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Condition of the State 2013

posted on January 9, 2013

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Dean Borg: This is the House of Representatives chamber at the Iowa Statehouse.  Members of the House and Senate convening now in joint session awaiting Governor Terry Branstad's 2013 Condition of the State Address.  I'm Dean Borg.  Governor Branstad is very familiar with speeches in this chamber first serving here as a representative from Winnebago County and as Governor delivering 17 Condition of the State Addresses in five terms as Iowa's Chief Executive.  Today's speech, his 18th, comes as he begins his third year of his fifth term as Governor, assessing the condition of Iowa and outlining initiatives he'd like legislators to consider during the next 100 days or so. 

You're seeing on the screen now, and as you listen, you're seeing the convening of the session of the Iowa General Assembly and the guests that are gathered in the House of Representatives chamber.  You're seeing the Iowa Court of Appeals, the Supreme Court, the Governor and Lieutenant Governor's families.  Governor Branstad now on the lectern and he is being introduced by Senate President Pam Jochum of Dubuque.

Senate President Pam Jochum: It is my pleasure to introduce Governor Terry Branstad for his Condition of the State message to the 2013 session of the 85th General Assembly. (applause)

Governor Terry Branstad: Madam Lt. Governor, Madam President, Mr. Speaker, Leaders, justices, judges, legislators, elected officials, distinguished guests, family, friends and fellow Iowans. 

It is an honor and a privilege to serve as your governor.  I thank God, each and every day, for this opportunity that has been provided to me to serve you and all the people of Iowa.

I stand before you once again to report on the condition of our state and to outline a focused agenda and a biennial budget.

I am pleased to report that we have made great progress.  Our state’s balanced budget is built on the principles of stability and predictability. It is a shining example of the good work that we have done together.  

And in the areas of job creation and economic development, I’d put our efforts to successfully attract new jobs and market both here at home and across the country and across the world against efforts of any state.

And yet, in other areas, an honest assessment would suggest that we still have much work to do.  In particular, I reference our on-going efforts to reduce property taxes and adopt a truly transformational educational system.

Iowans are entering a period of unprecedented opportunity and we in this chamber have it within our grasp to help foster this state’s greatest economic expansion and quality of life improvement in modern history.

Perhaps the heaviest lift over the last two years was restoring budgeting practices that insisted on strict fiscal discipline.  I insisted on a two year budget and we measured all tax and spending decisions through the lens of a five year budget projection. 

And today, I am once again submitting a biennial budget for fiscal years 2014 and 2015 and ask you to commit to join me in making this sound budgeting practice a reality so that most – so that those most dependent on vital services that we can deliver to them and they can trust that our promises made are promises kept.

As a result of the tough choices that we made, Iowa is currently in the best financial position in our state’s long and proud history.  (applause)

This is not about good luck and it didn’t just happen.  We blazed a new path by making hard choices and we must never return to the irresponsible budgeting practices of the past.

Our successes do not end with the state budget.  We have completely redesigned our state’s economic development efforts through the creation of the new Iowa Economic Development Authority, the Iowa Innovation Council, and the Iowa Partnership for Economic Progress.

These efforts have paid big dividends leading to the two largest private capital investments in Iowa history with the construction of new fertilizer plants in Lee and Woodbury counties.

All totaled, in the two years since this administration took office, our efforts have landed more than $5.3 billion in capital investments in Iowa.  These investments translate into jobs for thousands of Iowans and higher incomes for so many Iowa families.

When I stood before you just two years ago Iowa’s unemployment rate was over six percent. 

Today our unemployment rate is at four point nine percent, the lowest it has been in over four years. (applause)

In addition, through the efforts of Lt. Governor Reynolds and University of Northern Iowa President Ben Allen, we launched the Governor’s science, technology, engineering and math, or STEM, initiative.  This initiative is already enhancing learning opportunities for Iowa children by putting outstanding STEM programs in more than 800 site locations.

But our work on education reform has not gone far enough. 

We were reminded yet again last month when a new study showed that our students’ ranking on vocabulary tests had slipped to mediocrity. 

Let me ask you this very hard question:  When did we decide that middle of the pack was good enough when it came to Iowa’s children’s education? 

Did we really make that decision?  Or did we simply let it happen through inaction?

Let’s take the same serious approach we took to solving our budget problems and reshaping our economic development efforts to making our schools the best in the world.  (applause)

The quality of our children’s education impacts everything we do to improve our state. Let’s focus on our future, and our children’s future.

