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News Analysis: February 4, 2008

posted on February 6, 2008 at 9:27 AM

Mundt: Here now for a bit of analysis behind the headlines is Jeneane Beck. Jeneane, welcome.

Beck: Thank you.

Todd Mundt: You have a long list here today for a Monday. We're going to start right down it here. First of all another settlement in the Touch Play situation.

Beck: You may remember these games, these video lottery machines sprung up across the state in bars and convenience stores in 2005. The state initially approved these machines as a way to get more revenue but later felt some public backlash because they resembled slot machines and many people were uncomfortable with them.

They banned them in early 2006 and companies that had invested millions of dollars to put these machines out there were left holding the bag and sued the state. Now, the state said, look, we have every right to ban something we don't like and today, though, the state agreed to settle with Camden, Inc. out of Cedar Rapids, will pay them $1 million.

That means taxpayers like you and me pay that money because the state is self-insured. That is $1 million settlement plus $290,000 in some debt they owed.

Todd Mundt: So, essentially $1.3 million, that is just to one company and there are multiple companies that they have to settle with.

Beck: There are further lawsuits pending and that is part of the reason the Attorney General called this settlement fair and reasonable. He said, considering the ongoing litigation this is fair and reasonable. But you will hear more.

Todd Mundt: Now, you told me this before we started that we did make some money from this, so this is something to keep in mind as we're paying out settlements. But obviously we made, what, $30 million?

Beck: Yeah, in the brief time that they were in the communities the state collected about $30 million in Touch Play revenue. So, so far this has not hurt the state treasury. The state has taken in far more than it has returned to these businesses.

Todd Mundt: I assume, though, that the state hoped at the time that it would be using this money for other purposes rather than paying settlements.

Beck: Exactly.

Todd Mundt: Okay, well we'll follow that as it comes along. Now, we've talked over a period of time about the wastewater issue, treatment facilities needing additional funds in order to upgrade. Give me an update on that.

Beck: You know, just a week ago on this program L.D. McMullen said that he thinks it's a billion dollar problem, the infrastructure repairs needed by local governments to update their sewage treatment facilities as we try to comply with the federal Clean Water Act.

And the Governor today decided his decision to zero out of the budget an annual $4 million appropriation that was going into a pool of money that local governments could borrow from to fix their facilities. And he said, well, you know, we've got about $8 million in there so far and the requests are just now trickling in from communities that want to borrow this money so I think we can hold off for a year or two until more of those requests come in.

But there are local governments saying, you know, one upgrade can be anywhere from $1 million to $4 million for one community and that that $8 million, they're going to go through that money in no time and that this is not the time for the Governor to be zeroing out that annual appropriation.

Todd Mundt: Certainly any wait is going to increase the cost because of inflation to fix this. Is there any chance that the legislature, legislative leaders will take any other action on this besides what the Governor has already said he's going to do?

Beck: Yeah, this is just his budget recommendation and you can bet that city governments will be up there lobbying, asking for that money to remain in the budget and we'll just see what lawmakers do.

Todd Mundt: The revenue picture looks pretty good. I mean, we get it lagging, as you can imagine, but the latest figures I saw in front of me just a couple of minutes ago was for December, looked pretty solid.

Beck: Revenues continue to increase. The personal income taxes are up about 8% so what that really means is that lawmakers are going to hold off doing the state budget for as long as they can. Under state law they're supposed to put together the budget based on December revenue figures.

But if revenues are higher, in March let's say, they can say well, let's just ignore that part of the state law and do our budget based on those figures so they have more money to spend essentially.

Todd Mundt: Have they done that in the past?

Beck: Oh, many times, many times when things looked like they were going to continue to improve, yes.

Todd Mundt: Is there any, in the forecasting that has been done or any discussion that you've been a part of or heard, is there some feeling that there are dark clouds on the horizon since in many parts of the country there is talk of a beginning of a recession. And we know Iowa tends to lag but are they seeing anything like that?

Beck: They're not seeing that yet but that is their concern that Iowa will eventually face that same down turn that other states are now facing. The one thing that is buoying Iowa is our farm economy.

You know, with ethanol production being what it is farm values are high, farm profits are high, soybeans and corn both at record prices so Iowa is being buoyed by that industry currently and not facing the down turn the rest of the country is. But make no doubt, there are economists saying those dark clouds are on the horizon and we need to be prepared.

Todd Mundt: I guess the question would be if we have another great year in terms of our budget, let's say we get to March, figures still look good, are we going to have -- everyone said we were going to have a case of indigestion coming into this year and we're going to have to pull back on spending. Are we just pushing it off until another year, until next year when we face an even more stark situation?

Beck: And that is what Republicans will argue. And I think even Democrats are sort of realizing that and saying, okay, to the groups that we made promises to last year, teachers, schools, we're going to keep those promises. The rest of you groups that are coming to the statehouse lobbying for additional money, not so fast, we're probably not going to give it to you.

So I think even Democrats are saying, we've got to pull back, we've got to fund what we promised so far and make no further promises in case the budget goes south.

Tags: Iowa news