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Reporter's Roundtable: Fiscal Rollbacks

posted on December 12, 2008

Borg: Fiscal rollbacks. Iowa's current budget and the budget for fiscal 2010 under pressure. We're discussing the ramifications with Iowa political journalists on this edition of Iowa Press.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association, for personal, business and commercial needs Iowa banks help Iowans reach their financial goals.

On statewide Iowa Public Television this is the Friday, December 12th edition of Iowa Press. Here is Dean Borg.

Borg: We had planned to have Senator Chuck Grassley join us here at the Iowa Press table this weekend. However, the voting schedule in Washington, D.C., specifically on the measure to loan money to the cash strapped big three automakers prevented Senator Grassley from getting back from the nation's capital in a timely manner. We hope to have him join us here at the Iowa Press table at the earliest convenient date. Instead we have monetary problems here in Iowa to consider, specifically an anticipated revenue shortfall for the current budget and fiscal 2010 also. Governor Chet Culver said earlier this week that up to roughly 77 million dollars needs to be cut to make ends meet. Most consider that might be a starting point even. Joining us are four members of the Iowa Statehouse press corp, Des Moines Register Political Columnist David Yepsen, Radio Iowa News Director Kay Henderson, Associated Press Statehouse Reporter David Pitt and Lee Newspaper's Bureau Chief Charlotte Eby. Kay, the budget shortfall in the neighborhood of 75 to 77 million dollars. Governor Culver, as I understand it, it's been in the past that governors have ordered an across-the-board budget cut, everybody takes the same cut. That's not the case this time. He's looking selectively.

Henderson: Right, there were selective cuts. For instance, the Board of Regents institutions, Iowa, Iowa State, UNI, the two state special schools are being asked to cut about $7 million out of their budget and also about $37 million of the $77 million that he identified as cuts accounts for a new state office building. He is deciding that the state should not be building a new state office building. This would replace the Wallace Building which, if you drive around Des Moines, it's that wall of glass that nicely reflects the Iowa State Capitol. Inside it's not that nice a facility. It's known as a sick building and people in it often are sick with respiratory illnesses.

Borg: It's one of the newer buildings though.

Henderson: It's one of the newer buildings on the capitol complex but in an era when companies like Principal is laying off 300 people who work in downtown Des Moines and other job losses around the state and the economic downturn that everyone seems to be feeling the mood among legislators is we don't want to be seen building a new state office building in Des Moines.

Borg: Well, David, that did not go also for the state prison that was authorized during the last legislative session.

Pitt: Correct, it's my understanding that the prison improvement project was going to be funded through bonding, through borrowing of money rather than coming out of the general fund budget. But it's interesting because I think the state is doing what a lot of companies are being forced to do right now and that is taking action to freeze open positions and to do things like really eliminate out-of-state travel or cut back on that so they're doing a lot of little budget cuts around the edges too to try to save $15 million, $20 million in places where a lot of corporate companies are being expected to right now too.

Borg: David, you've been around the statehouse for a long time. This is cyclical, isn't it? I mean, you have seen budget cuts in the past. Is there anything about this that you see is different?

Yepsen: No, it's the same because we're seeing the Governor react in the same nickel and dime way. It's tough to cut budgets, you don't want to make people mad, you hate to sacrifice your priorities. The Governor's actions last week were grabbing the low hanging fruit according to conservatives, a good first step according to Mike Gronstal so that's just the first round. State tax revenues are plummeting and they're going to have to do more and an across-the-board cut is still not out of the question. Some of this stuff is just peanuts compared to the problem they have. Not building a new state office building, that sounds good. The trouble is the one they're in is falling apart, construction costs don't get any cheaper as we all know if you've ever remodeled a bathroom and the third thing is the state is paying about six or seven million a year in rent just around Polk County. A new building would have paid for itself in about six to seven years. So, this stuff is pretty short sided.

Borg: And what I seem to hear you say is that there's more around the corner.

Yepsen: No question about it. It's not only do I think it's short sided but I think that there's going to have to be a lot more and the sooner the Governor and the legislature make cuts the easier it's going to be. We're midway through a fiscal year. And so if you do a one percent across the board it's really only half a percent on an annualized basis. And so I think before this is over with the Governor is going to have to come in and get more.