For too many years young people have looked to the coasts in search of career opportunities, be it financial industry prospects in the East or the tech sector in the West and Iowa was relegated to a status some disparagingly called “flyover country.”

Today, we are living a different story.

Within the past year Iowa has gotten a serious look by more than 1.3 billion residents of China—many of whom are familiar with our state as a result of our special relationship we have with their incoming president.

It was just a year ago that I invited China’s next President, Xi Jinping, to visit our state. As you know, he accepted my invitation and many of you were in attendance at the dinner we hosted right here in the state Capitol in his honor.

Iowa’s emerging role in the world economy really struck home to me at the dinner that night that we hosted for Vice President Xi and his delegation. 

He said Iowa was the first place in the United States that he ever visited and then he said in reference to the special people that he met in Iowa on that trip: “to me, you are America.”

The next day, fittingly, at the World Food Prize building, our state signed an agreement with China to provide more than $4.3 billion in soybeans.

Iowa no longer just feeds the world--it feeds the world economy. 

Vice President Xi and his delegation’s visit made clear: Iowa is “flyover country” no more. (applause)

Today, Iowa-produced avionics are installed in aircraft in Brazil, Iowa tractor technology plows the ground in Russia, and Iowa lighting illuminates growth around the world.

Innovation is propelling Iowa forward, both at home and abroad. The coming decades can be ours if we are bold enough to make these incredible opportunities our new Iowa reality.

This year, I bring to you a bold action plan focusing specifically on three goals: First…job creation and expanding opportunities for Iowa families; Second…improving educational opportunities for Iowa children; and Third…improving the health of all of our citizens.

These are opportunities that not only benefit us, but they will reshape the future for our children and grandchildren.

This is our opportunity.  This is our Iowa.

In the past two years, Iowa has experienced some significant successes.  Family incomes in Iowa have grown at the second highest rate of any state in the nation, at nearly seven percent, and our economy has created 100,000 jobs.

These are nice success stories, but they are only the first chapters in a book of accomplishments that we are still writing.  There is much more to do because this is our opportunity. This is our Iowa.

When we consider strategies for stimulating our economy to encourage job creation we need to look at ways to lower the cost of doing business in this state.

This will improve our ability to compete, putting more dollars in the hands of Iowa consumers to purchase Iowa goods and services. 

Both of these objectives can be accomplished by returning a significant portion of our state’s budget surplus to the taxpayers who made that surplus possible in the first place.  (applause)

In this budget, I am proposing a significant plan to reform our property tax system to make it competitive and to provide nearly $400 million in actual property tax relief to Iowa’s hardworking taxpayers.

The principles guiding our property tax plan are simple. Permanent property tax relief.  No shift of the tax burden between classes of property.  And property tax reduction for all classes of property.

Our plan has three significant components.

First, the budget fully funds the Homestead Tax Credit and the Elderly and Disabled Tax Credit for fiscal year 2014.  (applause)  That is with an additional $33 million. 

Last year, as you know, we made a down payment on this funding gap and this year we’re going to close that gap once and for all.

Second, I will propose legislation to permanently change the school finance formula so that “allowable growth” will be replaced by 100% state aid. 

No longer will the school aid formula trigger automatic increases in local property taxes.

Third, we will bring forward legislation designed to stop any future tax shifts between classes of property by tying the classes together in one combined rollback, correcting a mistake that was made when the original rollback formula was implemented back in the 1970s.

This legislation will take the current four percent cap on valuation growth for residential property and agricultural land and cut it in half to two percent and apply it to all classes of property. 

If left unchecked, our current law will allow property taxes to grow by over two billion dollars in the next eight years and half the increase will fall on Iowa homeowners. I find that prospect terrifying and ask you to work with me to ensure that property taxpayers are protected from this unprecedented property tax increase.

My plan permanently reduces commercial and industrial values, tax values, by 20% over a four year period and provides direct funding for local governments to replace 100% of the property tax revenue.  

My biennial budget provides the resources to make this possible and my five year budget projection accounts for nearly 400 million dollars in direct property tax relief.

Small businesses in Iowa have paid some of the highest property taxes in the nation for far too long. These high taxes mean less money for businesses to hire new employees or provide salary increases for current employees.

Businesses pay the taxes yes, but it is the middle class families who truly feel the pain.  

And it is those same middle class families who will reap the benefits of a competitive property tax structure that makes it easier for us to recruit, retain, and grow those companies that create new jobs that Iowa families need.

Our plan is to reform and reduce property taxes is an investment in Iowa families and small businesses, but not at the expense of local government.

