Borg: Managing crisis … storms, flood and a staggering economy test Iowa’s resiliency. The buck stops with Iowa Governor Chet Culver, and we’re talking with him on this edition of Iowa Press.
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On statewide Iowa Public Television, this is the Friday, December 19th edition of Iowa Press. Here is Dean Borg.
Borg: Anyone who’s listed in Iowa’s state budget is scrambling this weekend because Governor Chet Culver is reducing all line items by 1.5 percent. That’s more than a $91 million cut overall, affecting everything from school aid to Medicaid, from old-age assistance to aid to dependent children. This week’s across-the-board budget reductions are in addition to some $77 million selectively sliced away earlier this fall. The Governor is using crisis prevention management, exercising his the-buck-stops-here authority, responding to the deteriorating world economy’s effect on state revenues. Governor Culver, tough times but welcome back to Iowa Press.
Culver: Good to be with you, Dean.
Borg: We’ll try to keep the lights on here during the show. Across the Iowa Press table, Des Moines Register Political Columnist David Yepsen and Associated Press Senior Political Writer Mike Glover.
Glover: Governor, as Dean mentioned, you have ordered a 1.5 percent across-the-board cut in state spending for the budget year that we’re in right now. Is that the end of cutting for this budget year, or should we anticipate there’s more to come?
Culver: Well, we hope it’s the end of the cuts for fiscal year ’09, which ends on June 30 of next year. We don’t know for sure. We’ll have new revenue estimating numbers at the end of March of ’09. But I took these steps, the $180 million total in cuts that I’ve recommended, in an effort to get 2009 behind us so that we can get ready and focus our attention on 2010.
Glover: Some of your critics have said you waited too long, that you should have seen this coming, that had you acted earlier, you’d taken less draconian steps. How do you respond to that?
Culver: Well, the economy has turned a lot more quickly downward than anyone anticipated. Just last year, for example, at this time, there were 15 states in the country that were having some economic and budget challenges. Today there are 43. Those 43 states collectively are looking at a $60 billion deficit just for fiscal year ’09. So this downward spiral, if you will, has suddenly affected states like Iowa a lot sooner than anyone expected. But we’ve really taken three steps over the last several weeks. Number one, I instructed our department heads to freeze hiring, to restrict travel, to restrict purchasing. Then the second step, as Dean outlined, was a $77 million cut selectively. And then just yesterday the third step was a 1.5 percent across-the-board mandatory cut. So we have quickly and I think very prudently reacted to this economy crisis.
Glover: And you decided this fall against a special legislative session. With the benefit of 20/20 hindsight, would we have been better off to bring the legislature back to have a special session to begin wrestling with these things?
Culver: I don’t think so. I’ve been able to use my executive authority to balance the budget for fiscal year ’09. I look forward to working with the legislature when they come back in January. If we need to make additional changes to the fiscal year ’09 budget, we can do that. But we have so much work to do, including focusing on flood recovery and rebuilding this great state because of the natural disasters. I’d like to turn our attention to fiscal year ’10 as quickly as we can when we reconvene in January.
Yepsen: Governor, why not raise taxes? George Mills always used to remind that Iowa got the sales tax during the Great Depression. Well, we’re supposedly near a Great Depression in our country. Why not raise taxes?
Culver: Well, you know, one of the things that we’re doing here is trying to be very smart about the type of cuts that we make, and we’re trying to be very smart about how we get through this fiscal crisis. And most economists will tell you that raising taxes should not be a part of the equation when you’re in a recession. So we’ve been listening to economists across the state. I’ve convened my council of economic advisors, and tax increases should be the last resort. So I’ve taken them off the table for now. We’ve got to get out of this recession. We have to put more money in the pockets of Iowa families and Iowa businesses that desperately need it. We don’t have to take it out of their pockets with a tax increase.
Yepsen: Some people are suggesting you plug tax loopholes. One person’s tax break is somebody else’s loophole. Corporate combined reporting I’m thinking of. Lots of ideas out there for raising little taxes here and there. Are those off the table as well?