Borg: Charlotte, we said that the last legislative session with democrats in control they were fortunate. We have often said around this Iowa Press table they had money to work with. All of a sudden that money has been taken away even out of the current budget and probably more to come. But what are the implications of all this for the new session that opens in January?

Eby: We could be looking at layoffs again, like David talked about across-the-board cuts. That's what we saw in the recession earlier in this decade. It's going to be fairly ugly and republicans are going to be pointing fingers saying you should have cut spending a lot sooner than you did. I mean, just a year ago we had Governor Culver and legislative leaders talking about Iowa's sound economy. Iowa typically goes into a recession later than the rest of the country. We were insulated even more this time around simply because commodity prices were so high at the beginning of the year. But those have dropped and some of the things that have kept Iowa afloat are now no longer keeping us in a sound economy.

Borg: You mentioned a heart attack word there and just went right on by, you said layoffs. Now, do you mean layoffs across Iowa and that means less tax revenue, income tax and so on? Or are you talking about layoffs in state workers?

Eby: It doesn't look like that's something the state is going to be able to avoid this time around. It looks pretty dismal.

Yepsen: It's pretty hard for a state government to avoid doing the same sorts of things that the private sector is, painful as it is, it's painful to the private sector. All businesses, mine are having to lay off people right now. Since when does state government get to be exempt? The political ramifications of this are also very real, Dean. We haven't talked about that. Chet Culver is up for re-election in 2010, so will the democratic majority in the legislature. They need to get on top of this problem now so that next year, in 2010, they can come in and have a nice, tidy, lovey-dovey session. They need to do the ugly stuff this year, layoffs, budget cuts, get rid of programs, get on top of this because republicans will come at democrats hard saying you messed up the state budget, you can't trust democrats with the dollar. We already know 2010 is going to be a very tough year for democrats, they hold the White House. So, democrats in Iowa need to get on top of this now.

Borg: David Pitt, David Yepsen just said that they should have gotten on top of it and need to get on top of it right away. That begs the question of those who are pushing for a special session earlier, back in September and so on, that was because of the floods. But in retrospect what do you think?

Pitt: Well, it appears that no one really saw maybe the depth of the economic slump coming as deep as it is and maybe as rapidly as it happened. I think we've seen a lot of unraveling of our economy relatively quickly. I think republicans were posturing themselves relatively early on in the process to say the democrats are going to have this opportunity, now are they going to live up to it and we're going to hold their feet to the fire to live up to it. But I think it's happened relatively quickly. I think a lot of economists perhaps didn't expect the economy to drop as quickly and as rapidly and as Charlotte said, you know, in Iowa we've been somewhat insulated from the early impacts of a recession and perhaps it came here quicker than many people would have expected.

Borg: Kay, you've been around state government, you cover events throughout the state, what is the mood? David Pitt just said we are somewhat insulated here. Is that the way that people have been feeling, that we aren't really -- I hear about problems in California in the multi-million dollars. Iowa doesn't have that sort of a problem. But what is the mood?

Henderson: I think pessimistic. NBC, Wall Street Journal did a survey this past week and found that 90% of Americans, that would probably be true in Iowa, think that the economy got worst last year. That's basically everybody thought the economy got worse, you're seeing it in spending patterns, people aren't buying to the extent that they were in the past. They're saving, which is a good thing. The other thing that I find remarkable is that in central Iowa United Way surpassed its fundraising goal and in that same survey that I mentioned it found that a majority, a good majority of Americans would be willing to take a pay cut if it meant this person that sits next to them at work wouldn't get laid off and so I think there is a sense that Americans and Iowans are ready to make some sacrifices because they realize the economic cloud that we're all under.

Borg: It wasn't unanimous this past week but the Board of Regents sort of tip-toed past the tuition increase and said, yes, we need to do it. How is that going to affect the mood? Have you heard any fallout from that?

Henderson: Well, it wasn't a unanimous decision. Ruth Harkin and Michael Gartner who are well known Iowans voted against it. Mr. Gartner made the point that in a time when families are either having the major bread winner lose his or her job or perhaps have pay cuts at work this isn't the time to put more of a financial burden on students and their families particularly because in some instances people are finding it harder to acquire student loans.