In addition to lowering and reforming the property taxes, I am committed to enhancing the skills of Iowa’s workforce as a critical investment in meeting the needs of Iowa’s state, of our job creators over the next decade. 

To that end our administration has embarked on an ambitious effort called Skilled Iowa to bring new workforce skills to our unemployed, under-employed, and those simply seeking better long-term careers.

The impetus of the Skilled Iowa initiative came from conversations I had with Iowans like Bill Knapp, Jim Cownie, and Teresa Wahlert on how we can bridge the gap, the skills gap that so many employers have articulated as an impediment to bringing more high quality jobs to Iowa.

Our Skilled Iowa initiative builds on the STEM program to ensure workers in Iowa get the skills they need to fill the high-paying jobs of today and tomorrow. 

It is simply unacceptable to me to hear time and time again as I go through Iowa’s 99 counties that employers are ready to hire, but our workers aren’t prepared with the necessary skill set to fill these jobs.

Skilled Iowa is helping to change this and bring new hope to Iowans. We already have 2,400 Iowa businesses signed up for Skilled Iowa and 18,000 Iowans have used Skilled Iowa resources to certify their skills with a National Career Readiness Certificate. 

My hope is to grow this program and work with new employers seeking a skilled workforce while serving more Iowans. 

Through lower property taxes and a more highly skilled workforce, in addition to our successful economic development efforts, we have the opportunity to stimulate the state’s economy and provide our citizens with the high quality careers that they truly deserve.

This is our opportunity. This is our Iowa.

And speaking of our Iowa, today in the balconies of this chamber are school children from around our state.

Today they get the opportunity to watch democracy in action.  I hope they will leave this building with the knowledge that each of us here shares a commitment to making Iowa a better place for them and their family.

In today’s knowledge-based, global economy, youngsters must finish high school ready for college or career training.

This is an economic and moral imperative.

We cannot continue to be complacent: Iowa’s eighth-graders led the nation in math back in 1992.  Now, we rank 25th–not because our scores have slipped, but because other state’s scores have been stagnant while other states’ have improved.  We are shortchanging some of our best students, too.  Just eight percent of Iowa eighth-graders scored at the advanced level on the math and science national test compared to 15 percent in Massachusetts, which is now number one in the nation.  Among Iowa’s high school class of 2012 who went directly to a community college, more than 36 percent had to enroll in a remedial class.

Let me be perfectly clear to the teachers who are here today and the teachers in classrooms across Iowa, you are NOT the problem. 

Iowa is fortunate to have many dedicated educators who work incredibly hard. I know this from visiting many schools all across the state and because my daughter Allison teaches in Waukee and the Lt. Governor’s daughter Jessica teaches in Creston.

Unfortunately, our teachers are stuck in a system designed for the 20th century. We must work together to transform our schools for the 21st century.

Let’s establish new roles for top teachers who will provide instructional leadership alongside principals to better meet the needs of every student.

That is why elevating the teaching profession is at the heart of our 2013 education plan.  There are three key pieces.

The centerpiece of our plan is to revitalize Iowa schools with a new teacher leadership and compensation structure.  Relying on teacher leadership is a hallmark of high-performing school systems around our country and around the world.

Iowa has embraced paying teachers in innovative ways before.  Back in 2001, the Iowa legislature passed and Governor Vilsack signed a law establishing a career ladder.

They understood back then that we were losing teachers who found few ways to advance professionally without leaving the classroom. But unfortunately, it was never funded. 

Establishing new career pathways promises to do more than just raise student achievement.  It will offer outstanding teachers new professional opportunities. 

Our plan honors teachers by recognizing how vitally important they are and provides five career pathways that teachers may pursue.

Educators will be able to advance their careers in the classroom through these numerous pathways.  Our plan gives teachers the opportunity to make a meaningful impact as leaders in their schools while giving our children a better education. 

The end result for Iowa’s children will be better performance in the classroom and better opportunities in their futures.

This kind of reform does come with significant cost, but it is a cost I believe to be a true investment in educational excellence.  I am recommending a $160 million state investment in this new teacher compensation model to keep our best performing teachers in the classrooms throughout their entire careers.

And, I believe that we should resolve the issue of what we are collectively willing to invest in achievement-driven reform before we spend a minute discussing additional resources to support our existing educational system.

The second piece of our education reform plan – The Teach Iowa Initiative – addresses another key problem:  recruiting top students to become teachers. The simple truth is we must attract more of our best students into the teaching profession.

Today, I propose boosting beginning minimum teacher salaries from $28,000 to $35,000 a year – a 25 percent increase to help reduce the amount of financial sacrifice that high-achieving students must to make in order to choose to enter the teaching profession.

