Opportunity knocking. That is how Governor Terry Branstad is viewing Iowa's future. A conversation with Governor Branstad on this edition of Iowa Press.
Borg: The Iowa Statehouse is buzzing again. The 85th General Assembly convening this past week and receiving updates from the other two branches of government, Supreme Court Chief Justice Mark Cady providing the State of the Judiciary and Governor Terry Branstad assessing the Condition of the State. But in that address the Governor also projects the state's future, visioning the state's priorities into a legislative agenda and state budget. And those priorities raise questions and we hope to provide perspective as we're asking Governor Branstad about his vision. Governor, welcome back to Iowa Press.
Governor Branstad: Thank you, Dean. Great to be with you today.
Borg: And across the Iowa Press table Des Moines Register Political Columnist Kathie Obradovich and Radio Iowa News Director Kay Henderson.
Henderson: Governor, many of the proposals you have outlined would come to fruition way past 2014. Does this mean you are seeking re-election?
Governor Branstad: No, it means I'm focused on an agenda of public policy issues designed to really project, propel Iowa into the future.
Henderson: So you're not going to run for re-election in 2014?
Governor Branstad: No, we're not focused on politics, we're focused on policy. I'll make the decision in 2014. But I love what I'm doing. Lieutenant Governor Reynolds and I have been working very diligently to really get first the state's financial house in order and then focus on the things that are important for having a growing, prosperous state in the future, reforming education, reducing the property tax burden, our goal of becoming the healthiest state. So this is a very focused agenda. I think it is in tune with what Iowans want. They are tired of politics. They want to focus on policy that will make Iowa better. We can be very proud of what we have accomplished in Iowa in the last two years. We're in one of the strongest positions we've ever been and unlike Washington, D.C. where they spend all their time fighting and attacking each other, we're focused on things that can make Iowa a better, more prosperous and healthy state.
Henderson: Well, Governor, you have had two fundraisers to raise money for a campaign in 2014. Would that money be --
Governor Branstad: Well, actually I had a birthday party and we invited Marco Rubio to come and he was a great hit and I think we'll probably have another birthday party next fall.
Henderson: Would you relish running against Bruce Braley or perhaps a rematch against Chet Culver?
Governor Branstad: Well, you know, I'm a very competitive person and I've been in twelve contested elections and I have never lost. But my focus is on policy. And I think the people of Iowa elected me to do some important things. First, get the state's financial house in order. Second, restore our leadership position in education. We used to be best in America in student achievement, now we're 25th. Our schools are still focused on the 20th century. We need to be focused on the 21st century preparing Iowa students for the jobs of the future, especially in science, technology, engineering and math.
Obradovich: Governor, Senator Chuck Grassley was out here recently and he always says that his decision on whether to run again is based in part on his health. Is that a consideration for you?
Governor Branstad: Well, I think it is for everybody. And I know Senator Grassley runs all the time. I want you to know I take my health very seriously. I spend a lot of time at Des Moines University. As a retiree I can use the wonderful wellness center there and work out. I also want to lead by example. We want to become the healthiest state so we need to focus on exercise and nutrition and those things that can make our state a healthy state and help people to take ownership of their own health.
Obradovich: You've also made a point of promoting Lieutenant Governor Kim Reynolds. We've talked about the fact that you may be grooming her to run for governor in the future. If you decide to run for re-election and win, would you consider resigning midterm to give her a head start should she like to run?
Governor Branstad: Well, first of all, we haven't even decided what we're going to do in 2014, we're not going to speculate about the future.
Obradovich: A lot of people are speculating about it.
Governor Branstad: Well, people might speculate but I'm going to focus on the things that Iowans want me to focus on and that is policy to improve this state, not politics. And I would also say, Kim Reynolds is one of many outstanding women we have in my administration. We have Debi Durham running the economic development authority, we have Teresa Wahlert at Workforce Development, we have Kay, your friend over there in revenue and finance -- Courtney Kay-Decker. Kay is a middle name. I think yours is too.
