Borg: Navigating stormy waters. Legislative leaders and the governor are charged with steering the state to financial safe harbor. But there is increasing economic uncertainty. We're questioning senate democratic majority leader Mike Gronstal on this edition of Iowa Press.
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On statewide Iowa Public Television this is the Friday, February 6th edition of Iowa Press. Here is Dean Borg.
Borg: A year ago at this time Iowa legislators were viewing very favorable revenue projections for the state. Life was good. Well, it's no exaggeration to say the bottom has dropped out. The worldwide economic slowdown seems to be gathering intensity. The budget crafted a year ago, the one the state is using right now, has already been pared at least twice and for next year's budget taking effect July 1st Governor Chet Culver is calling for an additional 6.5% spending rollback and that is from the already shaved this year's budget. Getting that accomplished starts in committees, principally one dealing with appropriations, another with taxes, that is called ways and means, and steering it all, at least in the senate, is Mike Gronstal of Council Bluffs who leads the majority democrats in that chamber. Welcome back to Iowa Press.
Gronstal: Thanks for having me.
Borg: Did I get that all right?
Gronstal: Absolutely. Well, I don't know how much I'm steering. There are a lot of currents. It's not easy to steer.
Borg: The current is downward right now.
Gronstal: That's correct.
Borg: We got that right. Also at the table Des Moines Register Political Columnist David Yepsen and Associated Press Senior Political Writer Mike Glover.
Glover: Senator Gronstal, we'll get to some details down the road but I'd like for you to step back a second and take a big picture look at things. We've got some new economic numbers out now on unemployment that is worse than people thought. The governor suggested a 6.5% budget cut. Is that your starting point? Are you going to have to go beyond that? How bad is it?
Gronstal: We have asked our members -- they are the best of times, they are the worst of times. If you're looking at what's right in front of us times are tough, we're going to cut budgets, there is going to be real pain, there is going to be furloughs, there will probably be layoffs in some sectors of state government. So, we have very, very challenging times. On the other hand we are so incredibly well positioned, our economy, for the long-term that we're better positioned than we've ever been in my lifetime. So, I'm actually excited about Iowa's long-term future. We have these bumps in the road. We are better positioned. Last time we had this kind of serious bump in the road in the early 90s we had about $45 million in the bank. This time we've got over $600 million in the bank. So, we're in better shape, in better position to handle this crisis than we've ever been in past history. But it's still, as Dean said, this is still an international economic trend.
Glover: Can you give me a number? The governor suggested a 6.5% reduction in what the state was projecting to spend. Can you give me a number how far beyond that you're going to have to go?
Gronstal: Look, we're telling our members to change their normal attitude and we're working very hard at changing that attitude. First of all, we don't have all the information yet to make our final set of judgments about what we're going to do in this year's budget but we have told them rather than look for ways to fix things that are short in terms of the governor's recommended budget we want them to forget that and look at ways to come up with additional cuts, look at ways to take certain things off the table that we might like to do but that we can't afford in the current world. I would rather be a little extra careful this year and hope that next year's economy is better and I'd rather find out next January we cut a little too much and now we can afford to fix some things. I'd like to see us go lower. And I haven't put a dollar amount on that yet and as we said it is a complicated picture, we've got the federal stimulus package and we've got the March revenue estimate. One of them will probably be negative, one of them will probably be positive. Towards the end of March we will make final decisions about the budget. But we have to go through this process now with our members and that process now is about identifying deeper cuts.
Yepsen: Senator, I want to put a finer point on the question of tax increases. I remember George Mills telling me that Iowa got a sales tax in the depth of the Great Depression when they enacted a sales tax as property tax relief. You and I were on Capitol Hill in the 80s when you raised sales tax at that time during the farm crisis. At some point here doesn't the pain of these cuts become so great that it's just easier for lawmakers to raise the state sales tax?
Gronstal: I don't see that happening this year, David.
Yepsen: So next year?
Gronstal: Can you tell me how deep this recession is going to go? If you can I might be able to tell you about next year. But I can't tell you about next year. So, we will do our job this year and face those issues next year. I don't see it likely that we're going to pursue any kind of significant tax ...
