Crunching the numbers. Iowa legislators using this week's new revenue estimates in crafting next year's state budgets. Majority democrats are leading the process, and we're questioning the Senate's Democratic leader, Mike Gronstal, on this edition of Iowa Press.
Borg: Just yesterday Iowa legislators got the information they'd been waiting for from the state's Revenue Estimating Conference. The news is only mildly encouraging, predicting slight increases in tax revenues during the next several months. For legislators that means not much is changing from the austere approach they've been taking in crafting next year's spending plans for the fiscal year beginning July 1. It also means that legislators may be focusing now on buttoning up the budget, adjourning the session, and turning attention to the elections. Council Bluffs Senator Mike Gronstal will be leading the democratic majority's budget decision making process. And, Senator Gronstal, thanks for making time for us today.
Gronstal: Happy to be here.
Borg: Busy time --
Gronstal: Yes, it is.
Borg: -- in the legislature right now. We're going to be asking about those numbers in just a second. But across the table, Associated Press Senior Political Writer Mike Glover and Radio Iowa News Director Kay Henderson.
Glover: Senator Gronstal, we're going to get to those budget numbers and how you're going to handle it and how you're going to wrap up this session in a minute. But before we get there, I'd like to talk about something that's kind of flared up in the last few days, and that suggestion is that the money from the Iowa Association of School Boards, taxpayer money, may have been misspent. How are you going to react to that?
Gronstal: Well, as you know, next week we're going to have a hearing -- we're going to have them before our legislative oversight committee. I've got to tell you, I think Iowans are outraged at what has gone on there. It appears to me that this has actually been going on for quite a while and that the organization hired somebody -- got rid of some people and then hired somebody to come in and clean it up. And pretty obviously it wasn't cleaned up. I think in the end we'll need to give subpoena authority to our oversight committee to call people in, some of those previous employees that worked there. I just think what's happened is outrageous, and I think people are sick and tired of it. The executive director literally said, "I thought I was getting paid too much money. I asked them to lower it." What kind of an executive director can't get their own pay lowered? I mean something isn't right in this place, and I think in the end we'll have to have subpoena power to get the answers to it.
Glover: And this is not the only group association that spends a lot of taxpayer dollars. How widespread is this?
Gronstal: I think that's a great question, and it's certainly one we're going to look into. We think these organizations -- listen, I don't know about other governmental associations, but we thought this organization was primarily to help do education of board members and provide -- provide a place for people to share ideas. It appears that they had a number of money making schemes designed to -- designed to try and, you know, generate for-profit activities, and a think a lot of legislators are very concerned about it.
Glover: And what do you say to local schools? I mean in the Des Moines school system, they're going to lay off 300 teachers, and they're paying money to the association to send people off to Costa R ica or something.
Gronstal: And that's absolutely unbelievable that that's going on and that that's what's happened with this organization. So I think you're going to see -- this is going to continue beyond the legislative session. I haven't seen anything like this since CIETC, and this thing appears to have so many -- there were three or four different for-profit entities under this thing, maybe more. We simply do not know, and we're going to find out. It will probably take subpoena power to do it, but we're going to pursue this until we get the answers to those questions. It's just outrageous that any teacher should lose their job while school districts across the state are sending in dues money to an organization that's engaged -- I mean it looks to me like the executive director was paid twice what the governor was paid. Twice what the governor of the state of Iowa was paid! I think that's just absolutely outrageous.
Glover: And what do you have to do to get subpoena power?
Gronstal: Legislative council on the oversight committee can ask us for subpoena power. They've already asked if they asked whether that request would be honored, and I assured them that, yes, it would if they need subpoena power. And like I say, I think they probably do. The legislative council can grant that to them. As you know, legislative council is an entity of about 25 to 30 --
Glover: And when does that happen?
Gronstal: That will happen whenever they ask for it. I mean we'll get together on a conference call and do that authority if that's necessary.
Henderson: Back to Mike's other question, though. There are other associations in the state, which take money from government entities. Will you launch a wide-scale investigation and have new rules for those entities as a result?
Gronstal: I think we'll certainly ask them those questions: what kind of entities do you have out there that are profit-making entities that are designed about kind of empire building? It appears to me the School Board Association, like I said, had four or five. Who knows how many profit-making entities that were all about building some sort of financial empire that would -- so we're going to get to the bottom of it.
