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State Sen. Mike Gronstal on the State Budget

posted on January 8, 2010

Tight money, political land mines. Democrats convening Iowa's legislature facing revenue shortfalls and a looming election. We're discussing expectations with senate democratic majority leader Mike Gronstal on this edition of Iowa Press.

Borg: For democrats, the good news is they control the legislature and the governor's office. Sizable democratic majorities can push through just about whatever legislation they want for Governor Culver's signature. The bad news is democrats control the legislature and the governor's office. Declining tax revenue is forcing painful, sometimes unpopular, cuts in state services with a big election just ten months away. That means policy is politics when it comes to balancing the books in this session. Senator Mike Gronstal of Council Bluffs is guiding the Iowa senate's majority democrats in this delicate political challenge. Welcome back to Iowa Press.

Gronstal: Good to be here.

Borg: Did I paint the picture accurately, the good news and the bad news?

Gronstal: Actually I've often said that, the good news and the bad news. And they're the same news.

Borg: Right. Across the table, Iowa Press regular here, Associated Press Senior Political Writer Mike Glover and another regular Radio Iowa News Director Kay Henderson.

Glover: Senator, there's a lot of talk at the statehouse about draconian budget cuts. Give me a number. How much are you going to have to cut out of state spending, and will it be big enough that people actually notice?

Gronstal: I think people will notice. I think it's pretty clear this is -- this is the worst national recession in many, many years. The decline in revenues for the state of Iowa is literally record breaking. I think it's the worst decline -- year-to-year decline in actual revenues in the history of our state. I'm not going to -- there are a whole set of confusing numbers out there to -- to make it difficult to show you a clear balance sheet. We have challenges with the budget. We have expectations that some have said are as high as a billion dollars. That's a tad on the exaggerated side. But there are also revenues last year that we used as part of the budget that were federal stimulus dollars, and it's not likely that there will be much forthcoming on that front. We have very serious challenges. People will see real cuts.

Glover: And you have taken tax increases off the table. At what point do they have to go on the table just to make the budget realistic?

Gronstal: You know, we actually -- we actually talked about that some, and if things were -- if things were worse in the December revenue estimate than the October revenue estimate, if they were significantly worse, some people might have started talking about that. But at this point in time, it seems clear to us that at a time when middle-class families in the state are trying to balance their own budgets, us piling on with a tax increase is probably a mistake. So we've decided we're not going to raise taxes to balance the budget.

Glover: Will these cuts force significant layoffs of state workers?

Gronstal: We're doing our best. We're working closely with folks to try and develop an early retirement effort that will get some of the high-wage people that are kind of at the end of their careers to retire early, and we're hoping we can do this -- much of this through attrition. But there will, I think in every department, still be some layoffs, in fact. So we're trying to minimize that. At a time when other Iowans are also out there looking for jobs, adding a whole bunch of state workers to those rolls isn't a good idea. We're trying to minimize it, but there probably will still be layoffs in every department.

Henderson: State tax credits have garnered a good deal of attention. Let's talk about one specifically to start, a state tax credit for movie and TV productions. Will you eliminate that?

Gronstal: I think it's hard to say whether we'll eliminate it. I have said, and I repeat, I don't think that's changed, that's it's 50/50 as to whether it survives. Some of the proponents of the film industry have made the case that it creates jobs. Some of the -- some of the skeptics have said these are short-term jobs that don't last a long time. The study out in Mexico tax credits -- I mean at this point, we don't know even know if the tax credit is a 25-percent tax credit or a 50-percent tax credit. The attorney general's interpretation is that it's a 25-percent tax credit. Many others thought this was a 50-percent tax credit. In Mew Mexico -- I hesitate to get so detailed, but in New Mexico they have a 25-percent tax credit that they say for every dollar invested they get 1.55. If this is a 50-percent tax credit and all of that applies in Iowa, we're losing money on every dollar we invest. It doesn't make sense. That's the evaluation we've got to make. Does this actually produce a net benefit to the state treasury? If it does not, I say eliminate it.

Henderson: How would you vote right now?

Gronstal: Today I would vote to eliminate it.

