Mid-year, mid-term. Iowa Governor Terry Branstad almost halfway through his sixth term. We're asking what the Governor sees ahead on this edition of Iowa Press.

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For decades Iowa Press has brought you politicians and newsmakers from across Iowa and beyond. Now celebrating more than 40 years of broadcast excellence on statewide Iowa Public Television, this is the Friday, June 10 edition of Iowa Press. Here is Dean Borg.

Borg: Governor Terry Branstad knows his way around the Iowa Statehouse, literally and politically. Beginning in 1973, representing Winnebago County in the House of Representatives, 10 years later he was Governor, after serving as Lieutenant Governor in the Robert Ray administration. But experience isn't suppressing political challenges. The Branstad administration now navigating troubled waters over converting Iowa's Medicaid program to private management. In many unpopular decisions like that, Governor Branstad contends he is keeping the state financially healthy. Governor Branstad, welcome back to Iowa Press.

Branstad: Thank you very much, Dean. Great to be with you.

Borg: This is going to be a busy summer. You've got the convention up ahead of you. Anything else planned?

Branstad: Well, we're hosting the National Governor's Annual Meeting here in Des Moines July 14th through the 17th. We'll have the Governor's Council, which advises the Pentagon and National Guard and Homeland Security, we're going to have a meeting at Camp Dodge and we're proud to be able to do that, showcase all the great things going on in Des Moines and Iowa. And of course we do have the National Convention. Next week I'll be in San Francisco to speak at the World Bio Conference to talk about the fact that Iowa is the first state to have a biochemical tax credit, which is where we think that's the next generation of products that can be made in conjunction with ethanol in this state. We've added 43 ethanol plants and we hope to get many other complexes like Eddyville throughout the state where other products will be made as well.

Borg: Governor, we're going to get the program underway and I want to introduce to our viewers people that you know well. Across the table, Des Moines Register Political Columnist Kathie Obradovich and Radio Iowa's News Director Kay Henderson.

Henderson: Governor, you will be a delegate at the Republican National Convention in Cleveland. Many of the other delegates support Ted Cruz and are not enthused yet about Donald Trump. Do you consider yourself a party peacemaker?

Branstad: Well, I have always tried to be a party peacemaker and one that works to unite the party, to support the nominee, to win elections.

Henderson: So what do you say to those Cruz people who say, we just can't quite get on board the Trump train?

Branstad: Well, I think look at the alternative. And I think they strongly feel that Hillary Clinton would be a disaster for America. They're concerned, as I am, about the size of the national debt. They're concerned about the lack of leadership in the world in the fact that America has lost support among our allies and our adversaries are embolden. They see the overreach of government. I think we're all concerned about that. This administration has done many things beyond what should be done in issue after issue. So I think when they examine the choice -- and the next President is going to choose at least one and maybe three or four members of the Supreme Court, Donald Trump has pointed out 11 prospective people that he would consider and one of them is Steven, it happens to be --

Borg: Steve Colloton.

Branstad: Steve Colloton, who is the son of John Colloton, an 8th Circuit Court of Appeals Judge from Iowa, which would be a great choice.

Henderson: Speaking of Iowans, early in May you said you wanted to have a one-on-one with Donald Trump to tell him to pick Joni Ernst. Have you had that conversation?

Branstad: No, but recently in North Dakota he said he wanted to consult with me about ethanol and what happens beyond the year 2022 in terms of the Renewable Fuel Standard. And so I intend to -- and once the California primary is over I think we'll have that opportunity to visit. First of all, Joni is doing a great job. I'm really proud of the work she's doing as United States Senator. With Chuck Grassley and Joni Ernst we have two real leaders that are making a difference for our state. And obviously a lot of people were surprised that she beat Congressman Braley by more than 8 points. So I think she is a strong leader. She's got military background. And she served in --

Obradovich: Do you think she would entertain a bid to be Vice President? She said that's not what she's looking at right now.

Branstad: Well, I don't know of anybody that looks at being Vice President. It's one of those things if the candidate for President asks you, it's a pretty hard thing to say no.

Obradovich: In your role as party unifier, what would be your advice to the Chairman of your Republican Governor's Association? Donald Trump criticized her in her home state of New Mexico and now he's asking for her endorsement. Should she endorse him?