Borg: Well, let's be clear. Are you troubled about the fact that the profit-making entities within these associations -- I think of the Iowa Association of Counties, for example, where counties pay apparently dues money to -- is that something you're going to be looking into too?
Gronstal: I think our first job right now is to get to the bottom of the Iowa School Board Association. I think our second job is to make sure these kinds of things are not happening in those other entities, and we're certainly going to be asking those questions.
Glover: Would that entail creating some kind of a new committee to take a look at this?
Gronstal: I think oversight committee can probably handle this and come back with a set of recommendations for us next session if something is needed on that front. But I think -- I mean we've got to get the forensic audit. We've got to get all these -- I start to wonder should a purely public organization that creates a for-profit entity -- it kind of seems to me that for-profit entity, even if it's somehow independent of that group, should have complete open records and open meetings the way the rest of governments do in this state. So, you know, I'm inclined to think we're going to ask all of these organizations to be forthcoming about the kinds of things they operate.
Glover: Should the attorney general have a role in this?
Gronstal: I think the forensic auditors will tell us whether they believe any laws were broken. If you were, obviously the attorney general will be needed to intervene in this. I also think the state auditor should probably review whatever audits come out of there. It appears some of the audit information from the internal auditors was originally not shared with the board members. That too seems outrageous to me. So this thing is a real mess, and we're going to get to the bottom of it.
Henderson: You mentioned that Iowans are outraged about this. Another thing Iowans have been paying a little bit of attention to is a bill that would ban texting while driving in Iowa. The house took some action this past week. What will happen when that bill advances to a committee of house and senate members to try to iron out the differences?
Gronstal: It will go to a conference committee, and it's likely they will find some resolution to that bill. The original house bill applied to outgoing texting, you know, --
Henderson: You look like you've done it.
Gronstal: Yeah, yeah. Well, not in the car. Outgoing texting. The senate added -- it's not just you texting out. It's you reading messages as well. That's what the senate sent back to the house. They made some other adjustments. We'll go to conference committee.
Henderson: Their adjustments were limiting it to teenagers.
Gronstal: Yeah, I think there was some -- I think there was some argument about that in their own chamber. I think it's likely you'll see a texting bill pass the senate this year -- pass the legislature this year and get signed into law.
Henderson: The governor made the argument that the state stands to lose money. About midweek the governor's staff said it could be as much as $75 million. Is that enough of a threat?
Gronstal: That's not easy to answer. The feds have not yet acted, have not yet required that. Normally if the government passed a law to that effect, they would give states a certain amount of time to comply with it before they started withholding money. It's probably a good argument for the long-term but probably wouldn't make any difference this particular year.
Borg: Surprising that we're now only a third into the show and now we're asking about the biggest thing that's been happening and that is the budget -- the state budget. The Revenue Estimating Conference, as I said earlier, gave you new numbers and projections for tax revenues. What changes?
Gronstal: Nothing. We're going to put that money into the ending balance. We believe that will help shelter us from the need, if things got bad from an across-the board cut later. We had essentially decided very early on that unless this was a dramatic difference -- and it's not a dramatic difference, about $33 million for next year. Unless it was a dramatic difference, we weren't going to use any of that for next year's budget.
Borg: So much of your state work on the budget is valid.
Gronstal: Pretty much done. We're going to work through those details with the house and the senate. We're moving bills forward. Yeah, we don't have to make anyway adjustments to what we had planned. And we also think that will buy us a little higher level of confidence that even if things get a little muddier later on in the year, we won't have a need for an across-the-board budget cut.
Glover: There's been a lot of talk, particularly from the majority leader of the house, your counterpart, Kevin McCarthy, about a bill that would loosen up some gambling measures and maybe generate a little bit of money for the state. He estimated about $25 million. That hasn't moved very far. Is that something that's going to happen in the last couple of weeks?
Gronstal: I'd say it's still possible, but I'd also say it's a long shot.
Glover: Why? I mean it's extra money in a year when you need money.
Gronstal: I think part of what they're talking about is internet gambling. They call it advanced deposit gambling, and it would be very, very limited. You'd have to take your cash into an existing casino in Iowa. Cash, you couldn't do this on credit. You'd have to go through some secured measures. You'd still be subject to self-banning, as we do for problem gamblers in the state. So, you know, I think there's still some talk about that, but I also think it's stuff that makes people a little bit nervous. How exactly would it work? How can we make sure it will be secure?