Henderson: A panel of the governor's top state agency managers have suggested capping all business related tax credits that the state awards at $185 million annually. Is that something legislators are willing to do?

Gronstal: We have a set of tax credits now. We put a cap in last year that put several tax credits under that cap, and then we have some that were not under that cap. I think each of these things has to -- I think we have to go through a tough evaluation through the legislative process. There's some tax credits that you can make a strong case create real jobs, long-term jobs, and the kinds of jobs we want in this state, high wage, high-skilled jobs.

Henderson: Such as?

Gronstal: Well, I think you've seen -- and maybe it doesn't work everywhere in every circumstance, but I think you've seen research activities credits do things for -- for large companies like John Deere and Pioneer Hi-bred and some of those kinds of companies bring research to Iowa, and that creates long-term jobs that are very high wage, very high skilled.

Henderson: One more question about that research activities credit. In some instances some businesses in Iowa are claiming credit so much that the state winds up writing them a check because a credit is worth more than their tax liability to the state. This group of agency managers says that practice should end. Do you agree?

Gronstal: I think -- again, I think you have to go through an evaluation that's just a little bit more in depth than that. Iowa has a corporate income tax structure that is predicated on sales in Iowa. If you have no sales in Iowa, you pay no income tax -- corporate income taxes in Iowa. So for a company like Rockwell Collins, who sells all of their products to airplane manufacturers -- and we don't have very many of those in Iowa -- they have very, very little tax liability in our state. That doesn't alter the fact they're bringing the research here and producing those products here, thousands of employees, very high wage, very high skilled, building real wealth in this state. I don't think you want to discourage that kind of activity. So the legislature is going to go through a tough evaluation on all of these.

Borg: Sorry to interrupt but I need to get a question in here and follow up before I forget what you said earlier. You said you don't intend to raise taxes to balance the state budget. But what -- there are some who are saying, yes, but you're forcing municipalities, counties, and others to raise taxes through some of your actions.

Gronstal: Well, first of all --

Borg: Property taxes.

Gronstal: I understand the property tax argument, and there are property tax increases every year, okay, and that's part of our -- of our system of school aid. Part of school aid is by state dollars. Part of school aid is by local property tax dollars. There are some impacts there that are kind of hard to nail down. We are going to discourage both cities and counties and school districts from raising property taxes as a way out of the challenges they face as a result of anything that we may -- that we may end up with a shortfall. So if we don't fully fund the allowable growth formula, we're going to discourage school districts. Those are also local decisions that -- that they need to make. They're not required to spend more, but some of them may choose to and have a conversation with their constituents at the local level, but we're going to try and discourage them from using property taxes. We're dipping into our cash reserves in a fairly significant way, and we'll probably do that again next year for next year's budget. We're dipping into our cash reserves. We don't think -- we think it's appropriate for school districts and local governments to do that as well as opposed to raising property taxes.

Borg: Are you still adamant that you won't be debating social issues such as the possible amendment to the state constitution with the voter referendum on gay marriage?

Gronstal: I'm still convinced it's wrong to put discrimination in the state constitution, and I'm not going to go there.

Glover: Senator, there were a series of labor backed bills that the legislature couldn't tackle last year requiring nonunion members of the bargaining unions to pay a fee for representation expanding the scope of bargaining, so forth and so on. What's the future of those bills in this election year session?

Gronstal: The future of efforts to expand and strengthen the middle class in the state of Iowa, that's an area that I am open to considering whenever we have the votes to do it.

Glover: But those specific bills.

Gronstal: Those -- those sets of bills, in my view, have built stronger economies and more wealth in states like Minnesota and Wisconsin, and I'm certainly open to considering those.

Glover: Well, what's changed from last year when you couldn't pass them? You have the same members of the legislature, the same parties of --

Gronstal: No, actually we got a couple new members of the legislature.

Glover: But the partisan breakdown is the same.