Governor Branstad: And I just provided a bonus for our director of the Department of Civil Rights who has done such an outstanding job and Beth Townsend, she took an agency that was a mess and you had people that were using their state computers for their own personal e-mails instead of investigating. She has cleaned it up and she has eliminated the backlog and that's the kind of women that I put in key positions in state government. I'm very proud of what we're accomplishing.
Borg: Let's get back to the Condition of the State Address. Someone mentioned to me, in fact I mentioned as I wrapped up the Iowa Public Television telecast, that it seemed to be rather sedate reaction to you -- did you sense that same thing, that you didn't get a whole lot of applause?
Governor Branstad: Well, first and foremost it was not a rousing partisan speech. It was designed to be one that was really a serious and focused on the issues that are important to Iowa's future and these are substantive issues that require some thought. Reforming the property tax system in a meaningful way, and we have made some changes in our recommendations to address some of the concerns expressed by local governments, fully funding the tax credits, seeing that all of the replacement, that when we reduce property tax for commercial and industrial property we provide state dollars to replace all of that. Education reform. These are important and difficult issues and I was pleased with the response. I was pleased with the fact that legislators understand that these are issues that need to be addressed, need to be focused on. People are tired of the politics as usual and all of the bantering back and forth.
Borg: You mentioned education reform. As I talked with Senator Mike Gronstal, who is the democratic leader of the Iowa Senate, he expressed some concern about your education financing support and delaying the, what we call allowable growth, notification to Iowa public schools. Let's take a look at that.
Condition of the State Address 2013 - Senator Mike Gronstal: I've got to say I think I'm kind of disappointed in the support for K-12 education. So that is something I am disappointed in. We're going to work with him on that. We also think we should follow the law that he signed in 1995 that sets allowable growth within the first month of the session. We think we should do that so school districts can plan around their budgets. They are supposed to have that information so they can plan -- they're actually supposed to have it a year and a half out.
Borg: Governor, are you adamant about delaying letting schools know how much money they're going to be receiving until you set policy?
Governor Branstad: Well, first of all, back in 1992 when we led the nation on student achievement 37% of our general fund budget was going to K-12, pre K-12 education. It's now up to 43% and we have dropped from first in the nation to 25th. So obviously just spending more money is not the answer. We need to reform the system. We have a 20th century education system but we're in the 21st century. And we have been working for two years in education reform, we now have the business community, all of the business community on board supporting it. The legislature last year, we asked them to do major education reform, they only passed a modest change but they put together some task forces. We worked with those task forces, seven I think task forces, one was on teacher leadership and compensation and our proposal, most of the money, $160 million over the next five years is focused on that bipartisan recommendation from education leadership. We think that should be the top priority and once that is accomplished we're then willing to work with them on the issue of providing more state aid for schools in addition to what we do in the education reform. But I think reform needs to be the priority. And the history of the legislature is they'll spend all their time fighting over money instead of passing the substantive reform policies that we need.
Henderson: The education reform package that you unveiled this past week is far less aggressive than the package that your Department of Education director unveiled in 2011. Why?
Governor Branstad: Because we have listened to the concerns and we've heard that it is too much, the legislature can't digest all of this so we need to boil it down, we need to focus on the things that are the most important so we have refined it. I think we have improved it. We have also reached out, the Lieutenant Governor and I have been all over the state listening to people from the business community, from educators and we have got a plan now that we think has a lot more broad-based bipartisan support both from educators and from the business community.
Obradovich: Governor, you said you're worried about legislators spending a month or all of the session fighting about money but that could happen anyway. Democrats have come out and said we're going to push through with allowable growth, they have asked for 4% allowable growth which is about $135 million extra for schools for this fiscal year. And so they are indicating that they are going, you know, prepared to perhaps have a stare down on whether to set the money or the policy first. How are you going to deal with that?
Governor Branstad: This isn't Washington, D.C., people don't want all of these partisan fights, they want us to work together. That is the reason why I gave the state of the state address that I did. I was very focused on policy issues, ones that I think we can come together on. We have indeed made a very focused agenda, one that we think can generate bipartisan support and we ask legislators to put the partisanship aside, let's not try to create a political fight, let's work together on the policy. Once we have agreed on the policy then we can agree on the funding. But we also have some other funding issues that have to be resolved, collective bargaining with state employees and other things. We need to know all of these things, all of those things need to be resolved in such a way that the budget is balanced for both years of the biennium and it projects out for five years and we know that, we look at it through a lens of five years to make sure that we have a budget that will continue to be balanced for the five years into the future.