Yepsen: You didn't mention the flood, Dean. The state does have a rainy day fund and those floods were the result of rain so it's pretty clear that some help has to be given to people in eastern Iowa particularly who were decimated by the flood. But that said, the state's ability to do a lot is really limited and I expect one of the tensions in this session is going to be over the need for government to help people who really do need it versus the fiscal limitations that are there.

Borg: You might say, how much more bad luck do the people in eastern Iowa need because right when they need the help the worst the economy drops out.

Yepsen: And Cedar Rapids and eastern Iowa communities just can't back a truck up to the state capitol and load up with cash. The money is not there, there will be some limited help but I think it has to start being made clear to communities that were hurt by the floods, you're on your own for a lot of this.

Pitt: And to speak to that very specifically, the University of Iowa is saying that the budget cuts that they are incurring as part of the Regent's decision could make it more difficult for them to recover as quickly from the flooding that they experienced just simply because some of that money was matching funds and so that speaks exactly to that point. It's going to have to be a prioritization of where the money goes.

Borg: We could go on and on wringing our hands here but I want to go over to Charlotte Eby here because she was one of those who were in the Iowa Supreme Court courtroom this past week for the landmark case that was being argued there. Charlotte, give us some background on that.

Eby: We had six same sex couples who have sued because they were denied marriage licenses. They say they have been discriminated against and should be able to enjoy the same legal rights as married couples if they choose to. The Supreme Court heard oral arguments in that case this week and it could have big political implications in the coming months when a decision comes down.

Borg: That's a lawsuit that is brought by some Iowa couples, is it not, but has backing of national groups?

Eby: It does, indeed. Lambda Legal and Nationwide Gay Rights Advocacy Group argued on behalf of these folks before the Iowa Supreme Court.

Borg: And Kay, were you also up in the courtroom this week?

Henderson: No, I was sitting at my desk watching the legal arguments on my computer screen because the Iowa Supreme Court realizing that this was a case that had interest not only in Iowa but nationwide made it available. So, I watched both lawyers make their arguments. An Assistant Polk County Attorney, Roger Kuhle, representing the Polk County recorder who denied the marriage licenses to these six couples made several arguments one of which was that marriage is an institution which dates back thousands of years and is between a man and a woman. He actually said to make the reference to same sex marriage as oxymoronic. On the other side it was interesting when the justices were asking the lawyers questions when they questioned Dennis Johnson who was the lawyer who represented the six gay couples about would civil unions be an alternate remedy to marriage he offered their arguments for why that was not a remedy. So, it was a fascinating case in a number of ways. Usually these affairs, each side gets about ten minutes. This thing lasted for over an hour and a half. It was a fascinating legal drama and it also showed that these justices aren't tipping their hand by the questions that they asked.

Yepsen: It was a civil discussion which rarely occurs when you bring this subject up. Really not that much new was said but it was a thoughtful, civil discussion.

Borg: David, what are likely to be the legislative implications of this? I have observed that if you ask a legislator, what about same sex marriage, that can be taken up there and said, no, we're going to wait for the Iowa Supreme Court to make a decision. So, what is likely to happen when the decision does come?

Pitt: Well, it's not going to be for a while because I think the court will probably take a year, perhaps 18 months. This is going to be a lengthy process for them to deliberate and to read the briefings. I don't know how many hundreds and hundreds of pages they must have to pour through and look at case law and try to determine which way to come down on this. So, the legislature is probably not going to be taking it up for a while but one must assume that the arguments will come down on the normal political lines. Social conservatives obviously feel strongly about it one way and the democrats would feel another way but I don't think they are eager in any way to take this up again.

Yepsen: No, you're right. It's not going to come up in this session and the excuse will be that the courts are considering it. No matter which way the courts rule there will be an attempt made to bring it back up in the legislature but you're not going to see the democratic majority in the legislature bring this up for debate. It's too emotional, it starts dividing -- it's just too politically hot. And so if the court in 2010 after the court maybe has ruled then there will be an attempt by republicans to bring it up, it will go nowhere and so this is going to be a debate in the 2010 legislative elections one way or another. Democrats are just trying to avoid it. It's too controversial. They may have some success, Dean. We've just been talking about how the economy is in the tank. I've got to tell you, you look at the polling data, yes, this is an emotional issue but people are more concerned about the economy and jobs.