Yepsen: How much do we read into that? You're saying no tax increase this session but you're saying the door has still got to be open.
Gronstal: Everybody always wants us to take certain things off the table.
Yepsen: We do like yes or no answers, Senator.
Gronstal: But the depth of this recession and how long it's going to last I think it's unwise to take a whole bunch of things off the table because we've got to have people really thinking hard about what it is state government does, what are the things that are nice add-ons and what are the things that are critical core functions. And from my perspective this is about priorities, this is about making sure people have access to healthcare, in particular at a time the economy is weak and people are losing jobs and losing healthcare coverage. That is probably in my view the top priority to maintain.
Borg: Sometimes the consequences of that philosophy though are increases enacted by other agencies of state government. Thinking about the Board of Regents, the president there says maybe we're going to have to revisit the tuition increase that we had planned for next year, we may have to raise that. What do you think about that?
Gronstal: We're going to come up with a budget that works for the state of Iowa. We're not going to take those kinds of things off the table. They may, in fact, find that necessary. We would also advise them to take into account the trying conditions that Iowa families are facing in terms of getting their kids access to higher education. We're all going to have to -- everybody is going to have to tighten their belt. It's not just institutions of state government in Des Moines. Across the board government is going to have to tighten their belt.
Borg: And does that go for such things as license fees, hunting and fishing licenses and other things like that?
Gronstal: I'm taking nothing off the table, okay, and I keep trying to stress that, that we're going to look at every option out there, we're going to try and do as good a job as we can. The one place where we have been clear that we're willing to do more than we've done before is in the area of disaster recovery. And as you've seen, look, here's what we did just this week, just got signed this week, we passed it the week before. We took a look at the challenges facing disaster communities in the state of Iowa and rather than do what happened a few years ago where we pulled the rug out from under cities and counties in this state we said they've got real challenges and we're going to take money out of our economic emergency fund and give $22 million to cities and counties that have lost resources because of these disasters. So, we're working to have a responsible budget but there are things that we're willing to go into the economic emergency fund, we call it a rainy day fund, we're all pretty sure it rained last summer.
Glover: You're not taking things off the table, let me help you set the table if I could. You had an unhappy experience not long ago when you passed a bill expanding the scope of bargaining for public workers, saw it vetoed. What is labor going to get from this legislature? There are several pieces out on the table. Which of those are real live rounds you think you can pass?
Gronstal: I think potentially they are all live rounds.
Glover: Tell the viewers which ones, what they do, what they are ...
Gronstal: There is one that would give a worker more voice in the medical care they receive when they are injured on the job. That is very much a live round. There is one that would say when it comes to public projects, public building projects we're not going to set it up so that companies compete based on how low they can big down the wages of their workers. That is the prevailing financial onset. There is the concept of fair share that as you know the senate passed two years ago. And there is the issue of collective bargaining and I've said on your show before why can't a cop sit across the table and say to the city administration we'd like bullet proof vests ... scope of bargaining. Those are four issues out there that we are very open to considering, it's a measure of what we can pass, what the house can pass and what the senate can pass and what the governor will sign. I'm hopeful we can do something on all four of those fronts.
Glover: And you've talked to the governor?
Glover: And he's receptive to all of this?
Gronstal: We have talked to the governor repeatedly. We have had better communication, we've done a great job of assembling a better operation in terms of ongoing communication with the governor and yes we have had those discussions with the governor on all of these issues. Iowa, for 60 years, has pursued a weak union, low wage, low skill strategy towards economic ... and it has not created life in this state and it has not created good paying jobs in this state.
Glover: And fair share, to be clear, is that members of the bargaining unit who don't belong to the union would have to pay a fee to the union for their representation.
Gronstal: For the services they get.
Glover: And all four of those you think are live rounds?
Gronstal: Absolutely, all four of those have a real opportunity to get considered and passed. The final details, I think that's still lots of people are talking about it.
Yepsen: Senator, the governor needs a political fig leaf. He did veto a labor bill that you folks passed so he can't come back and sign it now can he? He's got to get something different from the legislature.