Obradovich: At the end of your fourth term as governor when you left office before, education reform, people thought that might be your legacy. But your partners in the legislature let you down. Are you still looking at --
Governor Branstad: I left too soon, that's why I came back.
Obradovich: Are you looking at ed reform as your legacy now?
Governor Branstad: Well, a growing, prosperous Iowa, healthiest state in the nation and higher incomes, more good jobs and an education system that meets the needs of this growing economic engine that we want to have in the state --
Obradovich: -- office until you get that done, is that right?
Governor Branstad: Well, I want to make sure that we get that done. Between the Lieutenant Governor and I we intend to be around a long time to see it through.
Borg: And you've been around a long time and over that period, back in the 1980s you were adamantly against gambling. What do you think about the way that Iowa has now moved to gambling in a big way and state government --
Governor Branstad: I lost that battle.
Borg: You did but now are you willing to say I was wrong and this is --
Governor Branstad: First and foremost, let's go back if you want to talk about what happened in the 80s --
Borg: No, I don't want to talk about that in the 80s, I want to talk about right now with cities and communities just vying and fighting with each other to get more gambling.
Governor Branstad: Okay. Well, first and foremost, I told people that I had some real concerns about the state, first of all, being in the lottery business. And once I found out that the vast majority of Iowans wanted to have legal gambling I accepted that. As a leader of this state you also need to be a good listener. I accepted they wanted it. I just wanted to keep honest and clean and I wanted to keep corruption out. And so I laid out some very clear ground rules. One, you'd only have it in counties that people voted for it. Two, the license would be held by non-profits. They'd have to make substantial contributions to charities and to the communities in which they are located. For the most part I think it has worked out quite well. We have not had the scandals -- Louisiana we have a governor that has gone to prison, Illinois they have dozens of people who have gone to prison for their illegal activities, you have that legislators in I think South Carolina and Arizona. So we have had clean, honest gambling --
Borg: And you stayed out of Fort Madison.
Governor Branstad: Yeah, that's right. And unlike Illinois where they talk about Illinois, these two guys standing in the chow line in prison and one says to the other, you know, the food was a lot better when you were governor. We have a much better, cleaner operation and I'm really proud of the fact that it has been well managed. I have confidence in the people on the Racing and Gaming Commission. I have interviewed every one of them. I have told them it is your responsibility to protect the integrity of the state, not to promote gambling.
Henderson: Let's talk about the operation at the state universities. You have a new president being hired for UNI. At the University of Iowa there have been concerns about the management under current President Sally Mason. And at Iowa State University there have been concerns raised about the Harkin Institute. Are you confident in the way those three campuses are being managed?
Governor Branstad: Well, first and foremost, I respect the academic integrity of our universities and I have appointed some very quality people to oversee the Board of Regents. I think they have done an outstanding job in choosing Steven Leath as the President of Iowa State University. I think he is the right kind of guy. He is really focused on how Iowa State can help grow our economy and especially in the research and biosciences area.
Henderson: Are you on board with the Harkin Institute?
Governor Branstad: As you know I thought it was a mistake to rush that through and now there's a lot of problems involved with that. I thought they should have waited and studied it more and had more information. And they are in the process now, I think Steven Leath is on the right track and I support him and the way he is overseeing that situation at Iowa State.
Henderson: You presented legislators with more information about property tax reform. You cut in half your proposal and you are promising cities and counties that you will afford state money over the course of the next five years.
Governor Branstad: Fully fund, yes.
Henderson: You have trust issues with the federal government in terms of financing. Why shouldn't cities and counties have trust issues with you?