Pitt: And it's always come up in the realm of a constitutional issue. They want the people to be able to vote on this issue and that is probably if it were to come up don't you believe at some point it would be a cry for allowing the electorate to vote on which way they would like this thing to go down?

Yepsen: Yes, but even there if it's constitutional you could bring it up in 2010 and pass it but then it would still have to come up in 2011 or 2012 so we're a long way from ever getting to a point where it's before the electorate.

Eby: One point of note, this measure to get this on the ballot, a constitutional amendment banning gay marriage, it stalled even when republicans were in control of the legislature so the idea that they're going to be able to push it through easily if they're in control, I'm not sure that's true.

Borg: You were in the courtroom, Kay was not, she was watching it back in her office on her computer because of the expanded media coverage which was a first for the Iowa Supreme Court, isn't that right?

Eby: I was actually in a media room with several TV people, reporters, we had a live feed in there and many news organizations also had live streams on their Web site. Another unique thing you had the Chief Justice knowing that so many people were tuning in gave an explanation of the case and what the likely arguments were and the process which it's not usually that friendly of a place for spectators who want to go see a court case argued in front of the Supreme Court.

Yepsen: And the Iowa courts deserve a compliment for opening up their process over the years to more media coverage because I think it develops greater public understanding of how the courts work.

Pitt: I think Chief Justice Ternus has taken that on as something she likes. She seems to be a person that likes to open the courts up to the public and make them more accessible and more understandable and I was really struck, because I've covered a few supreme court cases before, how many questions and how back and forth between the justices, that was the most open, I think, court process I've seen since I've ever covered them.

Borg: Kay, you were in person at the legislative rules committee this week and they were considering controversial, how to implement a very controversial law that was enacted during the last legislative session, that is the statewide ban on smoking.

Henderson: Right, the final set of rules which govern implementation of the smoking ban were approved by the legislative administrative rules review committee. Primarily the most controversial of them would allow anonymous complaints to be filed if someone goes into an establishment or works in an establishment and sees smoking going on they can file a complaint anonymously the argument being that you protect employees who rat out on a business owner who still lets smoking go on. One of the comical elements of this was that a group of bar owners who have attended many of these meetings in the past again waged a verbal assault, with some salty language I might say, against legislators for voting for this. In one instance one of the gentlemen accused legislators of being bought out by the casinos. Of course, we know smoking is still allowed on the casino floors. But in the end legislators appear to, in the words of Kevin McCarthy who is the democratic leader in the Iowa House of Representatives, let sleeping dogs lie. It does not appear as if legislators want to re-open this can of worms and pass any adjustments to the law which took effect in July.

Borg: So, would you say that the legislative rules committee sort of put flesh on the bare bones of the legislation?

Henderson: Actually the Department of Public Health by law is required to develop these rules of operation regarding signage and exactly where you can and can not smoke.

Yepsen: And that's fairly typical for controversial pieces of legislation. The legislature passes it, they have no stomach for dealing with it for a while, people have to kind of work their way through it, departments have rules. Maybe in a few years those sorts of tweaks and changes can come up. But Kay is right, there is no inclination, there is no excitement for doing anything in that session except cutting the budget and getting out of there. They just aren't interested in tackling any more of these hot issues.

Borg: Is there not likely then to be any change in the exemption for casinos?

Henderson: No, primarily because I think the folks who were the primary advocates for a smoking ban are afraid if that can of worms gets re-opened then other things will happen. So, I think they're willing to accept the idea that smoking will continue on the gaming floors because they got such a broad ban on smoking in other public places.

Eby: The other thing to consider too, the casino industry has successfully argued that they will likely lose revenues if they are required to ban smoking on the gaming floors. That has happened in other places where casino smoking has been banned. And it's the last thing the state needs right now is to reduce revenues from gambling taxes.

Borg: I'm going to jump back across to Kay and Bruce Braley over in the first congressional district was on this program, as you recall a week or so ago, and at that time he acknowledged that he was trying to get on a key congressional committee. That happened this week.

Henderson: It did. House Speaker Nancy Pelosi appointed Braley and another group of legislators who were first elected to Congress in 2006, Braley is among them, to the powerful energy and commerce committee. This is the panel that is going to write the first draft of healthcare legislation, it's the panel that's going to write the first draft of energy reform if and when it does happen at the congressional level. So, this is a plum job that Braley has landed himself and it's also an indication that Braley is sort of a rising star among house democrats.