Culver: Well, I look forward to working with the legislature when they come back in January to figure out how we’re going to balance in 2010. We’re going to need to work in a bipartisan way. We’re going to have to be extremely creative and thoughtful about how we balance the budget in ’10. And I look forward to having a good discussion about any and all options to balance the budget in a fiscally prudent way.
Borg: You mentioned a moment ago about flood recovery assistance. How far back does the state’s budget problems right now push those flood recovery efforts on behalf of the state to the people in eastern Iowa?
Culver: Well, Dean, the good news is I feel good about the overall response to this natural disaster, this unprecedented event that we all dealt with. I want to thank your viewers. I want to thank Iowans across the state for helping in so many different ways. We have Barry Griswell, for example, with Principal who, along with Fred Hubbell, led the private fundraising effort. They’ve raised nearly $8 million in private money from businesses across the state. We had 80,000 volunteers who stepped up and helped in various ways.
Borg: But that was immediate. But there’s so much more to do. People in downtown Cedar Rapids right now in the downtown area are shivering because the steam is out.
Culver: That’s right. And one of the things I feel good about is we’re able to use $100 million in state revenue to immediately help individuals, homeowners and businesses, through our jump-start initiative to help families and businesses that were impacted. But you’re right, Dean, we have a lot of work to do. That’s why I want to make it a very top priority when we get back in January to make sure that we help those communities and those individuals that still need our help. That’s another reason I didn’t dip into the economic emergency fund to balance the ’09 budget because it’s likely we’ll need some of that money to help those that have been impacted by these natural disasters. I can guarantee you one thing, I will fight every single day as long as I’m governor to help those individuals, those businesses, and those communities that were impacted. We’re making progress but we have a long way to go and I’m committed to doing everything in my power to help out.
Glover: Everybody understands that recovering from a natural disaster like this is a long-term project. Let’s put a timeline on it. How long do you think it will be before some people in these flood impacted areas are back to normal?
Culver: Cedar Rapids is now talking about a five to ten year plan, a billion dollar plan to essentially redesign the downtown area. So it’s going to be a matter of years. My focus is to get these families back on their feet, to get them into their old houses that need to be repaired, to get them in new houses if their homes were destroyed. I want to get businesses back up and running as quickly as possible. We can do a lot of that by this time next year. We’ve come a long way. We’ve helped thousands of families, but we’ve got thousands more that are still dealing with tough challenges. So, it will take some time to get to rebuild communities, year, but we can certainly rebuild one house at a time and make a lot of progress in a short period of time.
Glover: So it could be a decade before we have a rebuilt, newer, better Cedar Rapids, but by this time, within a year, if I’ve been flooded out, I ought to be back in my house.
Culver: I would love to think that we can get you back in you house or get you in a new house. FEMA allows people to stay in the mobile homes for eighteen months. So at the end, that clock will run out exactly at this time next year, in December of ’09. So we want to have those families back in their old homes or into new homes. And yesterday I met for two hours just on housing. This crisis is real. I’m going over to Cedar Rapids again next week to meet with affected families. And I’ll fight every single day to do all I can to make sure we get this federal money into the hands of those that desperately need it, especially when it comes to housing and businesses.
Borg: Some people in Cedar Rapids are asking for authority to help themselves with a local option tax. Would you support that?
Culver: You know, I think that we need to work in a bipartisan way next session to come up with a flood relief package of some kind, to listen to those communities that have been affected like Cedar Rapids, and to find some consensus and common ground on ways that we can help these areas, in addition to providing some financial assistance, which I think we will do. There might be some other things that we can do. I want to commend the republican and democratic leaders in the legislature for creating the flood relief committees in both the house and the senate and I look forward to working with those new established committees as we rebuild our state.
Yepsen: Governor, how do you square the notion of allowing local governments to be raising taxes with what you just said a moment ago, that raising taxes in a recession is a bad idea?
