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Borrowing Money to Make Money: Senate Minority Leader Paul McKinley (R)

posted on January 16, 2009

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Borg: Borrowing money to make money. Iowa Governor Chet Culver says Iowa has a good credit rating and he intends to use it. Some legislators are wary. We're discussing the Governor's economic stimulus ideas with the Iowa Senate's Republican Minority Leader Paul McKinley 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. By Iowa's Private Colleges and Universities ... enrolling 25% of the total Iowa higher education enrollment and conferring 44% of the baccalaureate and 40% of the graduate degrees in the state. More information is available at The Iowa Hospital Association ... supporting the missions and visions of Iowa's 117 community hospitals. The Iowa Hospital Association ... we care about Iowa's health.

On statewide Iowa Public Television, this is the Friday, January 16th edition of Iowa Press. Here is Dean Borg.

Borg: Governor Chet Culver's Condition of the State Address earlier this week focused on rebuilding Iowa, rebuilding storm and flood damaged cities and rejuvenating revenue streams into the state budget. Among the democratic governor's proposals, if the democratic controlled legislature agrees, is borrowing, issuing some $700 million in bonds to put people to work improving Iowa's infrastructure, highways, trails, water systems, parks to name a few. The state's share of gambling revenues would repay bond holders. Some urge let's get started and others say not so fast cautioning against borrowing money in an ailing economy. It's mostly republicans who have some reservations about the bonding idea but their objections may be somewhat irrelevant because democrats hold sizeable majorities in both the house and the senate. Today we're getting perspective from Chariton's Paul McKinley, the new leader of minority republicans in the senate. Welcome to Iowa Press.

McKinley: Thank you very much, Dean.

Borg: Nice to have you here. And across the table two gentlemen that you recognize from the statehouse, Columnist David Yepsen with the Des Moines Register and Associated Press Senior Political Writer Mike Glover.

Glover: Senator McKinley, we'll get to some of those issues in a minute but first I'd like to get you to make a political assessment here. Most people say that republicans took a bath in the last election. You lost seats in both chambers of the legislature, democratic senator got re-elected without opposition basically and President-elect Obama carried the state fairly handily. What is your assessment of the health of your republican party?

McKinley: Well, Mike, I think there's no doubt about it, it was a bad year for republicans, we all know that elections go in cycles. I would say that I think the republicans have forgotten what it is to be republicans and when we start running as republicans again, running on the issues of limited government and economic opportunity, I believe we can turn republican's fortunes around.

Glover: Give me some kind of a time assessment. You're down to 18 seats in the senate. Realistically how long will it take until republicans can realistically look at majorities again in the legislature?

McKinley: Well, I don't want to put a timeframe on this, Mike, but I believe that if we go out and talk about republican principles we've seen success and we will see success. We know that Iowans continue to believe that taxes are too high, that we need limited government and I think that if we can articulate a good, sound republican message we will re-earn the trust of Iowans.

Yepsen: Senator, who have you got to run against Chet Culver in 2010?

McKinley: You know, David, the election is but two months over and I don't even have an idea. I'm thinking merely about getting the senate organized and republicans and recruiting and getting the message out. We have plenty of time and I think we'll have a lot of good people who will be available.

Yepsen: Is it possible you would be a candidate for governor?

McKinley: I haven't even thought about that at this point. I'm too busy worrying about getting the senate organized, getting republican senators organized, recruiting, getting the message out there and that's what I'm involved in.

Glover: I'd like to dispute what you say about it's a long time until this election. In fact, Governor Culver has his election campaign structure in place, he's already raising money, he's well on the road to running a re-election campaign. This cycle is open and going. Aren't you behind times?

McKinley: Well, that may be but I think this is one of the reasons that voters are cynical that we always look just to the next election. I think we must take a longer term view and have a vision of how we're going to move this state forward rather than just looking at the next election cycle.

Yepsen: What is the republican message? You said republicans have to get back to limited government and economic opportunity. Certainly you did not mention social issues. Did republicans take these issues of God, guns and gays off the table and focus on messages like you're talking about?

McKinley: I believe that republicans have a very strong message. The overarching principle is that we need to return to the notion that it is Iowans who run government and not the other way around. I believe that we will promote economic opportunity, limited government, I believe in family values and I think all Iowans will respond to the message we have.