Yepsen: It has local political ramifications and here's how it works. Bruce Braley now has a very powerful committee assignment. He's going to think twice before he gives that assignment up to run for governor or run for the U.S. Senate some day. He's a bright guy, he's an impressive politician and there's a lot of talk about him coming back here to run for something else. Now he'd have to give up a pretty good spot to do that.

Borg: David Pitt, Senator Harkin just let it be known this week that he's not being consulted by President-elect Obama as Obama considers appointments to key positions, cabinet and so on. That was kind of a getting out of the family grumbling. I'm a little surprised about that.

Pitt: Yeah, I guess one has to just weigh when you're President-elect Obama what loyalties, what does he owe Senator Harkin. So, David, you've covered politics for a lot longer than I have but what else can you say about the fact that, yeah, it just seems to be a little interfamily squabble, I guess, and Senator Harkin may be voicing his little bit of displeasure that he's not in the inner circle as much as he would like to be.

Yepsen: Dean, Senator Harkin grumbles a lot as we've all seen over the years.

Pitt: That's David Yepsen that said that.

Yepsen: I think it's important to note that the Senator also said he doesn't have any objections to any of the people who have been chosen. I think maybe somebody in the White House in the transition office is picking up the phone and calling Tom Harkin once in a while. He is a little miffed that apparently Tom Vilsack has been passed over for Secretary of Agriculture and I think what that also shows is for all that Iowa supposedly did for Barack Obama there aren't that many jobs that have come open yet. We've talked about that before on this program. I think some of that frustration is behind the grumbling.

Borg: Senator Grassley, Charlotte, we have observed was to be here on this program today and we're here replacing him because he's back in Washington, voted late Thursday night on the auto maker's bailout. What are the implications, if at all, on that? You've been following that story.

Eby: There are huge implications in the Midwest for the auto industry. Of course, if they were to fail I just can't imagine that they're not going to have some kind of bailout or rescue package in the coming months. This could be just one speed bump, if you will, in the process. But I think at some point people will see how serious this situation is getting.

Borg: Senator Grassley, though, I believe was in the republican minority that really cast key votes and killed that legislation which had already passed the House.

Pitt: I think what he wanted to see and the republicans wanted to see were some concessions on the part of labor, perhaps in pay and the problem is that auto companies in the United States are strapped with some huge legacy costs whether it's retirement benefits, healthcare benefits. Some people are making it about pay but the pay differential between American auto makers and Japanese auto makers really isn't that huge. It's in all of these costs that go into healthcare and go into some of those benefits.

Borg: That republican vote, is that likely to play well in Iowa?

Pitt: I suppose it could be kind of divided. We certainly have strong labor unions in Iowa.

Borg: There's an economic impact too of the auto makers going down.

Henderson: Governor Culver issued a statement urging all Iowa congressmen and senators to support the bailout. He, in that letter, indicated there were 34,000 jobs in Iowa at stake in regards to the bailout. So, obviously 34,000 people were keenly interested in it. When the bill passed the House the three democrats voted for it and the two republicans voted against it. I don't think it's going to have that huge ramification in terms of Grassley's re-election chances in 2010.

Yepsen: It's a long way to the next election but I've got to tell you ever reading I've seen is that this bailing out stuff is very unpopular with people and it's a heavy lift for politicians to go do this. They have to, what Culver was talking about, educate people. But to your question, it's unpopular.

Pitt: Dean, if I might just put a final note on it, I think probably what's going to happen is I think the Treasury Department and the Bush administration stepped up and said that since Congress didn't act if it's necessary to keep a company from going under they probably will. So, the bottom line is this all may be mute in a matter of days or weeks depending on how quickly one of the auto makers looks like they may go under.

Borg: Thanks all for your comments. We're going to be back doing this again very soon I have a feeling. Thanks for your insights today. We'll be back next weekend with our regular Iowa Press airtimes -- that's 7:30 Friday night and Sunday morning at 11:30. I hope you'll watch. I'm Dean Borg, thanks for joining us today.

Archive editions of Iowa Press can be accessed on the World Wide Web. Audio and video streaming is available as are transcripts at www.iptv.org.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association, for personal, business and commercial needs Iowa banks help Iowans reach their financial goals.


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