Additionally, I propose a significant expansion of a program administered by the Iowa College Student Aid Commission. 

Our Teach Iowa Initiative attempts to attract more top students into teaching by offering tuition reimbursement for highly talented new graduates who teach in Iowa schools for five years.

Priority will be placed on students majoring in hard-to-hire subjects, like math and science, but awards will go to future teachers in other majors as well.

And the Teach Iowa Initiative includes a pilot to expand the traditional one-semester of student-teaching to a year-long apprenticeship in partner schools.  Stronger clinical experiences stand to better prepare future teachers. 

The third key piece of our plan to revitalize education in Iowa is a new college or career ready seal that high school students may earn in addition to their diploma. We want business and education leaders to set high standards for the seals.

Beginning next year, students will have the option, at the state’s expense, of taking a college-entrance or workforce readiness test.  

Our program will make it clear what it means to be college or career ready based on real world expectations from Iowa business and education leaders.

When Iowa can brag about having the best-educated workforce anywhere, more businesses will locate and expand here.  As a result, more young people will stay in Iowa because they can land good jobs that pay well, and allow them to enjoy a great quality of life.

Our children deserve our best because this is our opportunity.  This is our Iowa.

Lastly, I wish to speak to you about an issue that stands at the heart of our Iowa quality of life and is so personally important to me. 

That issue is the health and well-being of each and every Iowan and my desire to make Iowa the healthiest state in the nation.

As a former President of one of Iowa’s medical teaching universities, I marveled at the progress that modern medicine has made to save lives and lengthen lives.

Yet, while we are living longer lives I have to ask are we living better lives? 

The obesity epidemic and the onset of more and more chronic diseases stretches the capacity of our medical system to meet our needs and stretches the ability of our taxpayers to support programs like Medicaid.

This is why we have embarked on the ambitious public-private partnership to make Iowa the healthiest state in the nation. 

We have an opportunity to make Iowa communities vibrant by ensuring they have the health care professionals need to keep their residents healthy.  And why shouldn’t doctors choose to live and work in Iowa?

Yet, in the past decade Iowa has fallen further and further behind in terms of active physicians per 100,000 residents.  Sure, we are behind states like Massachusetts and Michigan but we are also trailing neighboring rural states like South Dakota and Nebraska.  Iowa is 46th in the nation in internal medicine, 47th in pediatric, 48th in psychiatry and last in both emergency medicine and obstetrics and gynecology.

We are home to two great medical schools—the University of Iowa and Des Moines University.

In fact, we have over 1,500 medical students currently enrolled in these institutions.  But we are not doing enough to keep them here after graduation.

Today, I am proposing three initiatives intended to keep Iowa and Iowans healthy by keeping more doctors in our communities.

First, my budget proposes two million dollars to support medical residency programs in Iowa.

Last year, we came together and created a public-private partnership to help doctors serving rural areas repay their costly loans. My second proposal provides two million dollars to launch the Rural Physician Loan Repayment Program and expand it to include OB-GYN and emergency medicine doctors as well as primary care physicians.  (applause)

My third proposal is for us to come together and pass a Certificate of Merit law and a cap on non-economic damages. 

Keeping doctors in Iowa requires that we make our state a place that is friendly to those who practice medicine.

The first oath taken by a doctor is to do no harm.  And no group of people is more committed to protecting patients than Iowa doctors.

Frivolous lawsuits are harming our ability to recruit and retain doctors.

A Certificate of Merit simply requires a medical expert review the facts of a case when a lawsuit is filed to verify that the injuries could have come from substandard care. This lets real claims move forward and takes the weight of bad claims off the health care and judicial systems.

These are sensible reforms. We know that they work because the states that have these laws have more doctors and lower insurance costs than we do.

It is our responsibility—mine and yours--to work together to offer these generational gifts: the best education, a thriving marketplace where start-ups are competing to create jobs for all Iowans, coupled with responsible and measured leadership from each of us to promote and enhance what is right with Iowa and to reach our full potential.

This is our opportunity. This is our Iowa.

It is the promise of a good people, who demand a good government, and expect the men and women serving in that government to put aside their differences and come together to make good public policy. 

It is the promise of providing hardworking parents the ability to give their children a world-class education.

It is the promise of a way of life that provides opportunities to thrive here in the heartland of America.

The condition of our state is strong and growing stronger every day.

We stand at a place in history where many other states are burdened with way too much debt and looming uncertainty while Iowa is well positioned for unprecedented growth.