Borg: What would be your advice in doing those things to the republican state central committee? You have a new state chair now, there is new blood there. What advice would you give?

McKinley: Well, I've met Matt Strawn, Matt Strawn is going to be a great leader. I would say this, that the senate republicans, the house republicans and the republicans down at the party are all working in concert and we are continuing to get the message out that we believe in limited government, economic opportunities.

Borg: Practically though -- you're repeating what you said philosophically -- practically what does the state central committee have to do?

McKinley: I believe the state central party will continue to articulate those messages and we will work very, very closely. As a matter of fact, we've invited the new director over to the caucus and we will begin working together immediately.

Glover: Why do you want the state central committee to articulate a message? You need a state central committee to put together a mechanical machine to turn out voters. You don't need a state party to make a message, you have candidates to make messages.

McKinley: I believe that one of the functions of the state party will be to build at the grassroots level. I see that as part of my role as well and I think if we're going to re-earn the trust of Iowans we all have to be on a republican message.

Yepsen: Senator, I see the new republican state chairman has offered these new social networking communications. We're going to have Twittering with people. Are a lot of people in Chariton Twittering?

McKinley: You know, I will tell you, I didn't even know what Twittering was but I met with Senator Grassley the other day and I asked him about Twittering and his face lit up and if Senator Grassley can participate with Twittering I certainly think I can learn how to Twitter.

Glover: Isn't there a test coming up fairly quickly? You have mid-term elections just next year. History would teach that -- it will be the mid-term election of a president's first term in office, history would teach the party out of power ought to do pretty well. If you lose seats again next year are you a permanent minority party?

McKinley: I think that republicans have an excellent opportunity in 2010 to pick up seats and I believe, again, if we continue to articulate the message that Iowans believe in and get that message home I think we will do very well in the 2010 elections.

Borg: But what is that new message?

McKinley: That new message is that we believe in economic opportunity and limited government and I think if ever there were a time to articulate that message now is that time.

Yepsen: Senator, let's switch gears and go to the session. What is your reaction to Governor Culver's Condition of the State speech?

McKinley: In looking at the Governor's speech it was noted for eliminating any talk -- there was no talk about the budget, which he has not put forth his budget yet, which he must do by February 1 -- and he did talk a lot in general terms about bonding and borrowing more money to spend more money. My reaction is spending is what got us in to the budgetary crisis we have now. It isn't the national economy, it's because we simply spent too much over the past 24 months.

Yepsen: We want to get to that but what was not in that speech that you would have liked to have seen?

McKinley: Well, I would have liked to have seen how we are going to help small business build, in rural Iowa particularly, but not just rural Iowa. We have a lot of stress in this state now with job loss, layoffs, bankruptcies. I think we must begin to address a positive, creating a positive environment for job creation, particularly with small business.

Glover: The heart of the Governor's speech was a $700 million plan to borrow money over 20 years for flood relief and to repair infrastructure. What is your reaction to that?

McKinley: Well, my reaction is we should separate those two issues. With the disaster relief or flood relief, which happened six, seven, eight months ago, we could deal with that issue tomorrow. We have an economic emergency fund that was created expressly for that purpose. The other issues, building infrastructure, we don't even know what it is he's talking about for certain, we have enough time to go over that. But just because we have a credit card doesn't mean we should use it. Spending is what got us into the economic mess we have now in this state.

Glover: And I'd like to hear what your alternatives are. We're in a recession, a state that was hit hard by flooding last summer. This is the Governor's approach to fixing it. What is the republican approach to dealing with those things?

McKinley: Well, first of all I wish we would have called a special session last summer shortly after this happened to have dealt with that. We're still waiting to see the report from the Rebuild Iowa Office before we even know what the proposal or the expected costs will be.

Yepsen: Senator, a lot of people in the flood took their credit card and went down to the hardware store and bought some things to start getting fixed up again. So, continue with the credit card metaphor, what's wrong with taking the state's credit card down to the store and buying some things to start getting fixed up?