Culver: Well, I didn’t say that I’m going to support anything specifically. What I said is that we need to listen to those communities that have been impacted, find ways to help them. And I’ve seen dozens and dozens of different ideas, so we don’t know exactly how we’re going to move forward at this point. And I agree with you, we have to be careful of any type of tax increase on anybody during this recession.
Yepsen: Governor, what about borrowing money? Iowa has some of the lowest levels of public debt of any state in the country. Interest rates are low. Why do we not borrow to build infrastructure in Cedar Rapids, all across eastern Iowa, for example?
Culver: Well, that’s a great question, David. If we want to rebuild our state, if we want to finish Highway 20, if we want to modernize our infrastructure, our sewer treatment facilities, our water treatment facilities, I don’t know how bonding can stay off the table. We need a comprehensive multibillion dollar infrastructure approach. That will include the hundreds of millions that we’ve already qualified for in FEMA assistance. The good news, David, is that we have about 8,000 projects that are related to flood recovery that are infrastructure projects, so rebuilding levees in places like Oakville, a new courthouse in Cedar Rapids that was wiped out because of the flood, that’s significant infrastructure improvement. Then we should get a federal round of infrastructure stimulus in early spring, in all likelihood. And then I think the state needs to step up to the plate and do our own infrastructure piece as well. That might include a bonding. It’s an issue I look forward to talking to legislators about.
Glover: Do you have a number for that?
Culver: You know what I think we have to do, Mike, is be very smart about this rebuilding and this infrastructure approach. We need to figure out how far can we make improvements with federal funds related to the flood, how much more can we do with an economic stimulus and infrastructure stimulus for roads and bridges that President-elect Obama is talking about and then what’s left. I’m talking about building out the grid, telecommunications, trails, rail. This is a great opportunity to rebuild our state. I think we have a new administration that wants to partner with us. And I’m excited about the opportunities to address some of these issues that have been ignored for far too long.
Glover: And a couple of legislative leaders have suggested another – to flip topics – another change in the state’s education law. They want to increase the state’s compulsory education age from 16 currently to 18, which would require virtually everyone to finish high school. You’re a former teacher. What do you think of that idea?
Culver: I’m for it all the way, and I’ve been for it. We’ve tried unsuccessfully the last couple of years to get that legislation passed. You know, as a former high school teacher and coach at Hoover High School here in Des Moines, it broke my heart to see 16, 17 year olds drop out. And they could by law drop out. There’s no consequences. We’re basically telling a 16 year old that once you – you can drop out, it’s okay. I think that’s the wrong message to send.
Glover: And what do you say to critics who say that that’s going to force kids who don’t want to be in school to be in school, they’ll be disruptive, they’ll be a problem for teachers? You’re a former teacher. How do you respond to that?
Culver: Well, first of all, I Think there are some fair concerns, but just think about it for a minute. If a 14 year old today wants to drop out of school, their attitude is I have two more years and I’m out of here. Well, if they’re fourteen and we change the law, that won’t be an option. They’re going to have a whole different mindset. I think they’ll be much more engaged and focused and interested and graduate. But right now we’re giving them an out, and that’s why our dropout numbers continue to go up and up. It’s not all about money. It’s about reform. This is an easy step that will send a strong message to all of our kids and to parents, and it will say that in Iowa it’s not okay for you to drop out when you’re 16, we expect you to graduate, and we’re going to help you graduate from high school.
Yepsen: Governor, another education related question. When you do an across-the-board cut, it cuts state aid to local schools, but it doesn’t necessarily reduce the ability of local school districts to raise property taxes to try to make up that difference. Will you also cap the authority to raise local property taxes for local schools that it might use to backfill that state aid cut? It would have the effect of raising property taxes?
Culver: Well, you know, I’ve always been a proponent of local control, whether it comes to running our schools, whether it comes to environmental issues. So I trust that in more than 360 school districts, the school boards, the administrators, the parents, the teachers, they’ll figure out the best step for them in terms of finding adequate revenue to run their districts. And they’re going to have to look at options, suddenly, because of the financial condition that we’re in because of this recession. There are also school districts, David, that have cash reserves too, and this is a time when they might want to look at those cash reserves too, given the economic conditions that we’re dealing with.