Glover: You've got a casino in Council Bluffs. If you walked into that casino in Council Bluffs, how would you bet on that gambling bill?
Gronstal: Like I say, a long shot. I won't characterize how long of a shot.
Glover: You wouldn't put a lot of money on it?
Gronstal: I also think there are people interested in looking at -- I personally don't think it makes sense to continue to have referendums -- referenda when they've passed by 60, 70, 80 percent repeatedly. We force entities to spend a significant amount of money on that that serves no real purpose in my community other than helping a few Nebraska TV stations in terms of advertising.
So I'm -- and the senate has in the past passed bills to, after a certain point if referendum in the community has gotten a high enough level have support and it's passed a second time, not making them do continued referendums.
Glover: So beyond Gronstal disses Nebraska television, you would do some kind --
Gronstal: No, I'd just as sooner see them invest those dollars on the Iowa side of the river.
Glover: So you could do a limited bill, maybe getting them to do way with the voting on them but not doing the expansion gambling?
Gronstal: I'd like to see something happen on that side, but even that I think is a bit of a long shot.
Henderson: This past week democrats in the legislature unveiled a series of proposals restricting tax credits. First of all, let's talk about the film tax credit that sort of got legislators into this discussion in the first place. The proposal is to keep it suspended through, I believe, July 1 of 2012. Is that what will happen when this goes before legislators, because you have legislators all over the board on this?
Gronstal: I think we have them all over the board, but I think you also have -- you have a significant number that would say, hey, this didn't work very well, it doesn't make a lot of sense. The credit that they marketed last summer was a 50-percent credit. Mexico had a 25-percent credit. Iowa went to 50 percent. The AG said it's not 50 percent; it's only 25 percent the way the statute is written. And the companies that were in Iowa moved to Michigan, which is at 42 percent. This is – long-term for all the states, this is a zero-sum loss, not a zero-sum gain. It's a zero-sum loss. States lower taxes on entities making films in their state. Every state tries to leapfrog the state before them to attract this business. Eventually they'll come here and they'll pay no taxes in every state. So I don't see -- my concern is I don't see it creating long-term jobs or building a long-term economy in our state. I see it as a short-term effort. But there are certainly some people that would like to fix this program. Fixing it at this point would, from the perspective of the attorney general, maybe call into question his issues relative to court cases, so we're going to suspend it. I think that's the likely outcome. We do have some people that would like to get rid of it. We do have some people that would like to fix it. And then there's some people that respect the AG's position on this. The conclusion that you'll end up with it's suspended for a couple years.
Henderson: In regards to tax credits overall, your plan would scale back the amount of tax credits that the state awards basically businesses. Republicans and business groups say it makes no sense at a time of economic downturn to reduce those incentives to do business in Iowa. How do you counter that argument?
Gronstal: Well, first of all, we have worked with the business community about these tax credits, had great conversations with them. They have been highly cooperative in helping identify what some of the issues are and also in advancing -- well, if you're going to cut -- and listen, what we've said to people, kind of the same point as earlier relative to the School Board Association: when you're laying off teachers in the state of Iowa, do you have to -- isn't there some way that businesses can be part of the solution as well? Does it all have to fall on kids' access to education? Does it all have to fall on citizens' access to health care, or can the business community share in some of this pain? And the business community has been responsive to that. And we've dealt with been respectful of their concerns, and we've dealt with those concerns. We've put -- the real savings in this bill -- there's a little bit of the savings in the first year. The real savings is in the out years when we lower the cap from 185 to 120. That means --
Henderson: The cap on tax credits --
Gronstal: I'm sorry. The cap on a set of four, five individual tax credits that are awarded through the Department of Economic Development. In essence, we're asking the Department of Economic Development to be more discerning and judicious in their awarding of tax credits. We don't have an unlimited treasury.
Borg: I'd like to ask about your relationship with local school budgets. Are you going to authorize schools to grow their budgets by 2 percent but not provide the funding from the state to grow those budgets? So you're saying essentially to them you're free to spend 2 percent more in your budget, but you find where to get the money.