McKinley: Well, that individual that went to the store and used his credit card, the credit card company knows where to go if he defaults on that credit card. As a matter of fact one of the problems we have in the nation right now is we've got a credit crisis because people have charged too much on credit cards. The government is totally different than a private business or an individual charging because with the private individual he is responsible and has probably pledged collateral. The state doesn't have that issue, they just go back to the taxpayer.

Yepsen: Senator, if you look at the list of state in per capita levels of state debt Iowa ranks 48th. You could triple the amount of public debt the state of Iowa has and you'd be at 47th. Now, why is it that Utah and Virginia and California and Alaska and Texas, all these states that have been run by republican governors, are comfortable borrowing funds for things and we're not here in Iowa?

McKinley: I don't know that we're not comfortable but the one thing I would ...

Yepsen: Well, we're ranked 48th, sorry to interrupt, but we are at the bottom of public debt.

McKinley: I would say we're at the top in fiscal responsibility if we haven't borrowed. Why would we borrow if it's not for something that is absolutely necessary that you can't get through other means?

Yepsen: Roads, bridges, sewers, bike trails, parks, all those things that were done in the Great Depression, that's what is being talked about here. What is wrong with borrowing money for those things?

McKinley: Well, first of all, I'm not sure that that's what is being talked about because we haven't seen those details yet and there are other ways to deal with these issues and once we see I think precisely what the Governor is talking about we can do with those issues.

Yepsen: You're a successful businessman in Chariton. Didn't you borrow money in your business, to run your enterprise?

McKinley: I did borrow money because, again, business and government are completely different. When I borrowed that money it was a seven year loan. If I defaulted on that my house was taken.

Yepsen: I thought republicans wanted to run government like a business.

McKinley: With the government they don't have any skin in the game, I did. If I failed it was on my shoulders. All that government does is pass that debt onto our kids and grandkids and I don't think that's fair.

Glover: The guts of what the Governor is proposing is these are all projects that at some point in the next 20 years are going to get done and he's just taking the money and borrowing it over that 20 year period and doing them up front to jump start an economy at a time when it's in recession. Philosophically what's wrong with that?

McKinley: Well, number one, I think we're talking about two different issues. Iowa needs good infrastructure, good roads. If you're talking about jobs I'm not sure this is, you know, that should be a byproduct. Again, I don't know what those details are. If it's merely digging holes and then filling them back up again to create jobs I don't think that's a worthwhile use of money.

Yepsen: What is your position on raising the gas tax?

McKinley: My position is I think that gas prices are high enough now, I think people are paying enough for their gas. I believe prices will go higher. I personally do not believe in raising the gas tax.

Yepsen: Do you see it as a tax or a user fee? They say it's a fee, it's not really a tax.

McKinley: I think the semantics are irrelevant, it's people are paying more for gas if we raise it.

Glover: The democrats have said they will not pass a gas tax user fee unless they have significant numbers of republican votes. What is your prediction? Will those numbers of republican votes be there?

McKinley: I really don't know. I suspect there are some republicans that do support that for specific projects but I would say this, road infrastructure is of critical need in Iowa. I think it is a priority but in the $7.5 billion budget we should be able to make that a priority. With a billion dollars of new spending that happened over the past couple of years that money would have gone a long way toward maintaining ...

Glover: You don't want to borrow money to fix up infrastructure, you don't want to raise the gas tax to fix roads, do you just want to ignore these problems?

McKinley: No, absolutely not. The republicans will be coming out with a plan that would not require borrowing money and we're in the midst of working on that plan now.

Glover: Tell us a little bit about that.

McKinley: I am not prepared to reveal that yet but you will be one of the first folks to know that when we come up with it.

Yepsen: Go back to the gas tax. The argument is made that a large percentage of that tax is going to be paid by people driving through Iowa. I've heard figures as high as 40%. It is a lot. But what about that argument? Why not let some of these out-of-state motorists pay for some of the costs of tearing up our roads as they come through here? We pay a higher gas tax than a lot of other states when we drive in them, why shouldn't we get some of this money back from them?

McKinley: I understand that argument and, again, I go back to I think Iowans believe they're paying enough for their gas, I think we can make roads a priority and continue to build roads and maintain roads, which is important, without borrowing money, without raising the gas tax.