Gronstal: Of course it's going to be different.
Yepsen: One idea out there is this fair share thing, make it for all employees in the state, not just public employees and make it just for new hires that for people who have a job they never have to pay a fee to a union but for people who get a job as of a certain date they might be having to pay a fee.
Gronstal: You're changing careers now but you have the makings of a legislator.
Yepsen: That hurts, Senator.
Gronstal: Looking at the art of compromise and I always say politics and nobody understand what I mean when I say this, politics is the art of the possible, what is possible and what you're discussing is something that is part of the art of what may be possible. I've got 100 house members, I've got 50 senators and I've got a governor, we've got to make all of that work together and find something that will work.
Glover: And you've had people talking about all four of those pieces trying to come up with little twists and nuances, right?
Glover: And what do you think this is going to start to move?
Gronstal: I think it's hard to tell which one of those will start to move first. If I was to guess today which one moves first I'd guess it would be prevailing wage.
Yepsen: Will you move this in such a way, Senator, that people in Iowa have a chance to hear about this? One of the criticisms was made last time, you kind of did it slamma-jamma and in a big hurry and people didn't have a chance to have a debate. So, will this be done over a period of several weeks in daylight hours so we all get a chance to see the bill?
Gronstal: I accept that criticism, David, I accept that and that's why I think the show right before session started I talked about these issues, I talked about them out loud, that's why Senator Courtney on Monday, probably mid-week next week will bring out a bill on giving workers a better voice in their medical care after they have been injured on the job. So, people didn't like that. We're fine. We're going to debate this and have that discussion. We're going to talk about what it means for the future of Iowa whether we want to have a low wage, low skill economy or whether we want to have unions that are a little bit stronger and that lead to better working conditions. Tomorrow is Saturday, everybody has their weekend thanks to organized labor.
Borg: How do you justify that with struggling businesses right now? You're putting what many of them say is an additional burden on us with some of that labor legislation.
Gronstal: First of all, I'm not quite sure how I see it's a burden for them. If a business doesn't like it they get to bargain it at the bargaining table. I'm talking about standing up for middle class families in Iowa who I don't think have been, I don't think their issues have been spoken to in a long time. I think this is about strengthening Iowa's economy. If you want to keep labor weak, the kinds of jobs you're going to end up with are the kinds of jobs you had at Postville with Ag Processors. If that is the world, if that is Iowa's economic future I think it's a pretty sad future and no wonder our kids are leaving this state.
Glover: Senator, we're having great fun talking about this issue but we're going to switch topics for a second if I could. One of the priorities that Governor Culver campaigned on and pushed for when he was elected was creating an Iowa Power Fund, $100 million towards alternative energy. You talk about cutting back, a $25 million increase is scheduled for that in the next budget. Are you going to come up with that $25 million?
Gronstal: Either the $25 or awfully darn close to it. Look, that's about our future. We have moved light years in the last ten years in Iowa. By the end of this decade we'll be at 18% of our electricity produced by wind energy, 18%, more than any other state on a per capita basis. We just moved from third to second, we just surpassed California on wind energy. The only state with more is Texas. I'm excited -- that's the part of Iowa's economy I'm excited about, wind energy, ethanol, who knows what the next generation will be, ethanol produced from cellulosic ethanol. In Emmetsburg, Iowa that is happening right now. That is our kid's future and I think the governor was right on the Power Fund and I think it fits so well with what's going on right now. We've got a president that wants to be energy independent in ten years. Iowa is at the epicenter of that kind of world. We have two of the most powerful U.S. senators in the country, Grassley and Harkin. We are incredibly well positioned to capitalize on this.
Yepsen: Got it. I want to move onto another question. Shifting property taxes. One of the criticisms that is being made of the legislature and the governor is that in the course of cutting budgets you are shifting tax burdens to property tax payers, not fully funding homestead credits. You're going to cut school aid but you're going to still allow local school districts to raise property taxes to make up the difference. How do you respond to that?