Gronstal: But there also may be nuances to the legislation that garners the votes necessary. So we're open to dealing with that. But our number one job this session is to -- is balance state budget that preserves our priorities in the face of this national recession, preserves our priorities of education, health care, job creation, do a state government reorg effort. It's -- it's -- out of necessities, the mother of invention, this is the right time for us to look at doing things more efficiently in state government, and that's going to be our priority this session.

Glover: Give me a -- give me a percentage on these labor bills, 50/50, 70/30?

Gronstal: I'll -- I'll leave the gambling to the casinos in the state of Iowa.

Henderson: Governor Culver has embraced the idea of using $50 million in gas tax revenue to finance the operations of the Iowa State Patrol. The Troopers Association has embraced the idea. Will democrats in the legislature choose to do that?

Gronstal: I think we're going to have a real serious discussion about that. I think everything has to be on the table. We've said that repeatedly that this is the most severe decline in state revenues in any of our memories. That necessitates us not just taking things off the table because they seem inconvenient or tough at the time. We're going -- we're going to go through a process. We've got 150 members that all get here on Monday, and my job isn't so much to tell them what they're going to do. My job is to help 150 people come together on a consensus as to what we're going to do. We're going to -- we're going to seriously consider that.

Glover: You mentioned casinos earlier and there have been, again, some suggestions that the legislature ought to have an annual gambling debate. The suggestion this time is allowing adult establishments to have some sort of a gambling device in those establishments, kind of a limited version of the touch play debate you had several years ago. That gets your hands on some money. Is that something you'll consider?

Gronstal: So a couple years ago we decide pretty dramatically in a pretty strong vote where the members really haven't changed all that much either then, we decided we're going to get rid of touch play because Iowans didn't like it. And a couple years later, we're going to reverse that and go back and kind of get half of touch play back? All I'm saying is I think that's unlikely. I think the legislature dealt with that a couple years ago.

Glover: But isn't this -- isn't this a much more limited proposal, and don't you need the money?

Gronstal: Age-restricted establishments?

Glover: Right.

Gronstal: Well, it's more limited. Instead of 6,000 locations, maybe it drops down to 4,000 locations in the state of Iowa, but that's not really terribly limited, mike.

Glover: So you're not going to do it?

Gronstal: I think it's highly unlikely but -- but we'll see.

Borg: Are you intent on legislative session light? By that I mean you've had big attendance here --

Gronstal: I wouldn't say light. I'd say efficient.

Borg: Well, I'm talking about the time that you're allotting for some very big decisions.

Gronstal: Here's kind of what I say to our members. You know, in ordinary sessions people lose on an issue once, they come back a second time to try and get it and then a third time and try and get it, and they kind of end up with four swings -- swings at the ball in the legislative process. What I'm telling folks is we have very tight budgets, we have very tough decisions to make. As a matter of fact, I've said to people -- to interest groups coming in saying is there anything we can do about the cuts for the 2010 budget, the budget year we're in. And I said, well, we could but if we deal with that now, you're last in line when it comes to 2011. Maybe you ought to live with what you've got currently. So I'm telling people when we come to the decision to say no to somebody, stick with it.

Borg: But still you're allotting fewer days than the law allows to get this session going.

Gronstal: But we don't have much that we can get done in terms of -- we don't have a lot of revenue, so it's about making some tough budget choices.

Glover: What about --

Gronstal: We're going to try and get a state government reorg bill done early. That will give us that -- that kind of carves out what we need to do to balance the budget, depending on the savings there.

Borg: What about the idea of recessing until you can get more information later on in the session -- later on in the year, I should say, and then coming back, because then you'll have more revenue data in order to make a budget decision?

Gronstal: We'll actually have the revenue data we need in late march. So let's say sometime shortly, March 20 or shortly thereafter, we will have the final numbers, just as we do most years. And when they're tough budget years, you're kind of looking for that number to help you out. We'll -- we'll -- we'll take a look at that March number. I don't expect that that will change much. And so we think -- we think ten days after March 1 we'll be able to say here's the budget decisions -- here's the resources available, how are we going to divide them, what are we going to do.

Glover: To be clear, what you're setting in terms of a time frame is a number of days for which legislators will receive expense payments. You said 80 days instead of the 100 days you would typically get this year. That would have the session end at the end of March. But that doesn't mean you couldn't continue on without pay, right?