Yepsen: ... come from rural Iowa and I'm curious if you think that we have too many roads in rural Iowa? Is it time we start closing some of these roads, we quit maintaining them? We have more per capita miles of road than just about any other state. Why don't we cut back on some of these roads in rural parts of the state?

McKinley: Well, Iowa is an agricultural state and we must have good roads to get agricultural products but I think one of the things we need to look at is the ten year plan that the DOT has put out. And economic activity generally follows roads. I believe that rural Iowa has great opportunity for the advancement of Iowa's economy, small business, the state is daunted with small manufacturing companies in rural Iowa and I think we need to continue to promote that. What a wonderful opportunity for Iowa.

Glover: One of the suggestions that is on the table to deal with what all sides say is a pretty significant budget problem is the idea of selling off or leasing the state's lottery. Where are you and where are republicans on that proposal.

McKinley: I think it's a sign of desperation that we're looking at selling the state's lottery. I'd like to say it's a little bit like the family that three or four years ago bought more house than they could afford and now they're having to sell the furniture off. Why would the state sell one of the few revenue producing assets that we own? I think in principle it's a bad idea, I think financially it's a bad idea.

Glover: Why not? These are tough times. It's a drastic decision, it's maybe not a great decision but in these times of times a lot of people are making decisions like that.

McKinley: If what was in the newspaper this morning, the Des Moines Register, is true -- I only glanced at that briefly -- but it looks to me like on a business basis it would be a poor decision to sell a lottery that generates $57 million a year for $200 million over a 40 year period. It just doesn't make economic sense.

Yepsen: Legislative leaders and the Governor have received campaign contributions from gambling interests. Is that at work here? Are the gambling interests trying to get a cut rate deal on our lottery because they donated money to people like you?

McKinley: Well, they haven't donated money to me, first of all.

Yepsen: You've not accepted any money from ...

McKinley: I have to this point not accepted any of their money. I can't say that as position of leader I wouldn't say that I wouldn't visit with folks about that but no, I have not accepted any.

Yepsen: Back to my question -- is talking of the lottery the result of campaign contributions that gambling interests have made to political leaders in Iowa?

McKinley: I would certainly hope not but I'm very concerned about what I read about, again, in the Register this morning that a group of individuals seem to have an inside track on this and I think if they do proceed with this it must be transparent and there must be accountability and open to everybody.

Yepsen: And could this lead to expanded gambling in our state? There's a lot of talk that if these business interests spend a lot of money to buy the lottery they're going to want a return on that investment and one way they get it is to expand gambling. Talk about Twittering, how about gambling on your cell phone?

McKinley: Well, that was one of the allegations made by somebody in the Register this morning. I think all of those are legitimate questions and these folks aren't coming up with money because they won't make a profit on it.

Glover: I'm going to turn David's question on its ear just a little bit -- isn't it in fact inevitable that gambling will have to be expanded if this step is taken?

McKinley: I believe that if Iowa -- if the legislature and the Governor are fiscally responsible and get out house back into order and make revenues and expenses match I don't think we have to rely upon ...

Glover: Do you anticipate a gambling debate this year?

McKinley: I don't but who knows what could happen.

Borg: Let me ask another question on what wasn't in the speech that David asked you just a minute ago and Mike just asked, do you expect a gambling debate, do you expect debate on amending Iowa's labor laws, collective bargaining?

McKinley: That was absent from the Governor's speech. The democratic leaders are calling for, again, examining those issues, repealing Iowa's right to work law, employee's choice of physician which would raise worker's comp premiums 15% to 25%, a whole host of issues that would drive jobs out of this state but it was largely absent from the Governor's speech.

Glover: And I don't hear a lot of talk among democratic legislative leaders about sweeping labor law changes after last year's veto, I think they feel pretty burned. Do you hear different things?

McKinley: Well, I certainly hope not but I believe Senator Kibbie when he gave his speech on the floor talked about labor law and collective bargaining and why would we want to go down the road of driving jobs out of this state when other states such as Oklahoma reinstituted right to work and Michigan is trying to reinstitute right to work?

Yepsen: Senator, I want to go back to the question of selling the lottery. You just said a minute ago the republicans are for limited government. I thought republicans were for privatization. What's wrong with privatizing the lottery?