While some states across this country are choking opportunities right out of their states through over-taxation and over-regulation, Iowa is like a lighthouse, beaming a bright light of opportunity to those seeking a better life within our borders.

Let us turn the page and write a new chapter in Iowa’s history.

A chapter that reflects how a people of good character and a common purpose, who were genuinely committed to working together, provided dynamic solutions that led to the best time in our state’s long and proud history.  A chapter that will hail the unprecedented growth of job opportunities and rise in family incomes for all Iowans.  A chapter that celebrates the fact that every Iowa child has access to the best education in the world.  A chapter that affirms how Iowans’ quality of life reached new heights, as our citizens became the healthiest in the United States.

This is the chapter of our history that you and I, each and every one of us in this chamber, have the opportunity to write.  Let’s write it well.  Let’s write it together.

This is our opportunity. This is our Iowa.

Thank you. God bless you and God bless the people of Iowa. (applause)

Dean Borg: Governor Branstad lingering at the podium, talking to House Majority Leader Kraig Paulsen.  Pam Jochum now at the lectern.

The Governor receiving a standing ovation after that Condition of the State Address but uncharacteristically the speech was not interrupted very many times by applause.  That's not to say that the speech wasn't well received by the legislators, it's just that they were not on their feet or they were not applauding as they usually are during the Condition of the State Address.

The Governor had three or four main points.  He opened saying that the state is in its best financial condition in our state's proud history.  That is exact words best as I remember, best financial condition of our state's proud history and then saying we have the lowest unemployment rate in the past four years.  The main items that he was talking about, job creation and under that he proposes to make major changes in the way that Iowa's property is assessed and valued and therefore the sources of property tax revenue that would be coming to all sections of the state's governmental entities.

Education is another major point that he emphasized.  Starting teacher salaries to be increased from $28,000 to $35,000 and proposals also for attracting high performing college students into the profession. 

Health care, the training and retention of physicians and also a Certificate of Merit Law he is proposing.  We'll talk more about that as we go along in this telecast.

And then a long range budget that he wants.  Right now though we're going to be turning to a democratic response, if you will, and we're going to be speaking with the Senate's democratic Majority Leader Mike Gronstal of Council Bluffs.  Senator Gronstal --

Senator Mike Gronstal: Hi, Dean.  Thanks for inviting me.

Borg: Senator Gronstal, if you were delivering the Condition of the State Address would it have been the same sort of address that you heard here today?  Or what would you have said?

Gronstal: Well, I don't know that I thought about what I'd give as the condition of the state -- let me say this, I strongly agree with the Governor that Iowa has an unprecedented opportunity for growth.  We recognize that.  We think Iowa is incredibly well positioned to capitalize on both our full state treasury in terms of doing some targeted tax cuts that will grow our economy and also to invest in those kinds of things that will train Iowa workers. 

Gronstal: In our talk across the state with business leaders and community colleges pretty clearly Iowa has a great opportunity.  We have lots of workers but they don't necessarily have the skills for the jobs that are out there.  So we think an effort to significantly increase what we do in the area of job training in the state of Iowa is in order.  So we agree with the Governor.  There is a great opportunity for growth for this state.

Borg: So there is agreement there.  Where would you find disagreement?  Where do you say that this is going to have a tough sledding in the Iowa legislature?

Gronstal: Well, I think it's always tough until you see all the details.  But let me say this, the stuff we have seen on K-12 education, the stuff about getting better teachers into the classroom, I think we have strong agreement on that.  Last year I thought we had strong agreement on early childhood literacy.  There's not a lot in the Governor's budget that really speaks to that issue and some of that stuff we saw yesterday not in today's speech.  His commitment to provide, phased in over five years, $187 million in new money to K-12 education is actually in some respects an historic retreat in terms of the state support for education.  If we just did an incredibly modest two percent a year in terms of allowable growth, just very modest, that would be a historic low for the next five years, that would generate well over $300 million in new state dollars to K-12 education.  His proposal puts $187 million on the table approaching one half of what modest increases in the school aid formula would do.

Gronstal: I've got to say I think I'm kind of disappointed in the support for K-12 education.  So that's 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, just this fall they need to know.

Borg: Just to be clear, he is proposing doing away with the legislature setting allowable growth and he says that throws the property tax in those individual districts into question.  He wants allowable growth whatever the budgets and local schools would be to be entirely paid by the state instead of 80% now.