Governor Branstad: Because unlike Washington, D.C. we have a budget and we're spending less than we're taking in. They're running up a trillion dollar deficit every year. What we have done -- we inherited a financial mess but we have corrected that. We have restored the cash reserve and economic emergency account. We only spent 97% of revenue last year. I have a five year budget projection. I'm insisting on fiscal integrity in the budget, spending less than we take in every year. And so we'll have the money set aside plus we are restoring full funding of the tax credits that haven't been funded for years like the Homestead Tax Credit, the Elderly and Disabled Tax Credit.
Henderson: There you go, they haven't been funded for years --
Governor Branstad: Right now under this administration, last year we picked up $33 million more, next year we're going to pick up $33 million more and going to the future we're going to fully fund those credits all the years forward and we're going to provide -- and we're doing this modestly, 5% a year -- but we're going to provide $400 million of direct property tax replacement to local governments.
Obradovich: If you embark on this, Governor, how far are you willing to go to keep that promise to local governments? Would you be willing to raise income or sales taxes at the state level?
Governor Branstad: We don't need to. We don't need to.
Obradovich: Not now, sure, but we don't know for sure what's going to happen to the federal fiscal cliff. We don't know for sure what is going to happen to the economy in the future.
Governor Branstad: Well, first of all, we have managed our resources very well in Iowa. We're looking at reducing property taxes. Those are the most unpopular and unfair taxes we have. So that is why I focused on property tax. I know there are those that would like to reduce the income tax and the corporate tax as well. But we think we need to focus on the property tax first because that is --
Obradovich: But no promises to local governments, though, that they will be continued to be made whole in the future?
Governor Branstad: Absolutely. We intend to fully fund our commitments. We're also taking over and redesigning the mental health program and the state is taking over that responsibility. So if you look at my history you can see that I have consistently supported reducing our dependency on property taxes and providing more state dollars but I also believe in reducing the size and cost of government so we can run it more efficiently and as we grow the economy, and by the way I think we're in the top three or four states in the country in terms of economic growth, our unemployment rate is the fourth lowest in the country, so I think there's an example that we're growing the Iowa economy and reducing the tax burden will help us grow it even more.
Borg: You spoke about property tax being a priority first. But Creighton University economist Ernie Goss was on this program a couple of weeks ago.
Governor Branstad: He lives in Nebraska.
Borg: And here's what he had to say about the income tax.
Iowa Press - January 4, 2013 -- Ernie Goss: What Iowa needs to look at, in my judgment, given what is going on in Kansas, what's about to go on in Nebraska, Iowa's neighbors, you need to look at income taxes in terms of being more competitive. I would argue that Iowa is not income tax competitive. Property taxes are sort of what people complain about but it's not as fundamental in my judgment to economic growth as the income tax. So I would argue for fixing some of your income tax issues in terms of lowering those rates and, again, cutting out some of the deductions. Again, we are arguing for lower rates and cutting some deductions.
Governor Branstad: He lives in Nebraska and the Governor of Nebraska wants to eliminate the income tax. And I understand that is an issue in Nebraska. But in Iowa, Iowans really appreciate that we have full federal deductibility and now with the federal taxes going up, the Iowa income taxes going down, our top rate might be 8.98% but with a federal rate of 39.5% that is fully deductible that means the effective rate in Iowa is now below 6%. So we are competitive. We're lower than Nebraska, we're lower than Kansas and of course Illinois is raising taxes. I submit that with the present makeup of the Senate you're not going to see an income tax reduction approved in Iowa. We need to focus on property taxes first. I would like to see the income taxes reduced and I think in the future we can do that but I think the property tax is the most important and especially because it is such an impediment to business development and economic growth in our state.
Henderson: So if an income tax cut bill landed on your desk would you veto it?
Governor Branstad: Well, I'm not proposing an income tax reduction. I am instead focusing on what I think is the most important and that is reducing the property tax. In the future, and if revenue continue to exceed expectations, I would like to see us be able to reduce income tax also.
Obradovich: Governor, you did propose a 4.3% spending increase for the coming year. Now, House republicans including the House Speaker said they don't think that people's paychecks in Iowa grew by 4.3%. How do you justify a spending increase at that level?
Governor Branstad: Well, because -- actually revenue grew by more than that last year --
Obradovich: State revenue did.