Gronstal: First of all, none of those decisions have been made. Here is how I respond to that. Five or six years ago when the republican budget was in the tank their solution was to cut $60 million out of local governments. What did we just do this week? We said to local governments you're strapped, you're hurting, we're going to come up with a way to help you with $22 million. We're going to fight property tax increases to the best of our abilities. Will we get it all stopped? I don't know. But we're going to do our best to make sure property taxes aren't on the rise in Iowa.
Yepsen: So, when you give local governments more authority to raise local taxes that may be great flexibility but to the taxpayer it's still a tax increase.
Gronstal: That's not what I said, David, I didn't say anything about that. I said we took $22 million out of the state treasury and used it to replace property taxes at the local level. That's what we did this week, the governor signed it on Monday.
Glover: One of the other things you did that he signed was the $56 million disaster relief bill with money to communities and homeowners and that kind of stuff, and cities and counties. One of the proposals that Governor Culver has laid on the table is a $700 million bonding proposal, borrow money up front to do flood relief, to do infrastructure repair, all that kind of stuff. You've done the first step in disaster recovery. Will you do that step?
Gronstal: Yes, we will take the second stop. We will pass the bonding bill in the legislature.
Glover: Will it be $700 million?
Gronstal: $160 million of that is to replace a bonding proposal we did last year that the market in terms of tobacco bonds didn't use. So, drop that number from $700 million to $540 million. So, we'll do something in that neighborhood. I don't know that we'll do exactly that much but we're very interested in disaster recovery and there's not a better time in our state -- we have a AAA bond rating ...
Glover: Critics will say you do a bond proposal that is repaid over 20 years, you build a road which in 20 years will be needing to be replaced. How do you answer that criticism?
Gronstal: The way I answer that criticism is I take Paul McKinley's words on opening day of session and he talked about what he did when he started his business -- republican leader in the senate -- what he did when he started his business, his words -- I leveraged myself to the hilt. He invested in his future. Everybody in this room that ever bought a house probably borrowed money to buy that house and that house became an asset for their family. We're willing to borrow money to invest in our future and to recover from these weather related disasters.
Yepsen: He will also say he used his own money, he borrowed money on his dime, not somebody else's. The criticism is made you're running up more debt, this is not your money, this is the taxpayer’s money.
Gronstal: And it's a time to invest in our future. We had disastrous natural disasters last summer. Should we just hope in 25 years that stuff gets cleaned up and fixed or should we take an extra step this year to go a little further and do a little more in that area? I say take the extra step.
Yepsen: One of the things I've heard you worry about is the concern that you've got a federal stimulus money coming to Iowa, you're going to do this state bonding program. That is a lot of money sloshing around. How are you going to prevent waste? How are you going to prevent duplication? Avoid earmarks? Have you got a mechanism in place to do this right?
Gronstal: We're talking about that, we're talking about how to create categories -- there's a lot of things we can do in terms of this rebuilding where we can make the rebuilding green rebuilding, where we can make it more energy efficient and long-term savings by doing it that way. So, we're looking at all of those questions. We're doing our best to create a category. We've got 150 legislators, they all have to have some input on this.
Glover: We've got one idea that's been around for a long time and that goes to this rebuilding the infrastructure and that is the gas tax. Will you talk about increasing that? It was debated last year, it's been talked about this year. Give me your best prognostication. You've been around the legislature for a long time. Does that pass this year?
Gronstal: Even money chance, 50/50. We're going to continue to explore that as a possibility for investing in our infrastructure. There are a lot of folks that think a mechanism that helps folks that travel across our roads and use our roads ought to help contribute to them and a user fee on fuel makes some sense in that respect.
Yepsen: What about the governor who, depending on what day of the week it is, is sending signals that he doesn't like the idea of raising the gas tax? You're surely not going to pass a gas tax increase if he's not committed to sign it are you?
Gronstal: Of course not.
Yepsen: So, you do have some signal from him that if you ...
Gronstal: No, I'm not saying we have any signal. I'm saying I have 150 legislators that came to town to set policy for the future of the state of Iowa and those folks are getting engaged in that practice and I told our caucus, I've said to our caucus it's a three-legged stool, the house, the senate and the governor's office and any time you leave one leg of the stool out you kind of fall down on a painful spot.