Gronstal: Yes and it's probably more like 60% of the allowable growth comes from local property taxes and I think we can work with him on that.  I think we're very open to considering an allowable growth mechanism that does not cause local property tax increase.  I think we're very open to that piece of the equation.  But let me repeat, it sounds good, you say $187 million, that sounds good on the surface.  So what would it be if we continued business as usual?  It would be close to twice that amount of resources for K-12 education.

Borg: Let me ask, and of course property tax revision is a big, major consideration here, but I'm going to go to something else he talked about and that was a Certificate of Merit screening for medical malpractice.  That is not going to be well received by the attorneys in Iowa, is it?

Gronstal: Well, I'd say we're open to looking at something along those lines.  I have talked with people about that before.  There are two sides to this equation.  There are sides where doctors feel that there are lawsuits where they are included and they really shouldn't be so I kind of understand the theory.  There are also mechanisms in the law that make it very difficult for somebody that has been injured to get any help to be made whole after they have had a problem.

Gronstal: So there are two sides to that equation.  We've got to have a balanced approach in the state of Iowa.  So we're willing to talk with him about that.  But, like I say, there's got to be a balanced approach to it.

Borg: Do you -- are you fully briefed and do you understand what the Governor is proposing in intricacy on tying all classes of property together and a major revision of the way property is taxed in Iowa?

Gronstal: I completely understand what the Governor is talking about.  I understand the property tax system.  It is immensely complicated.

Borg: Do you agree with what he is saying?

Gronstal: Let me say a couple of things.  I'm pretty sure the Governor is not tying his budget to no more than two percent growth but he is going to tie local government's budgets to no more than two percent growth.  It's a bit disingenuous to say we can grow our budget by 3.5, 4, 5 percent but we're not going to let local governments grow their budgets more than 2.  It is always nice to pick on local governments, very, very easy to do that, oh, that's where the problem is, when really we could step in and make a significant difference by what we do.  So we're going to talk with the Governor.  It is a complicated area.  There are -- he alleges there aren't tax shifts in the way he does it.  In fact, there are tax shifts in the way he does it over time.  So we'll sit down, we'll work with him, we'll look for a compromise on these issues.  We have some strong disagreements on this stuff.  And there's certainly -- but we certainly recognize the issues that he is about.  We have been concerned about property taxes as well, done a lot of things over many, many years to deal with high property taxes in this state.  We'll work with him on that but it is also -- probably two-thirds of the benefit of what he's talking about on the commercial level goes out of state, doesn't even help Iowa small businesses.  He can talk about small businesses but the truth is in the details and in the details they don't get much help.

Borg: One more question briefly about the surplus ranging from maybe $600 to maybe as much as $800 million.  I think that is yet to be set.  But is that being in the Governor's plans adequately addressed and spent in the right place?  He said returning it to the taxpayers of Iowa to whom it really belongs?

Gronstal: Well, we certainly agree.  Targeted tax cuts, in particular in those areas that will help our economy grow, they make a lot of sense and we're, we worked on those last year, we worked on them the year before and we'll continue to work on those.  But we also think there are key places to make investments in terms of training where Iowa really is at this unique point in our history where we have a healthy state treasury, where we have a nation's economy that is starting to come back, we have the skill shortage and if we can close the skill gap in the state of Iowa we can capture a lot of that economic growth that is going to happen over the next few years.

Borg: Thank you Senator Gronstal.

Gronstal: Thanks for having me.

Borg: We're going to be discussing the Governor's Condition of the State Address with statehouse journalists who cover the statehouse here every day and will be in the legislative session throughout its 100 days or more.  But before we get to that, we have a short clip from the speech which sort of capitalizes and overviews the Governor's speech.

Governor Terry Branstad: This year I bring to you a bold action plan focusing specifically on three goals.  First, job creation and expanding opportunities for Iowa families.  Second, improving educational opportunities for Iowa children.  Third, improving the health of all of our citizens.  These are opportunities that not only benefit us but they will reshape the future for our children and grandchildren.  This is our opportunity.  This is our Iowa.

Borg: And that is a theme that he repeated over and over again.  This is our opportunity.  This is our Iowa.  We'll ask now the journalists that we have convened here quickly after the speech to give us their assessments.  Kay Henderson is an Iowa Press regular and she is News Director of Radio Iowa.  James Lynch writes for the Gazette published in Cedar Rapids.  And Political Columnist for the Des Moines Register Kathie Obradovich also joins us.  Let me ask James, what reaction did you immediately, I mean immediate sampling, what reaction did you get among the legislators?