Gronstal: Sure, yeah, yeah we can stick around. But like I say, it doesn't get any easier to say no to people the fourth time. Why not say no the first time and mean it? If we had lots of resources and we were constructing, you know, some new state program, that would be fine. We're not. We don't have the resources to construct new programs, so this is going to be a -- nine out of ten years, we get to do great things, and we've got a great record for the last -- for the last three years of things we've done to move this state forward, to access -- we're first or second in the country in access to health care for kids. We've got a great record that we can talk about, but this particular year we're not going to be able to expand on that. And our effort is going to be to try and hold on to the gains we've made in education, the gains we've made in health care, and our efforts to create good, high-wage, high-skilled jobs.

Henderson: You will be saying no to some important interest groups in the Democratic Party. Given that you'll be saying no to those people and that you'll be angering other Iowans by not having a vote on an amendment to the state constitution and setting the wheels in motion for that vote, what are your prospects for November?

Gronstal: I think our prospects are pretty good. I'm excited about getting on the campaign trail and talking about the good things we have done. We've got a national recession that's kind of thrown a cold blanket on the entire economy. And to some degree, it's kind of hidden some of our accomplishments here in Iowa because people are obviously, just as we are, more concerned about whether they're going to keep their job or whether they can get another job. So -- so if the economy turns, I think that mood changes pretty quickly. But when it's all said and done, our campaigns aren't about national mood. They're not about presidents on the ballot. They are about recruiting good people that are already leaders in their community, that reach out to their community and listen and hear people's concerns, and then run good campaigns. We've done that very effectively.

Henderson: Will you have some legislators, though, who are democrats lose because of the gay marriage issue?

Gronstal: I doubt it but, you know, in some marginal districts, maybe that does have an effect. I don't know.

Glover: Let's step back and take a larger look at this year. If you look at history, this is the first midterm election of a newly elected democratic president. That should mean, if history teaches anything, it's a good year for republicans. But the economy seems to be driving the debate out there, which traditionally helps democrats. Step back and look at the tenor of this year. What's it look like?

Gronstal: Mike, your predicate, though, is -- is that it's a good year for republicans. You can go back all the years I've been in office, 28 years, and some off years where -- some off years are -- at the local level, at the state legislative level are counter to that. The republicans took the majority away from us in '96 when Bill Clinton was cruising to easy reelection. We took the majority -- we got to a tie in the senate in 2004 when George Bush was cruising to easy reelection. This is -- this is really more local politics at the state legislative level. So I don't think we're necessarily tied to that. And I do think it's a little hard to predict what the mood is going to be. You know, if we could have predicted -- if we could really predict the economy, none of us would probably be in this business. We'd be out making a zillion dollars. If you can tell me that the unemployment -- where the unemployment numbers are going to be going next August, September, and October, I can probably give you a little flavor of what I think that leads to. But -- but I don't think any of us really know right now. So we'll deal with whatever is thrown us.

Henderson: In the middle of December, the top two republican leaders in the legislature were on this program, and they described the prototype candidate that they're looking for, for legislative seats in the house and senate. Do you have a prototype candidate that you're looking for, or is it each district unique?

Gronstal: Yes, there are no prototypes because every district in the state of Iowa is different. We go into a district, talk with local people, and we -- in terms of recruitment. And we don't have a lot of recruitment to deal with this time. We won 19 out of 25 seats four years ago. So there's only six seats that republicans won four years ago, and there aren't a lot those that are highly competitive. There's a couple. We still think we've got a little bit of offense in a couple places in the state of Iowa. But, no, it's not a prototype. We don't go in -- we don't go in with -- I've got one litmus test that I always say to candidates, and sometimes they're a little bit surprised because they may expect to hear more than this. My litmus test is will you support education. If they can do that and they're a leader in their community, we can probably succeed in getting them elected.

Henderson: On the national scene, there have been some high-profile democrats who have chosen not to seek reelection. Will we see that phenomenon here in the state among legislators, democrats who decide the environment is not conducive to reelection?