Borg: I've noticed something else that you said just a moment ago to your members -- you've asked them to change their normal attitude toward everything. Everything is off the table and we start again. Is there any thought to having legislators pare their own expenses in some way?
Gronstal: We have already committed to paying ourselves for ten days less this session. Effectively we're taking a ten day furlough.
Borg: Okay. What else is thinking outside the box? I'm thinking of the way that the economy is swirling downward right now rather than call a special session is there some enablement that you could consider this time for state agencies that are under public construction with schools or whatever to enable those agencies to enact some special cost saving, cutting to a four day week in schools? I can't think of other things right now but you might.
Gronstal: And that is one example that I think several school districts have mentioned to us and it's certainly something that we're willing to consider. But let me also say we want to look at the impacts -- if you look in isolation of what that does for the school district maybe that’s a great deal. If you turn around then and for all the middle class families in the state of Iowa that now need childcare on Fridays you may make the judgment that if you really want to stand up for working families that is really a disadvantage and in the end costs them more anyway.
Glover: I'm going to give you a chance to send a signal. There has been discussion about selling the state's lottery. We've heard yes, no, maybe from various people. Tell me what's going to happen with the state lottery.
Gronstal: I think that is an incredible long shot.
Glover: So you're not going to sell the lottery?
Gronstal: The odds are pretty strongly against it and I think there is little or no interest in our caucus in pursuing that.
Yepsen: It's never an official Iowa Press show unless we talk about politics or gambling or gas tax -- let's do politics. 2010, democrats control the statehouse, you control Washington. Are voters going to hold you accountable if this economy isn't better by then?
Gronstal: Voters are going to measure us based on what we do in terms of reflecting their priorities. We're going to come up with a budget that we believe respects mainstream Iowa ...
Yepsen: Excuse me, Senator, I'm not talking about the politics of this -- are you worried ...
Gronstal: I think 99 out of 100 times good policy is good politics. I think the voters when they see the choices we make and if we run good campaigns and explain why we made the choices we make I think the voters will reward democrats. There's always some fallout -- there was fallout in '82, that's when I came here, the first two years of Reagan's term, part of how I got elected was a little bit of a democratic year. Maybe it will be not quite so democratic in 2010, I don't know.
Yepsen: Put your political scientist hat on. There's two factors that are going to be at work in 2010. One is there will not be as many of the Obama voters who will show up. There is a natural fall off. At the same time hard times historically have benefited democrats. So, one is a negative and one is a positive. Is it a wash? What's the effect of that on your members as they seek re-election?
Gronstal: I continue to believe campaigns are 80%, 90% about recruiting good candidates and getting them to run good campaigns. So, for me the key is to go out and find candidates that represent their district, that reflect their district.
Glover: One last question, we've only got about 30 seconds. You have a candidate for probably the top race in the state next year and that is Governor Chet Culver who will be seeking a second term next year. What are his prospects?
Gronstal: He's going to get re-elected. He's going to get re-elected handily. I think Iowans recognize he's got the right priorities, he's about moving our economy forward, about us being a world leader in energy production. I think people are going to be very excited about re-electing Governor Chet Culver.
Borg: And a lot of that is going to depend on what you give him in the way of legislation though to sign.
Gronstal: We're going to do our best to give him what he needs to make this work.
Glover: And who are the republicans going to run?
Gronstal: Don't care.
Borg: On that equivocation I'm going to have to call time. Thanks so much for being with us today and spending time with us. On our next edition of Iowa Press we'll be talking with Iowa congressman republican Steve King. He'll be here previewing the work of the new congress in which he and his fellow republicans are working with large democratic majorities and a democratic president too. Our conversation with Congressman King airs at the usual times, 7:30 Friday night and 11:30 Sunday morning. I'm Dean Borg. Thanks for joining us today.
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 ... employing over 10,000 Iowans and enrolling 25% of the total Iowa higher education enrollment. More information is available at www.thinkindependently.com. 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.