Lynch: Legislators, republicans liked it, thought he was setting a bold agenda, liked his talk about commercial tax reform and all property tax reform, his ideas on funding education.  Democrats I talked to took, they didn't disagree with him necessarily but they didn't see the speech as bold or innovative.

Borg: He had three major points.  And we have a graphic on that.  Of course, we're starting with a big budget surplus, Kay Henderson.  It's $600 to $800 million.  Is that right?

Henderson: Approximately. 

Borg: And what was he going to be doing with that?

Henderson: Well, part of the surplus he would like to use in the form of repayments to local cities and counties to reimburse them for lost property tax revenue.  Of course, this is the second time in two years that Terry Branstad has presented on the table of legislators the priority issues of his Condition of the State speech being property tax reform.  I think this was an opportunity for him to lay it out but the cake is still in the oven.  We don't know if it's going to be any good.  We're going to have to wait until the end of the legislative session to see if this can be worked out.  Today I'm pessimistic of the idea that they will agree to anything on property tax reform.

Borg: I'm going to come back to that, Kay.  We're going to develop that more fully.  But Kathie Obradovich, another main point is education reform.

Obradovich: Yes and most of that was stuff that we have heard already in the past week or so.  He is proposing a $187 million plan over five years.  A lot of that is focused on teacher salaries.  And I think the price tag of that plan may be of concern to republicans.  The bigger fight though especially with democrats is that the Governor is not proposing an increase in what we call allowable growth which is the per pupil spending state aid for schools.  It is the big increase that schools get.  The Governor has nothing in his budget on that.  But we're going to see a showdown before we even get started on talking about the details of education reform about whether to go ahead and set that basic state aid for schools in advance.  The state law says you've got to do it within 30 days.

Borg: And that is allowable -- go ahead Kay.

Henderson: I think the other thing about the speech is comparing it with last year's speech, last year's speech was much more conciliatory.  This year's speech was very plain spoken, this is what I want to do, sort of leaving it to legislators to fill in the blank as to whether they will accomplish these things.  There were no ultimatums but I don't think he was as energetic about this vision this year as he was last year.

Borg: But the third point that we had on that graphic that we showed just a moment ago is that this is a non-election year.  Jim Lynch, what difference is that going to make in this legislative session?

Lynch: Well, maybe that is why he wasn't as conciliatory as he might have been in an election year, this is the year that he sees he is going to put forward his plan and I was struck by how focused he was and just focusing in on those three priorities and ignoring everything else.  There was no litany of shout outs to every interest group under the sun, every interest group that lobbies here at the capitol.  He avoided that and just stuck to his three priorities.

Borg: Kathie, you were talking about property tax relief and that is going to be, it's very complicated first of all and Iowans, of course, when they go to pay their property tax bill they realize it.  But as far as what is going to be and how it's going to be done I think eyes glaze over.  Mine do.

Obradovich: Yeah, the details are difficult to explain and it's part of the reason why the state has tried and failed, legislators have tried and failed for 30 years to get to any sort of significant property tax relief, that the system is complicated, there are a lot of entrenched interests.  And one thing that the Governor does have going for him this year that he did not last year is that he is proposing to make local governments whole in the sense that any money that they will lose because property taxes are cut -- and it is your local governments that are depending on those property taxes, it's not the state -- but any money that they would lose the state is going to reimburse fully.  Last year the Governor was saying we don't want -- we'll reimburse up to a point but we don't want local governments to have a windfall.  This year the state has a bigger bottom line and the Governor is willing to spend a little bit more that way.

Borg: Do you mean bottom line the state has more surplus --

Obradovich: Yes, the state has a surplus.  The Governor is prepared to kick in $400 million for property tax reform over the next five years.

Henderson: The other dynamic here is that there is a growing sense among republican legislators that they really, really, really want to cut income taxes.  Iowans are starting to see in their paychecks , those of whom are paid once every two weeks, how much the payroll tax cut at the federal level that had been in place for the past couple of years is going to affect their bottom line.  If you cut income taxes that is felt by nearly everybody.  If you cut property taxes it is very hard to understand and it's not felt by everybody in the state.

Borg: Jim, the Governor in order to get things done has to add a little sugar to something that might be sour to some.  What was the sugar?  And where was the sourness today?

Lynch: Well, I think some of the sugar was what Kathie mentioned about holding local governments harmless.  They were down here last year arguing against his property tax reform because they felt like they were going to bear the burden and they would feel the pain.  This year he's saying we're not going to cut you, we're going to hold you harmless.  So there's a little sugar there.  There's a little sugar extended to teachers.  He pointedly said, teachers, you're not the problem, it's the system that you're stuck in.  So I think that was the sugar.  But I didn't hear a whole lot of sugar.  There was a little at the beginning where he complimented legislators on their fiscal integrity as far as the budget and not spending one-time revenues and those sorts of things.  But this was not pleasantries.

