ballots. At last, on May 19, the final word arrived: Arizonans had approved Prop 123 by fewer than 20,000 votes, out of more than a million cast. Although the close contest took many by surprise — they had thought the measure would pass easily — the campaign’s internal polling, released only after the election, had pointed to a tight race. “After eight years of President Obama and his policies, we’ve seen an erosion of trust,” says Ducey. “That’s why Prop 123 was a heavier lift than what a lot of people expected. For voters, a default position is ‘No.’” Even so, Ducey got what he wanted: “We’re thrilled with the outcome.”
He must feel relieved as well. The win caps the first stage of Ducey’s governorship, which started last year when he entered office and solved a big budget crunch without raising taxes. Prop 123 builds on that success, ending a round of expensive litigation and pumping new money into public schools, also without a tax hike. “Prop 123 was a creative response to a set of problems outside of the governor’s control,” says Stephen Slivinski of the Center for Economic Liberty at Arizona State University. Now Ducey can enter the next phase of his tenure with the chance to turn his attention away from fixing the fiscal problems he inherited to advancing his own priorities — and possibly emerge as a leading member of a new generation of conservative reformers to rise from the states.
The 52-year-old Ducey is an ice-cream man — a business whiz who helped Cold Stone Creamery expand from a few shops around Phoenix to become a fixture of suburban strip malls everywhere. He has dark eyes, the husky build of a linebacker, and a crooked nose that he says he broke several times as an athlete in high school. The son of a cop, he grew up in Toledo, Ohio, and traveled to Tempe for college at ASU. If nowhere else, his midwestern roots are apparent in the names of his dogs: He’s currently on his third hound named “Woody,” after the legendary Ohio State football coach Woody Hayes.
Across his career, Ducey has demonstrated a knack for product lines. In college, he worked for a beer distributor. After earning his degree in finance, he took a job with Procter & Gamble, enticing restaurants to buy Folgers coffee. Then he jumped to Cold Stone and its ice cream. As CEO, he made Cold Stone one of the fastest-growing franchises in the country. The chain became popular for its custom mixes and singing hand-dippers, whose performances provided entertainment as customers waited in line. Today, when Ducey warms up audiences, he likes to joke about the difference between pushing ice cream and peddling policies: “You get a lot of undeserved popularity when you’re selling ice cream.” (His favorite flavor, he says, is “Chocolate Devotion” — chocolate ice cream, chocolate chips, brownie bits, and fudge — in a waffle cone.)
When he and his business partner sold Cold Stone in 2007, Ducey did not envision a career in public life. At that point, he had never written a check to a candidate, nor had he ever set foot in Washington, D.C., even as a tourist. At work, he rarely talked about politics. “We were selling ice cream to everyone,” he says. “You want every demographic. I didn’t bring it up at our morning meetings.” To many of his own employees, his political views were a mystery. “I assumed he was a liberal, but only because my other bosses had been liberals,” says Jon Gabriel, editor of the conservative website Ricochet and a former graphic designer at Cold Stone. Yet Ducey says there was never a doubt in his own mind: “I knew I was a conservative because everything Ronald Reagan said made sense to me.” He read Ayn Rand’s Atlas Shrugged and in college briefly met Barry Goldwater when the longtime Arizona senator and 1964 GOP presidential nominee spoke at ASU. Years later, Ducey became a regular at events sponsored by the Goldwater Institute, Arizona’s free-market think tank.
In 2008, a fellow business leader approached Ducey about supporting the presidential candidacy of a different Arizona senator, John McCain. “That was the first time I was asked to be involved in politics,” he says. “I was flattered by it but I was also naïve — I didn’t realize it meant raising money.” He enjoyed the experience and soon after considered a run for Congress. He met with Jon Kyl, who was Arizona’s other Republican senator at the time. “He asked me a very good question: ‘Do you have an executive personality or a legislative personality?’” says Ducey. “I knew the answer right away.” Ducey declared for state treasurer, winning the job in 2010. Then he kept on winning, heading an effort two years later to beat back a ballot initiative that aimed to make permanent a “temporary” one-cent sales-tax increase. Next he turned his eyes to the governorship, now seeking the input of Indiana’s Mitch Daniels. “I was doing my due diligence,” says Ducey. “I thought he was the most successful governor. I had read his book Keeping the Republic and I figured out a way to get in front of him.” In 2014, Ducey ran for governor, promising “opportunity for all” and “government at the speed of business.” He won by a dozen points.
Right away, Ducey faced a challenge: a hole in the budget the size of the Grand Canyon. He needed to close a gap of $1 billion, spread over two years. Gimmicks weren’t an option, as the state already had tried them all. In 2010, it even raised cash by selling portions of the state capitol and leasing them back. Instead, Ducey worked with the legislature to cut spending and produced a budget that the Arizona Republic described as “historically lean.” Despite the belt-tightening, Ducey began to make good on a promise to cut taxes every year, eliminating “bracket creep” by indexing income-tax rates to inflation. He also signed several small-ball reforms into law, lifting restrictions on microbreweries and requiring students to pass a civics test to graduate from high school. At the end of 2015, Jeremy Duda of the Arizona Capitol Times summed things up: “It would be difficult to imagine a more successful first year for Arizona’s 23rd governor.”