Branstad: Well, she didn't go to the rally and I guess I don't know why she chose not to go to the rally. But my feeling is since the nomination is pretty well decided I think we all need to get together and support the ticket. And I think she has done a great job. I was recently out there for a republican governor's meeting in New Mexico. I have a lot of respect for Susana Martinez and the job she has done. In a very difficult state for republicans I think she has done a great job. But obviously I think it's important that we all come together and support the party, support the nominee for president, the vice presidential candidate, as well as our gubernatorial candidates. We're very excited about republicans have 31 governors and we may end up with 34 or 35 after this next election. We have some great chances to pick up more governorships and that is of course what our focus was in our meeting in New Mexico.

Obradovich: Would you consider advising Donald Trump about your longtime association with the media? Do you agree with him that the political media are sleazy?

Borg: Be careful now.

Branstad: Well, I take a different approach. But I think a lot of people are really upset at the establishment, the media establishment, the political establishment, they think the country is on the wrong track, they blame the media as well as the political establishment in D.C. They're looking for new leadership to restore American greatness and they see with Donald Trump somebody that has been successful in business, that has got all kinds of courage and guts to do the right thing and they think America needs to be a leader again instead of a follower, which we've been for the last eight years. It has driven the country into debt and it has driven us into a situation of weakness. We can't afford to continue in this direction.

Borg: Governor, the question really is the use of the word sleaze for media.

Branstad: I'm not going to choose -- first of all, I'm my own person and I'm not going to try to analyze other people's speech or whatever. And, like a lot of other people, I've been surprised that Donald Trump has been so successful. But I think he has hit a chord with a lot of Americans who are really unhappy with the media, unhappy with the political establishment in D.C. and want to see significant change. And he's not the only one. I see some of the same things on the democratic side with Bernie Sanders and his supporters feel the same way, alienated to feel America is not the land of opportunity we want for my grandchildren.

Obradovich: But you released your tax returns. So you seem to think that there's some measure of accountability or some measure of voters' right to know that Donald Trump doesn't seem to think applies to him. He seems to think that we ought to take his word for the fact that he gave donations to veterans' organizations.

Branstad: Well, he'll come out and he has released all of that information, all the contributions made to veterans, and that is a big contrast to Hillary Clinton, who has done nothing to speak of for veterans and who won't release the information about the speeches she has given to Wall Street nor the fundraising tactics of the Clinton Foundation or her emails and it goes on and on and on.

Henderson: But why do you release your tax returns?

Branstad: I've been doing it ever since I ran for the first time.

Henderson: So why do you think Donald Trump isn't?

Branstad: Well, I don't know. I'm not going to judge individual candidates. I'm just saying that's something that I felt was the right thing to do, something that I've always done, not everybody does it. But I am proud of -- first of all, I'm a lot different. I'm not a billionaire, I'm not a successful businessman, I'm just a farm kid from Iowa who has worked most of my life in public service and I'm proud and honored to serve the people of this state and my life is an open book. I think people know about anything they want to know about me because I've been in public office for a long time.

Henderson: Well, let's talk about some things you did in office in May. You issued a set of item vetoes of policy but you did not use your authority to subtract any of the budget items that legislators put together. In other words, you approved in whole the budget plan that legislators sent you. Are you that confident about the state's economy?

Branstad: Well, the good news is unlike last year and other years where the legislature spent one-time money for ongoing expenses, that happened only a very limited instance and frankly it was in the human services appropriation bill, something I couldn't get at with item veto anyway. But this legislature did respect the spending limitations, we can only spend 99% of projected revenue. I put my budget together on the December revenue estimate. The March revenue estimate was $46 million less. So they had to cut the budget another $46 million and they did it and I was proud of them for doing that. It wasn't easy. It was difficult. And they had to say no to a lot of things they'd have liked to have said yes to. But they did it. So in approving their budget I was reaffirming that I appreciate the fact that it fits within our five-year projections and it does not violate the 99% spending limitation and it doesn't use a significant amount of one-time money for ongoing expenses. Thank God last year I did item veto that one-time spending or we'd be in trouble right now.

Henderson: In making that decision, we you trying to butter them up, legislators, so that they'll be more amenable to your proposals in 2017?

