Paul Yeager: Hello and welcome to The Iowa Journal. Education has been a long held value in Iowa. But an era of "all of our children are above average" may be closing. It seems the rest of the world has pulled ahead of the U.S. and Iowa. We'll examine why that is and what can be done about it in a bit. Certainly education remains a priority, even at a time when state government is bracing for significant cuts to its budget. In total the cuts proposed by the Governor for next fiscal year amount to a reduction of about 1.4% from the current year's budget. But the fiscal diet means most state budgets will need to reduce anticipated expenditures next year by 6.5%. Also contained in the budget is a bonding proposal that would finance an ambitious building program.
Governor Chet Culver: So I believe we need to take bold action now to do something about this recession. Towards that end I have proposed the creation of the Rebuild Iowa Infrastructure Authority. The Rebuild Iowa Authority would issue $700 million in bonds, paid with existing gaming revenue. We've earned a AAA bond rating, interest rates are at near record low and our state has one of the lowest debt levels of any state in the nation. In fact, we're ranked 48th in the nation when it comes to our public debt per capita. If we doubled our current debt amount we would still be ranked 48th. When fully leveraged this $700 million investment will lead to billions of dollars of projects to improve our state, to rebuild our flood-affected areas and create thousands of new jobs. So, while we're cutting back on the day-to-day expenditures of state government, we must be investing in bricks and mortar to create jobs, support businesses and keep our economy going.
Paul Yeager: Those are comments made by the Governor yesterday in Des Moines at a press conference. David Pitt of the Associated Press is with us to help examine these proposals as well as some private sector trends. So, David first let's start with this bonding proposal idea. Do you think there will be any takers on buying the state of Iowa bonds?
David Pitt: I think so. As the Governor said the state has a good bond rating, it means our tax exempt bonds people are looking for safe places to put their money and these types of bonds, revenue bonds pay typically more than U.S. Treasury bonds so there is probably going to be a market for them.
Paul Yeager: So, there's not any question of if but it's a matter of when and it's a matter of how quickly we need to move forward. We know that these are going to sell, we think they're going to go quickly. That is good news to Iowans. Will they be bought by Iowans? Are they going to be bought by somebody out of state, out of country?
David Pitt: Well, my guess is that they will be investors in general who are looking for these types of investments so it could be a combination of anybody.
Paul Yeager: Let's actually have some bright economic news if we can. There are companies coming to Iowa -- IBM was announced in Dubuque last week -- there are other indicators, things are looking up in some parts, where is that?
David Pitt: Well, I think if you look in general the state according to December figures that were released has the 6th lowest unemployment rate in the country still under 5%, we're at 4.6% right now. There are a few states that have peaked over 10% so to give you kind of a relative idea of where we stand our unemployment rate generally is lower than other states and we do have a couple of companies in Iowa that seem to be doing well and seem to be weathering the recession. Wells Fargo, not based here but it has a significant presence in Des Moines, just released its quarterly report and although the quarterly report didn't look so great because it did have to write off a lot of money and investments and it bought Wachovia and had to take some losses from that but they are making loans, the bank is making loans, they are getting new customers and they seem to be weathering the recession as large banks go relatively well.
Paul Yeager: And you were on a conference call I think you said earlier this week with Principal. What did you learn from that?
David Pitt: Well, Principal is another company that has seen some issues with investments and so they have had to take some losses in the last several quarters but they were making a point in this conference call with analysts and investors that they have a pretty diversified revenue stream. They have operations in other countries and they are growing in their international asset management part of their business so it's a well diversified company and they were making the point that we're here to last through this thing.
Paul Yeager: We talked about bonding but there is also an issue that moved through the statehouse on Thursday that would provide for local option sales tax increases specifically for flood relief. Tell me about that bill and what's been behind that.
David Pitt: The idea I think it started in eastern Iowa, the Cedar Rapids area, where they're looking for opportunities to raise revenue to try to pay for some of the damage that was done by the flooding. What this bill would do, it's been sent to the Governor now would allow specific counties that have been declared a disaster area to vote on whether or not they want to raise their local taxes by one penny. Those counties and municipalities do not have 7%, which is the state limit now, they could raise their taxes from 6% to 7% if they are at 6% now. There are a few counties that have maxed out already and they wouldn't be able to do it but for a lot of those that have been declared disaster areas they would have that option.
Paul Yeager: That will now go to the Governor and we'll find out when that gets signed in a little bit. Also want to talk about what Iowa might see, some of that economic impact of investment. The Governor talked about that a little bit. There are industries, we talked about Principal Financial and Wells Fargo, there's other industries that are looking up in Iowa. What are those?
David Pitt: Well, if the Governor's plan goes through obviously it's going to boost construction. I think that is his major proposal is that construction projects could create a number of jobs and he's talking about projects that are really ready to go, they are projects that really just need the money, need the funding and they're ready to hit the road, so to speak, to get the projects underway whether it's bridges, whether it's fixing some damage from flooding. So, that aspect of the economy could I think get rolling relatively quickly and that is the whole idea behind doing it that way.
Paul Yeager: There's a company, Terra Industries in Sioux City is doing well, a farm company.
David Pitt: Terra Industries is a company that produces fertilizer, it has benefited from the fact that its major input cost, natural gas, has gone down so it's not paying as much for its raw materials. But fertilizer, as any farmer could tell you, costs a lot these days so their profit level has really increased.
Paul Yeager: Might see help in the farm economy. David Pitt of the Associated Press, thank you for stopping by The Iowa Journal tonight.
David Pitt: You're welcome.