Yepsen: Why should the state of Iowa grant state aid --- a full day of state aid to schools that shut down half days during snow vacation? We have a thing that happens in Iowa where we have snow days home from school. Districts will start late, they’ll quite early, and yet they’ll still collect a whole day of state aid. Will you put a stop to this kind of rip off?
Culver: You know, I have great confidence in administrators across the state, superintendents that make these tough calls. And the only reason they do something like that is in the interest of public safety for our kids. So, if they had it their way, they wouldn’t have to shut down school because of snow or ice or any other weather condition. That’s the least of my concerns right now. We’ve got other big challenges that we’re going to be dealing with.
Yepsen: Why don’t you pay them for an hour in the classroom? Time on task rather than days?
Culver: We pay our teachers for the great work that they do every day. One of the things I’m most proud of as governor is helping to move our teachers from 42nd in the nation in teacher pay to the national average. We’ve invested $150 million in great Iowa teachers over the last two years.
Borg: How did we get from snow days to teacher pay?
Glover: One of the things that’s been suggested as you wrestle with this budget deficit is some selling of the state’s lottery, leasing off the state’s lottery. What’s your take on that?
Culver: You know, any business, whether it’s during a recession or during good times, is always looking at their assets. And, you know, I think we have to make it very clear to the legislature and to all of our constituents out there that we have choices. We have a very valuable asset in the Iowa Lottery. There are private interests that are interesting in leasing that lottery, and they are making a case that it could be in our interests financially to consider it. We have a lot of assets. I think this is the time to look at all of those assets and to evaluate them. And the option, Mike, is perhaps further across-the-board cuts or more layoffs potentially. So, what I’m trying to do is present to the legislature options, and I have to do that at the end of next month. I’ve got to present a 2010 budget, and I’m looking for all opportunities right now to evaluate options and put them on the table so that I can present a budget that makes sense and that is fair to Iowans.
Glover: And some have suggested that it’s déjà vu all over again. The state got into the gambling business in the 1980s at the depth of the farm-based recession when it needed cash real ad. The state needs cash real bad right now. What about expanding gambling, Touch Play, things like that? Are those options on the table?
Culver: I don’t think Touch Play is on the table.
Glover: You got burned by that once before?
Culver: There has been some interest that the Iowa Lottery, the gaming commission is looking at whether or not they’re going to expand and perhaps grant another license at some point down the road. Right now they’re doing a study. And we’ll see, I’m not quite sure we’ll have a debate about gambling expansion next session, but we might have a debate about whether or not we lease the lottery.
Yepsen: Governor, how will Iowans see the effect of these budget cuts? 1.5 percent, that’s not a lot. A lot of families in Iowa are having to do a lot more. How will Iowans see this? Furloughs? Layoffs? Are you going to close state parks? How is this going to be tangible?
Culver: Well, it’s really a 3 percent cut over a six month period. That makes it tough. You will see in some cases, agencies or departments that reduce their hours. You will see in some parts of state government that there might be a layoff or a furlough, so that means the phone doesn’t get answered or the mail doesn’t get returned as quickly. There could be longer lines in some of these places, whether it’s the DOT station or a DNR licensing station. So there will be effects. The school districts across the state are going to be scrambling, trying to find new revenue. So there will be an impact. We’re trying to limit that impact. Again, furloughs and layoffs are hopefully the last resort. But it’s time to tighten the belt, and there will be evidence of that.
Glover: And it wouldn’t be an official Iowa Press show if we didn’t talk a little bit about politics. And you mentioned earlier you’ve done a lot to help teachers. We’ve had a big Iowa Values Fund. We had a big Iowa Power Fund to deal with alternative energy. In other words, you had a lot of money to pass out to people. These are tough times. Is that going to make it tough politically for democrats who now control state government?
Culver: I don’t think so. I think what our constituents expect is leadership through tough times, through good times. They want elected officials to do the right thing. I feel like I’ve done the right thing on the budget challenge that we’re dealing with. I think I’ve led on the flood recovery effort. And I think that’s what elections are ultimately all about is can you get the job done, can you lead effectively, can you govern, can you bring people together. And I think we’ve done all of those things.