Governor Branstad: Yeah, state revenue did and we're working very hard to bring more good paying jobs to the state and if you look at the revitalization we're seeing in manufacturing, the new construction jobs with the two big fertilizer plants that are being built in the state and the other bioscience complexes -- what are we investing that money in? Property tax relief and education. And so a part of that is going to reduce the property tax burden for all Iowans and the other part of it is focusing on improving education. And I believe that improving education, our community colleges, our state universities, for instance, state universities increased under the Vilsack administration tuition as much as 18% a year. We're looking at no increase in tuition for those kids next year. So this is an investment in Iowa's future, it is an investment in reducing the burden on the families of Iowa and preparing their children for the job of the future that we're going to create with our economic development.
Henderson: Governor, would you sign any changes in Iowa's gun laws?
Governor Branstad: Well, first and foremost, I am a supporter of the 2nd Amendment and even though the NRA endorsed my opponent in the last election I believe in protecting individual's rights. I also think that the issues of violence in the schools can best be addressed by things like the bullying prevention summit that we had and the reform that we're doing on the mental health system, try to identify and help people with mental problems. I also am very careful when it comes to restoring rights to convicted felons. Make sure that we don't have dangerous people getting possession of weapons. And I don't expect that there's going to be any significant change in the gun laws in the state of Iowa. I know there are people that feel strongly on both sides of this issue but I'm really focused on the things that I think are the most important to grow the Iowa economy and that is jobs, reforming and reducing the property tax and reforming education.
Obradovich: Governor, you mentioned anti-bullying and you had a big summit. We have yet to see those recommendations. What are you planning to propose?
Governor Branstad: Well, I think we do have in our program plans that would perfect and improve upon the law that we have in Iowa.
Obradovich: Do you have school notification procedures?
Governor Branstad: Yes and already we have basically information available for schools on what they can do to try to protect the safety of the students and their faculty and staff. But we also need to look at better, more effective ways to try to deal with this society issue. I was impressed when we had a young child from Iowa City that received national recognition for what he is doing in a positive way to say good things about his colleagues, other students and teachers, as opposed to using social media in a negative way to say mean and nasty things about other people.
Henderson: Help us read the tea leaves. You have one of the unions with which management is negotiating in state government which has signed a contract.
Governor Branstad: Yes, we're delighted with that.
Henderson: But what does that tell us about the other ones?
Governor Branstad: Well, we hope that this will set the pattern and we think this is a fair agreement that was reached by good faith bargaining. And what it does is the peace officers, the SPOC union, they will pay 20% towards their health insurance but if they are in a wellness program they can get some cash back so they can reduce that share. So they're really committed to working with us on focusing on health. Also the pay increases are actually bonuses so they don't go into raising the base pay but instead they get a 1% bonus two times a year over the next two years. I think it's a very fair agreement. I think it is something that I would hope the other unions would also see has some merit and makes sense for our state to help the employees as well as helping the state to be able to be competitive.
Obradovich: Governor, do you have the right leadership in place at the Republican Party of Iowa to carry your party into the 2014 elections? There's been some turmoil there. They have had trouble raising money. And now they have sort of doubled down on the Ron Paul faction to lead the party. Do you have the right leadership in place there?
Governor Branstad: Well, first and foremost, I am Governor of all of the people of Iowa. I am proud to be a republican. And I work with all republicans. I will be campaigning for Dennis Litterer who is running in the special election up in northern Iowa in Floyd County and Cerro Gordo and in Chickasaw County as I did for candidates for congress and for the legislature in the last election. And I feel confident that we can all work together. I'm very proud to be a republican and I want to do all I can to lead our party to victory.
Borg: It's not often that I have to interrupt the Governor but I must and we're out of time. Thank you, Governor, for being with us.
Governor Branstad: Thank you very much, Dean.
Borg: Next week on Iowa Press, Congressman Bruce Braley, newly re-elected representing Iowa's first congressional district, some speculating now that in another two years he might be running against Governor Branstad. We're inviting you to join us for next week's edition, same times 7:30 Friday night, again at noon on Sunday. I'm Dean Borg. Thanks for joining us today.