Gronstal: I don't anticipate any on the senate side. I think all of our folks, except for one, has already announced, Roger Stewart, a great legislator. If Roger is listening, he should -- he should reconsider, but we won't go there.

Glover: Towards the top of the ballot, Governor Culver is up this year. Is he vulnerable?

Gronstal: Well, everybody is vulnerable when the economy is bad. Okay? That's -- I think there's some truth to that. But let me tell you the first thing Governor Culver asked -- Governor-elect Culver asked me to do two days after his election -- the first thing he asked me to do was raise the minimum wage two bucks an hour for working families in this state. And I can tell you the first thing Terry Branstad asked me to do in 1983 was raise $300 million in taxes on working families in this state. That's the difference. I think when people -- when people understand when we get to talking about not the -- not the current economy we're in, the national recession, when we get to talking about things we've accomplished over the last few years in the legislature, we've had a great run. I think Culver is going to do an excellent job of articulating that. And I think when people start to remember that Terry Branstad is probably the biggest tax increaser in history of the state, they're going to have second thoughts about him.

Glover: So you're make the assumption that Terry Branstad is the winner of the republican primary.

Gronstal: I think he's -- no, you know, I think he's probably -- he's probably the one that conventional wisdom says is the most serious opponent for us. Okay? I do think former Governor Branstad has significant challenges in the primary.

Henderson: Your counterpart in the house in December on this program endorsed Roxanne Conlin, a U.S. Senate candidate. Do you intend to actively support one of the democrats who is seeking the nomination?

Gronstal: I have told Roxanne she can use my name. Yes, I'm endorsing Roxanne. Roxanne is going to be a great candidate.

Glover: Senator, we talked a little bit about President Obama. Is President Obama a help or a hindrance as you begin shaping this year's election?

Gronstal: I think the hindrance, as you've alluded to, is some degree the economy. And since -- and since democrats control everything in Washington, it's now kind of their responsibility to get the economy moving again. I think there's some likelihood that the economic news nationally is going to be more positive when we get to the summer and the fall, and people are going to say, yeah, we're starting to come out of this. So -- so we'll see how that plays out.

Glover: Would he be helpful? Would you like to see him out here on the campaign trail?

Gronstal: I'd love to see him out here. I think -- I think it's -- I think he's -- no one knows yet what this election is going to be. It could be a throw the rascals out. It could be -- it could be base against base with the middle staying home, so it's kind of hard to tell. And each of those scenarios begs for a different strategy.

Glover: Give him a grade.

Gronstal: Give him a grade?

Glover: Yeah. He's wrapping up his first year in office.

Gronstal: I'd give the democrats in Washington a grade. I think they've -- I think they've worked hard but they haven't made a lot of progress yet, and so I think there's -- I think our own base is a little disappointed that more hasn't gotten accomplished. I think as they finish health care --

Borg: The grade? The grade?

Gronstal: I'd give him a B.

Borg: Okay. With that B, class is out. The bell has rung. We're out of time. Thanks so much for being our guest.

Gronstal: Sure. Happy to be here.

Borg: As we've been discussing, it's a big week at the Iowa statehouse, and Iowa Public Television is putting you in the front row. On Tuesday, a day after the 2010 legislative session convenes, Governor Chet Culver delivers the annual Condition of the State address. It's one of the most anticipated in recent years because of the state's big budget challenges, and we'll be watching for insight and the governor's guidance to legislators. Iowa Public Television will be bringing that address to you as it happens at 10:00 Tuesday morning, January 12. Rebroadcast that night at 7. I'll be there. I hope you'll watch. And I hope you'll watch also when Governor Culver is our guest here on Iowa Press next weekend. And we remind you too that the Internet is your link to our Iowa Press staff. You can e-mail any comments to iowapress@iptv.org. Iowa Press is back at the usual times next weekend, 7:30 Friday night and 11:30 Sunday morning. Again, with Governor Chet Culver next week. I'm Dean Borg. Thanks for joining us today.

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Tags: budgets Congress Democrats Iowa Iowa legislature Mike Gronstal politics

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