Branstad: I've been around long enough to know that kind of stuff doesn't work. I just try to make a decision on each and every individual item and I did item veto some things, some policy issues, but generally I was pleased. We worked closely with the legislature and they made tough decisions and I know they weren't easy, but they did it. And so I think it was a pretty successful session. Compare us with Illinois, they haven't passed a budget for the last two years and they have the worst unfunded pension system, the most state and local debt per capita and people want to leave there in droves. In Iowa, things are good and getting better. In Illinois, they're bad and getting worse. Now this is despite the fact that we went through the bird flu epidemic and farm income has been below the cost of production in recent years.

Obradovich: Well, speaking of 2017, are you planning to lure more Illinoisans over the border with perhaps a big income tax cut? Are you going to propose an income tax cut for Iowa?

Branstad: Well, it's too early to talk about what we're going to do in the 2017 session. We've got an election between now and then and we've got to look at what is happening in terms of revenue. I'm encouraged by this, corn and soybean prices have improved a little bit in the last couple of months, and I'm hopeful we'll get from a loss situation to an income situation for agriculture. That would be good for the Iowa economy. Also the tax bill that passed this year provides some incentives in manufacturing and also the credit for biochemicals. And I'm going to be talking to the worldwide conference, in fact, no I guess -- we Iowans don't like to brag -- but I would say I'm going to be out there to tout the fact that Iowa is the first state in the nation to have this tax credit. And we already have a number of companies that are looking at Iowa. One of them recently located in Boone.

Obradovich: The Taxpayers Association though says Iowa could make some common sense reforms and deal with some of the exemptions, etcetera, and lower rates without it being a revenue, making it revenue neutral. Is that something you would consider?

Borg: Is that yes that you're shaking your head in agreement?

Branstad: Okay, first of all, I want to commend the Iowa Taxpayers Association for doing this study. I think it's a very thoughtful, comprehensive study. I haven't had a chance to go through all of it yet. I intend to review it very carefully and visit with legislators about it. I think there's some good ideas in there that could be used in 2017. But frankly, I haven't even read the whole report yet so we have to --

Obradovich: Eliminating federal deductibility is one of the rubs for a lot of those plans to make it revenue neutral. Are you ready to go there again?

Branstad: Well, I tried that once. But that was back when Iowans for Tax Relief really led the charge to keep that. The circumstances may have changed somewhat. I'm open to considering a lot of those ideas but I haven't formalized any plans yet and I want to visit with legislators to see what is the art of the possible. That's another thing I've learned from experience.

Obradovich: So you're not really possibly looking at federal deductibility, which is the ability to deduct your federal tax bill from your Iowa tax return.

Branstad: Yeah, and Iowa is one of the few states where you can do that. But the problem is when a lot of these groups look at it, they look at what is the high marginal rate and they don’t take into consideration the federal deductibility. So our effective rate is much lower than that marginal rate and that hurts a perception of Iowa. Now, a lot of Iowans understand that because they are familiar with the Iowa tax, but a lot of companies from the outside just looking at it don't realize that. So that is one of the impediments and one of the problems that I think we have faced for a long time.

Henderson: You've used the word problem twice in answering that question. If it's a problem does it need to be fixed?

Branstad: Well, it's also a question of what is the art of the possible. And I'm not one to tilt windmills. I want to do things that I think can be accomplished. And sometimes it takes more than one year to accomplish significant things like the --

Henderson: Well let's talk about your water quality --

Branstad: That's a great one, that's a great segway.

Henderson: Nice segway. You proposed in January a significant proposal to shift taxes being collected for school infrastructure, part of those to water quality. Didn't get adopted in the 2016 legislation. Do you plan to make adjustments and propose a new plan for legislators?