Yet a new budget calamity loomed. The year before Ducey entered office, Arizona’s supreme court had ruled that the state was illegally withholding funds for public schools. Ducey urged a settlement, but talks between the legislature and school districts broke down during the summer of 2015. This failure raised the specter of ongoing lawsuits, budget uncertainty, and court-ordered tax increases. So Ducey stepped in. He suggested that Arizona tap into a land trust with more than $5 billion in assets — an idea that had occurred to him because of his experience as state treasurer. “A lot of legislators didn’t even know about it,” says Ducey. “The last thing a government should have is a huge pile of cash sitting around. We needed to unlock its value.” Ducey’s proposal won support from business groups, teachers’ unions, and newspaper editorial boards. “It was a brilliant concept,” says Kyl. Yet it still required the approval of voters — and that’s what they delivered by passing Prop 123 on May 17.
In January, as he entered his second year as governor, Ducey cited one of his influences: “If you want to learn something new, you need to read something old,” he said. “As Barry Goldwater wrote in Conscience of a Conservative, ‘My aim is not to pass laws, it’s to repeal them.’” He went on to wipe out licensing requirements for a series of occupations, such as citrus packing, cremation services, and driver training. He also has pledged to make the “sharing economy” to Arizona “what Texas is to oil and what Silicon Valley used to be to the tech industry.” Shortly before Arizona hosted last year’s Super Bowl, he ended the state’s crackdown on Uber and Lyft, halting the practice of issuing tickets to drivers without commercial licenses. This year, he called on the city of Phoenix to let drivers with these firms pick up passengers at Sky Harbor International Airport. In April, he blocked local governments from limiting the activities of home-rental companies, such as Airbnb. “This is about the value of innovation and entrepreneurship,” he says. “There’s plenty of protection for the big companies. They can always hire one more lobbyist, lawyer, or accountant. Who’s the new guy with a new idea? Whether he’s opening a new ice-cream store or has one of these apps that’s going to change an entire industry — we want to welcome that.”
Earlier this year, Ducey mocked California’s governor, Democrat Jerry Brown, as “my partner in growing Arizona’s economy” and urged companies in the Golden State to relocate. If California’s woes present an opportunity, the thriving of Texas poses a threat — or at least offers a healthy rivalry. Ducey talks about meeting Greg Abbott, the governor of Texas, soon after both men were elected in 2014: “The first thing he said was that he’s going to improve Texas’s tax environment.” Ducey pauses for effect: “Texas already has no income tax.” Then he ticks off the other states without an income tax, such as Florida, Nevada, and Tennessee. “This is how people decide where they live and how businesses decide where they invest,” he says. “We’re going to get our income taxes as close to zero as possible.”
No state has eliminated its personal-income tax entirely since Alaska in 1980. The passage of Prop 123, however, will allow Ducey at last to concentrate on an agenda of his own making. “We’re already a growing state, among the fastest in the country,” he says. “In a growing environment, you can have tax reforms. That’s a gift Arizona has. I don’t want to squander that growth. I want to leave the state better than I found it.”
Another area of opportunity may be school choice. Before Ducey took office, Arizona already was a national leader, with tens of thousands of students participating in tax-credit programs. In January, the governor signaled his interest in expanding these opportunities when he filled a vacancy on the state supreme court with Clint Bolick, a hero of the school-choice movement who is also a founder of the Institute for Justice, a libertarian public-interest law firm. “We’ve got a good foundation on choice,” says Ducey. “We can do it more often and in more locations.” He refuses to rule out an ambitious proposal along the lines of the sweeping, statewide program approved last year in neighboring Nevada — but he also won’t commit to anything specific.
Nor will he say how he voted in Arizona’s GOP primary in March, which Donald Trump won. The two men have not met, though they probably will in July, when the governor will attend his party’s national convention in Cleveland, where Trump presumably will receive the GOP’s presidential nomination. Ducey doesn’t want to get into the details of Trump’s proposals except to say that “trade is good for Arizona” and to join in criticizing the Obama administration for refusing to focus on border security. “My mind is not on national politics,” he insists. “I’m open-minded to an outsider and a businessperson. As a conservative who believes in federalism, I would like to hear that we don’t need to solve problems from Washington, D.C. We can push those programs and dollars back to the states and let governors and legislatures and citizen leaders make decisions. We’re trying to do entirely too much out of Washington, D.C., and we’re doing most of it poorly. That’s my opinion. That’s not the plan that I’ve heard. That’s the plan I’d be attracted to.”
It’s also the plan he’s counting on as he moves into what could be the most inventive and difficult period of his governorship. “The changes I want to make would take two terms,” says Ducey. For better or worse, that could carry him through three-quarters of an eight-year Trump presidency. And it probably means he can count on many more late nights, waiting for election returns to trickle in.