Gronstal: We are obviously looking at that issue. We have not made a final decision on education funding. We're working with the governor as well. We're listening to school districts that right now are working through their budgets, and we're going through that effort. We will be at least at the governor's level. A lot of school districts are talking about what if we're not at the governor's level when it comes to the funding for K-12 education. That's really pretty unrealistic. We are, of course, at a minimum going to be at the governor's level, and we're working with the governor to try and identify additional resources to get beyond his level. And we're working with house, the senate, and the governor together. And I think, you know, we're going to be done in two weeks --
Borg: And his level is what?
Gronstal: His level is -- it's confusing because there's also ARRA money in there from last year.
Henderson: That would be federal stimulus --
Gronstal: That's the Federal American Recovery and Reinvestment Act. So there were non-general fund dollars in that program last year in K-12 education. So we're going to do our best on that front. We don't have a final decision on it yet. I think if we do the 2 percent the governor talked about and the hundred million more that he talked about in his state of the state address. -- and I think we'll actually reach just a little bit further than that -- I think school districts will -- I think that's better than school districts are expecting right now. We wish we could fully fund it. We do. But we're also asking school districts to do exactly what we're doing -- make real efforts to cut to save money, they can engage in early retirement efforts, they can come up with efficiencies at the local level, they can dip into their reserves. We're dipping into our reserves. They need to dip into their reserves. So we're trying to get them to do as little as possible that will push up property taxes.
Glover: It wouldn't be an official Iowa Press program if we didn't talk a little politics. So I'd like to ask for your take on this election year. This is the first midterm of a new democratic president. History would teach you that's a good year for republicans, but it seems as though the economy is driving everything. Traditionally that helps democrats. I know you're thinking about this election. What's your take on this year?
Gronstal: I would dispute your contention that the first midterm election of a new president is good for the -- is good for the party out of power. The reality is it may be in Congress. It may in Washington, D.C. -- it isn't in the states. The Iowa house dropped to 36 democrats in 1994. The Iowa senate retained every seat. This isn't about national mood or attitudes as to what's happening at the top of the ticket. This is about recruiting good people that are leaders in their community and then, when we get them here to the legislature, making sure they do great constituent service, that they door knock in off years, that they contact their voters and survey them about their opinions. It's about all that kind of stuff. And we have a great -- we have a great set of candidates. Last time -- there are 25 seats up every two years. Last time we won 19 of those 25.
Glover: And this time of the 25 seats that are up, 19 are democratic seats and 6 are republican. Isn't that a challenge for you?
Gronstal: The reality is generally speaking both parties would tell you if somebody found their way to the Capitol the first time, they're probably going to find their way back a second time. So unless they've done something really dumb and not been responsive to their voters, if they found their way to the capitol the first time -- and that's -- we've recruited really great people out there. We go out and recruit the kind of people that are natural leaders in their community, who heads up the United Way fund drive, who helped light the ball field, who's on the county economic development committee. Those are the kinds of people we recruited. I think we've got a great shot at re-electing --
Henderson: Senator, there are a handful of labor bills, and much of the focus heretofore has been on whether the house would pass them. In the closing two weeks of the legislative session, will the senate take the lead and pass any one of those bills?
Gronstal: I think we would love the opportunity to pass bills that will grow the middle class in this state, and we've talked about --
Henderson: Is that a yes?
Gronstal: And we've talked about that repeatedly. But we have told people this session, more than any other session, this is about us operating as a team. The state is in tough times. It's not about seeing what we can dump on the house or seeing what the house can dump on us or seeing what we can dump on the governor. It's about the three entities working together. We've got a state government reorganization bill that saved a quarter billion dollars. That didn't come without a lot of heavy lifting on the house side, on the senate side, and in the governor's office. I think that's a great effort. I think that's a sign that we are working to set aside our different individual arguments now and work together for the betterment of this state.
Borg: Senator, we're out of time.
Borg: Thanks so much for being with us today. On our next edition of Iowa Press, we'll be tapping the expertise of Iowa political journalists, getting their perspectives on the waning weeks of the Iowa General Assembly and the approaching primary and general elections. Just as we are this week during Iowa Public Television's Festival program, Iowa Press an hour earlier next week. You'll see the Reporters’ Roundtable at 6:30 Friday night, March 19. We hope you're enjoy that special Festival programming that you're seeing and that you've made your pledge of support for programs such as Iowa Press. I'm Dean Borg. Thanks for joining us today.