Branstad: Yes. Well, first of all, we work with the legislature throughout the whole session and the House of Representatives passed a water quality bill that we supported through the Agriculture Committee, through the Ways and Means Committee and through the Appropriations Committee. It got 65 votes and it had our full support and it goes all the way to the year 2029. Our plan went from 2029 to 2049, which would give us an even longer-term reliable source of funding for it. So I think between what the House passed and the ideas that we have presented, which were endorsed also by Secretary Vilsack, Secretary of Agriculture, I think we have the chance to get something significant done next year. I was disappointed that after the House worked on that all year and passed it through three committees and passed with strong bipartisan support with 65 votes, that the Senate leadership didn't even take it up, nor did they offer any alternative. I believe water quality needs to be addressed and I'm visiting farms all over the state of Iowa to personally see the different practices that are being put in place so that we can be as knowledgeable as possible and have an aggressive plan to address water quality next year. So, it'll be at the top of our priority list.

Borg: Governor, Senator Gronstal, Senate Majority Leader, a democrat from Council Bluffs, on this program just a few weeks ago, suggested a water quality summit. Would you take leadership in calling such a summit?

Branstad: I think in the midst of a political season it's probably not the time to do that. But I want to visit with as many people as I can and that's why I'm traveling throughout the state. Here's the problem, Gronstal is up for re-election, he’s got the fight of his life on his hands, once that is over then we'll be glad to sit down and talk with him or anybody else. But in the meantime, I'm going to do all I can to build grassroots support for a collaborative approach towards dealing with this that will help our cities as well as help our farmers to put in place practices that can reduce the loss of nutrients and provide long-term funding for it.

Obradovich: Governor, last time you were here you didn't seem to think that there was a big need for the legislature to insert a bunch more oversight over the Medicaid managed care program that you have in place. But you signed that bill. Why?

Branstad: Well, first of all, it scaled back to something that was reasonable and we worked with them through the legislative process. We're going to have the most transparent and I think effective oversight program of any state. Now, 70% of Medicaid patients are already under managed care, but we're going to have, in my mind, the best one that has the most oversight as well as the most transparency. And we had already agreed to a lot of the oversight matters in the agreement we worked out with CMS. So I appreciated the fact that the legislature worked with us on that, that they recognized the need. And there's $100 million in savings in the fiscal year from managed care in addition to improving the health outcomes for Medicaid patients.

Obradovich: Are you confident you're going to reach that savings?

Branstad: Yes.

Henderson: What role will you have in finding a replacement for Bill Ruud, the University of Northern Iowa President, who is leaving?

Branstad: I will not have a role in that. That is the responsibility of the Board of Regents.

Henderson: You met with Mr. Herrald, the current President of the University of Iowa, before he was hired.

Branstad: No.

Henderson: You talked to him on the phone.

Branstad: I talked to him on the phone, that's correct, because he requested to have a visit with me. And I guess if any of the candidates want to visit with me I'll certainly return their phone call. But I didn't meet with him nor did I play a role in that. I believe that is the responsibility of the Board of Regents. I respect their independent responsibility to do that.

Henderson: So there's questions about the timing of your meeting with a new member of the Board of Regents, the board you just mentioned, that governs Iowa, Iowa State and UNI and Mary Andringa's resignation. Did you ask for her resignation?

Branstad: No, no. Actually she informed me before it was announced publicly that she was intending to resign. I have the greatest respect for Mary Andringa. She did a great job. She just felt it was bigger undertaking than she wanted and I feel that the year that she served she served the people of Iowa well. When she told me that she was intending to resign at the end of the month, so I had a few weeks’ notice before the actual public announcement was made, I started thinking about who would be a really good replacement. And that's why I contacted my good friend, Dr. Mike Richards, who is a doctor, is Marcus' godfather, his kids went to grade school with my kids, he was my doctor for a while. He also was with the Iowa Health Systems and now he's in private business and they have a manufacturing company up in Orange City.

Borg: So you knew him.

Branstad: I knew him very well. He's a graduate of the University of Iowa. He's a doctor. He grew up in Osage.

Henderson: Is he your best friend?

Branstad: No, he's not my best friend. Mel Straub was my best friend and he passed away. But he's a good friend, he's a good friend of our family.

Obradovich: Did you consider other candidates though?

Branstad: Well, I think there were some other people that applied but I felt that, I like the idea that he had the medical experience and background because the University of Iowa Hospitals and also because he has also been somebody that, he has a really good way about him and works well with people. And I felt that -- he also I just thought would be a good addition to the Board of Regents.