Glover: And it’s going to be, it would strike me, a challenge for you. You’re up in two years and I don’t think this recession is going to be over in the next couple of years. You could be for the next two years fighting a tough budget battle, cutting popular programs that people like, laying off state workers. How do you wrestle with that politically?
Culver: Well, from day one on this job we’ve been fighting battles. February of 2007, right after I was sworn in, before I even moved into Terrace Hill, we had a winter storm, 400,000 Iowans without power. I was out at Camp Dodge working with the National Guard evacuating people, getting people off the roads. That was a crisis right out of the gate. And we’ve dealt with natural disasters since I’ve been governor, the worst natural disaster in our state’s history this past summer. No one has suggested this is an easy job. I love the job. I’m honored to have the opportunity to lead this great state.
Glover: And I’d be remiss if I didn’t ask if you’re going to run for another term in this job.
Culver: Well, as I said, I love the job. I’m working hard. And I’ll make it perhaps official on this show, but I’m certainly looking at running again in 2010. But there’s a lot of work to do between now and then.
Glover: Let us know and we can invite you out to make that announcement.
Borg: You talked about your leadership and decision making. Part of that responsibility is thinking creatively. We talked about possibly selling the lottery or at least being considered. Give me a hint of what other creative thinking is in your mind that we might see in your Condition of the State Address. Like what other state assets might be leased? Other states are leasing toll roads. What about you?
Culver: Well, that’s a great question, Dean. During the campaign for governor, on this show I talked a lot about efficiencies in state government, reorganization, being leaner and more efficient. I’ll give you one example. Just a few months ago, we found a way to save $20 million by expanding our group purchasing arrangement for health care for state employees. One day, $20 million savings. I think we can save tens of millions more in purchasing, equipment, paper, supplies. Right now we don’t have a very good statewide coordinated purchasing agreement with the Board of Regents – with the regents institutions, for example, and other state agencies. We should look at how government is organized right now. Can we save some money? Can we save in heating and utility costs by maybe shutting down parts of buildings or merging agencies? So I think this is an opportunity to look at government. Where are our inefficiencies right now? Where can we find savings? And purchasing in particular is something that I’ve always looked at. And pooling is a great opportunity, whether it’s buying equipment or purchasing health care.
Yepsen: Governor, we’ve got only about a minute left. I want to follow up on your idea of a state infrastructure program. If you borrow money, you’ve got to pay it back. Where are you going to get the money to pay it back?
Culver: Well, we’re going to come out of this recession, and that’s the one thing I want to leave your viewers with is that I am confident that working with the new administration in Washington, working with Congress, we will get out of this economic recession. And our state is moving forward. We’ve created 2,300 new green collar jobs. We’re going to have a big jobs announcement early next year. Companies are still expanding in Iowa despite the economic challenges. MASCAR just yesterday announced a big race in Newton. You know, a lot of good things are happening. Google, Microsoft have come to this state. We’re going to come out of it strong. Our revenues are going to pick up, and we’re going to lead the nation in things like renewable energy, and that will allow us to have revenue to pay back bonds and to pay our bills and balance our budget.
Yepsen: Less than thirty seconds. Postville, do you see any need for legislation to deal with that situation?
Culver: No. I think what we need to do is continue to use our state agencies to help out. We just sent some AmeriCorps volunteers or paid AmeriCorps staff there to help. This is a federal issue. This is a federal immigration challenge and one that Congress perhaps could help on.
Borg: Thank you, Governor.
Culver: Thank you.
Borg: Well, that’s Iowa Press for this weekend. We’ll continue through the holidays. We’re back next weekend at our usual times … 7:30 Friday night … 11:30 Sunday morning. If you’re traveling this coming Christmas week, be safe and enjoy time with family and friends. And best wishes from all of us here at Iowa Public Television. I’m Dean Borg. Thanks for joining us today.
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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.