McKinley: I believe in privatization but that horse is already out of the barn. We have the lottery and it is a revenue generator, why would we sell it now? It's making two bad decisions.

Yepsen: Here's the proposition that is in front of the legislature, you have a real budget hole that you're in, you know that, you've talked about that, in order to fill that you're going to have to cut education, you're going to have to cut healthcare, there's a lot of pain that's going to be coming on a lot of people, people who need help from government. As you weigh that out why isn't it better to dump the lottery, take the $200 million, $300 million you'd get and be able to pay for Medicaid costs. If you take the money you get from selling the lottery and the money the federal government is going to dump in here in the stimulus package haven't you balanced the budget?

McKinley: Well, I think borrowing more to spend more is not a good decision.

Yepsen: How about selling the lottery?

McKinley: I think selling the lottery would be a mistake. The lottery is a revenue generator and why would we get rid of a revenue generator to spend money now to saddle the debt on our kids and grandkids?

Yepsen: So, you're willing to cut healthcare for poor people in order to keep the lottery?

McKinley: I am not willing to cut healthcare to poor people but I would look at eligibility and we have legislators still calling for extending healthcare to illegal aliens. I think expanding those programs -- there are a number of things that can and should be done.

Glover: Everyone came into this session saying their top priority was approving something to relief from last summer's record flooding. There is a $43 million package that the Governor wants right away, by the end of the month maybe, with that money coming out of the state's economic emergency fund. Is that a good idea? Will republicans be on board with that?

McKinley: My understanding is that there is not agreement yet on what that $43 million is supposed to go to. And, as a matter of fact, last week there was major disagreement so I think they're still trying to work out those problems. But we met with the auditor and the auditor said we've not seeing anything from the Rebuild Iowa Office yet as to what the costs are, what the requests even are. But I, again, reiterate we could solve that problem immediately if we have those numbers because we have an economic emergency fund that can do it.

Borg: But you already said I wish we'd had a special session and yet you're saying now we don't have all the information yet. So, $33 million may not be and you don't know what it's going for but why would you have advocated a special session? You still don't have the information.

McKinley: Well, the information has to be forthcoming from the Rebuild Iowa Office. We should have had a special session to deal with people who were flooded out, didn't have any place to live and we could have worked those details out later, what the federal government was going to give and what the state's participation was.

Glover: Philosophically do you have a problem with spending $43 million and taking it out of the economic emergency fund?

McKinley: If the spending is for true disaster relief no I don't.

Yepsen: Senator, how do you balance this out? I mean, talk about the floods of 2008, someday all the snow that's on the ground here is going to melt and we're going to have the floods of 2009 and maybe the floods of 2010. How much of the emergency fund do we use to pay for 2008 and how much do we keep in the bank for the next round of floods?

McKinley: One of the things I would say about that issue is Iowans have always helped out Iowans. I believe we need to follow that principle. Additionally I think we want to make sure that these communities participate in flood insurance and take care of themselves. I just absolutely think that more could have been done last fall than was done but we find ourselves in this situation now and as soon as these businesses get back up, people get in their homes and they start generating business they will begin to generate and pay taxes which will help themselves.

Glover: Part of what's happening here is the state is now getting flood relief money from the federal government, the state is likely to get a pretty good pile of money as an economic stimulus package from the federal government. Do you think that will work?

McKinley: I honestly don’t know. Until we see what the federal government is giving we don't even have an idea yet. I've heard numbers but I honestly don't know.

Glover: You're a businessman, how long do you think this recession is going to last?

McKinley: I honestly don't know. The one thing I think that we must be careful of is over spending and I think that's a lot of what led us to the problem we have in Iowa. As far as the stimulus package from the federal government I want to see what it is before I pass judgment but I have a jaundiced eye toward that.

Borg: Are you going to be out of this session by April?

McKinley: Well, Senator Gronstal says it's 100-day session, we're cutting it ten days short and I fully support that.

Borg: We're out of time and we're ending right now. Thank you, Senator McKinley, for being here today.

McKinley: Thank you.

Borg: We'll have another edition of Iowa Press next weekend at the usual times, 7:30 Friday evening and 11:30 Sunday morning. I hope you'll watch at that time. I'm Dean Borg. Thanks for joining us today.

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