Borg: I'm going to get into tuition just briefly here. What is your long-term strategy? There's a tuition increase the Regents are going to be considering right now because the state appropriation didn't come up to their expectations and desires. What is your long-term strategy? Where would you like to see the balance between what parents and students have to kick in as to what the state appropriates?

Branstad: Well, that's a great question. First of all, I'm very sensitive to the cost of higher education. I went to the University of Iowa right out of high school. My parents didn't have the money to send me there. I worked construction work in the summer, I worked in the cafeteria during the school year and I had to borrow money. And I didn't get my last student loan paid back until after I was elected Governor the first time. So I'm very sensitive to the tuition costs for parents and students. And I want to keep -- and I'm proud to say that we've had two years where we had a total freeze and now I would like to see the tuition increase to be pretty modest. And so I'm concerned about too big an increase, especially with the financial hardships that families are facing. I understand the Regents have to balance the needs of the universities with the impact that it's going to have on the students and their families, but I for one would like to see those tuition increases kept modest so we can keep our university tuition affordable for Iowa students.

Borg: Just a quick follow-up to that, more modest than is being considered right now, taking on an extra $300 onto what has already been approved for the fall?

Branstad: I think that's --

Borg: Too much?

Branstad: I think it's too much. I hope the Regents will take a close look at that. That is a board recommendation. It has not been approved by the Regents. But I think they need to look at the impact it's going to have on Iowa students and their families, especially this late, because the fall school year is not that far away. So I think we have to be careful about it.

Obradovich: The end of this program is not very far away either so I want to get in another question. You mentioned Senator Gronstal a few minutes ago. What are you doing to try to make sure that you have a republican Senate in the next term? And how confident are you that that's going to happen?

Branstad: Oh, I am very excited about that. We have a young man that used to be on my staff that, Matt Leopold, we got together a long time ago with the House leadership, the Senate leadership and the Republican Party leadership, and said we need to get somebody really good to go out and recruit the best candidates. And Matt agreed to leave the staff and to do that and he has done a phenomenal job. We have a great group of candidates. They're working hard. If you've seen the financial disclosure reports, you see many of our challengers are raising more money than their incumbent opponents. They are going door-to-door. They're working extraordinarily hard. We have a primary out in Council Bluffs to take on Gronstal and we have six districts where we have more republican registrations than democrats and the candidates are, they're going to a lot of doors. I went to a fundraiser for one of those candidates in State Center the other day, Jeff Edler, 170 people and he started in March and he has already raised more money than the incumbent he's running against and he's knocked on thousands of doors. So I think we have a great chance. We've got six or seven districts that are in play. I think we're going to win four or five districts. So I'm pretty encouraged about this.

Henderson: Are you prepared to withhold nominating anyone in your final year in office to follow the way of the United States Senate and not confirm folks for important positions?

Branstad: We have a different system than we have -- first of all, my choice of people to serve on the courts is not subject to confirmation. Just wait a minute, let me explain the system --

Henderson: We don't have time -- we don't have time --

Branstad: No, there's time. The system is we have a nominating commission that gives me three and I have to select among those three. I can't choose anybody I want to like the President can and we don't have a confirmation process. I think our system is better than the federal system and I'm proud of the quality of people I've appointed to the court. I hope I'll get more opportunities to do that in the future.

Borg: Governor, I know you're Governor, but you can't dictate time. Thank you.

Branstad: Thank you.

Borg: We'll be back next week, 7:30 Friday night and noon on Sunday. I'm Dean Borg. Thanks for joining us today.

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Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. I'm a veteran. I am a builder. I'm a volunteer. I am a teacher. I'm a banker. I'm an Iowa banker. No matter who you are there is an Iowa banker who is ready to help you get where you want to go. Iowa Bankers, allowing you to discover the genuine difference of Iowa banks. Iowa Communications Network. ICN's Broadband Matters campaign advocates for access to high speed broadband in all corners of Iowa for education, public safety, health care, government and economic development. Information is available at broadbandmatters.com. Iowa Community Foundations, an initiative of the Iowa Council of Foundations, connecting donors to the causes and communities they care about for good, for Iowa, for ever. Details at iowacommunityfoundations.org. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. The Arlene McKeever Endowment Fund at the Iowa Public Television Foundation, a fund established to support local programming on Iowa Public Television.