Obradovich: Except, you know what, this is a 4.3% growth in the budget over last year.  House republicans, they like to say, well how much did household budgets grow, probably not 4.3% across Iowa.  They're going to look at this and think there is way too much sugar.  They're going to be getting cavities in their caucus because they think that this overall growth in state spending is probably going to be not acceptable to their constituents.

Borg: They're biting off major, major things here.  Education reform, which was started last year, but hoping for major things to be done here and property tax reform, as we've already said, very complicated.  What is this going to do, Kay, to the length of the session because look over the past years of how long some sessions have gone?

Henderson: Well, are you just trying to depress those of us who are up here every day covering this legislature because our belief is that this will not be easy to resolve.  The only way it is easy to resolve is if legislators walk away from trying to come up with some property tax reform deal.  If they do have an intensity of purpose we'll be here in May and June trying to hammer things out because it is so complicated.  Back to your question about the sweet and sour, I think the sour note for a lot of democrats was this fight the Governor is picking over the level of general state support for schools.  Schools don't yet know what the level of state support they're going to get for the next academic year that starts on July 1st is.  I think that is a growing point of contention between democrats and the Governor and frankly republicans and the Governor who see a little egg on their face because they are disobeying state law which says they should have already made that decision.

Lynch: Democrats are also quick to point out that the $187 million that Branstad is proposing to put into education is about half as much as schools would receive if allowable growth continued at its traditional pace of two to four percent per year growth, that would be about $350 million over the same period of time.

Borg: Kathie, is there -- go ahead --

Obradovich: I was going to say, as we talk about the length of the session there's a big wild card coming in the sense of the federal fiscal cliff.  What happens with federal spending could really affect what Iowa is going to be charged for Medicaid.  Iowa's cost for Medicaid, which is the state/federal program of health care for the poor, our costs could go up a whole lot if there's big cuts in the federal budget due to the fiscal cliff.  We're not going to know that until the end of March probably and so a lot of those big budget questions may have to wait until this spring.

Borg: Kay?

Henderson: As someone who grew up in rural Iowa I was also struck by a couple of things that the Governor threw in his speech about quality of life in rural Iowa, trying to get more doctors to practice in rural hospitals in their emergency rooms, to deliver babies in those emergency rooms.  I have relatives who live there.  That's a problem.  He is not spending or proposing to spend much money in that regard.  Just a few doctors at a few rural hospitals might make a big difference in the quality of life in rural Iowa.

Borg: Well that certainly, that's sugar right there.

Lynch: I was struck by what he didn't talk about.  There was no talk about gun control, no mention of capital punishment, same-sex marriage, abortion, natural resources, gas tax or income tax in this address.

Borg: Well, I spoke with Mike Gronstal, the Senate democratic leader, and he told me I was surprised there was nothing in there about mental health.

Lynch: Right.

Obradovich: Yeah, mental health was a big omission but the Governor does say that his staff says there's $37 million in his budget for mental health.  The state last year approved a really big transformation of the system.  It used to be a 99 county system, now it's more of a regional system, and there are growing pains in that system.  $30 million is probably higher than most of the figures I have actually heard people say was the minimum needed.  So he may be soothing some ruffled feathers there with the money.

Henderson: And back to your fantastic omissions list, James, I think that just highlights what a practical, pragmatic politician Terry Branstad is.  He is intending to run again in 2014.  He doesn’t want to rock the boat.  I think he senses that to win in this state he has to be seen as a practical politician and sort of scratching the wounds on those issues would really hamper his ability to run an effective campaign in 2014.

Borg: That's a good summary to end our discussion.  Look forward to talking with you more as the session goes on.  And we'll have a chance to discuss these topics and more with Governor Branstad and that will be actually later this week on statewide Iowa Public Television, this Friday on Iowa Press we'll be questioning the Governor on his agenda and the legislative path forward.  That will be on Iowa Press Friday at 7:30 in the evening and Sunday at noon.  And tomorrow morning we'll bring you Iowa Supreme Court Chief Justice Mark Cady's State of the Judiciary speech live at 10 tomorrow morning on IPTV World and also online at iptv.org.  And it will be rebroadcast at 6:30 tomorrow night on IPTV's main channel.  For our entire Iowa Public Television crew here at the state capitol in Des Moines, thanks for joining us today.

 


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