Here in Iowa state revenues are falling short of expectations with talk of a special legislative session. In Washington everything from immigration to tax reform and disaster relief are dominating the conversation. 2017 is not an election year but 2018 issues are during this Reporter's Roundtable 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, September 8 edition of Iowa Press. Here is David Yepsen.

Yepsen: When Terry Branstad handed over the keys to Terrace Hill, Kim Reynolds inherited much more than a downtown Des Moines residence. Iowa's first female Governor also claimed ownership of a state budget falling short of funding amid dwindling revenues. How Reynolds and state lawmakers plug the financial holes is just an appetizer for the many issues in Iowa politics and beyond. Here to talk about it we have a full team of Iowa journalists joining our Reporters' Roundtable edition of Iowa Press. Jason Noble is Chief Political Reporter for the Des Moines Register. James Lynch writes for the Gazette in Cedar Rapids. Barbara Rodriguez covers the Iowa Statehouse for the Associated Press. And Kay Henderson is News Director at Radio Iowa. Well, I hope everybody had a good summer. Nice quiet summer, not much happening right?

Lynch: Not much to talk about.

Yepsen: Well, we'll start with you Barbara. Let's start with the state budget. Give us a condition report on the state's finances.

Rodriguez: In a nutshell, Iowa has a roughly $7.2 billion budget and we have incoming revenue that is not potentially where it needs to be. And so we have some projections earlier this summer that indicated a shortfall of as much as $100 million. We're still waiting as a state to figure out whether that number has gone down or up and whether a special session needs to be called.

Yepsen: What is everybody's guess? James, what is your take on it? Will there be a special session?

Lynch: Given the numbers we've seen, as Barbara referenced, I don't see how we avoid it. But if you talk to republican legislators almost to a person that I've talked to say no, it won't be necessary, the Governor can handle it, she has authority to shift $50 million around without legislative approval. Democrats can't seem to wait for the special session. They're chomping at the bit.

Noble: And the $50 million number is really the magic number here and we'll know by the end of September whether the revenues are off by more or less than that and that will dictate whether the special session happens.

Yepsen: Kay, can't they fake this? Can't they muddle their way through?

Henderson: I think your favorite phrase is smoke and mirrors. I choose hocus pocus. I think there's a little bit of that going on in that they may be coming up with some creative ways to make the $50 million level. And, again, when you speak with republican legislators I think they believe in hocus pocus.

Yepsen: Well, do you blame them? The last thing any Governor wants to do is bring a legislature back into session because he or she can't get rid of them once they're here.

Henderson: Right. And the aforementioned $100 million figure that Barbara referenced came from the Legislative Services Agency, a nonpartisan group, and the same day they issued that number I spoke with David Roederer who is the Governor's budget director and his number at that time was $76 million. And I asked him, what about this $100 million figure? And he said, I don't know where they get that. So there may be looming two sets of figures heading into sort of a confrontation here.

Noble: Aside from the politics of the special session, this is almost kind of half dozen one, six in the other, this is money that is going to need to be borrowed or taken from the current budget to plug a hole in the previous budget and the upshot of that ultimately is less money to work with going into the new legislative session.

Rodriguez: I just wanted to also note that in some other statehouses a special session is pretty typical. And in Iowa we haven't had one in more than a decade. And so I think the optics of it, it just plays for a partisan talk of how we as a state are handling money, especially with Governor Kim Reynolds now being Governor.

Yepsen: But Barbara, can you blame Governor Reynolds for wanting to avoid this? All that's going to happen if they do have a special session is democrats are going to be using this as a platform to pound away on her. Ron Corbett, who is challenging her in a primary, former Speaker of the House, will be pounding, already is. Why would she even want to get near the idea? Why doesn't she just scratch it?

Rodriguez: It's clear, by the way, how you framed this, she does want to avoid a special session. But, again, she will have to call a special session if again that number goes above $50 million.

Lynch: And, David, if there is a special session I would assume that the Senate and the House both controlled by republicans will come in with a package, introduce it, set a time certain for a vote and be out of town before the sun sets. They don't want to let this discussion go on any longer than absolutely necessary. They don't want a rehash of collective bargaining, of worker's comp, of every budget debate that we had during the regular session.

Yepsen: Barbara, what would be some of the options that the legislature is going to have to deal with whether they do it in a special session or next year when they convene the legislature? What are some of the options that lawmakers have for dealing with these revenue shortfalls?

Rodriguez: If they call a special session it's as simple as, again, approving a transfer of money from emergency funds. They could also decide that they will do additional cuts to state agencies, which again optics wise is not a good option because we're talking about a budget year that actually ended in June and the budget year for 2018, that's a whole other can of worms. We've got some budget projections that are going to come in, in October. So all of this really is just something that is going to be kind of kicked down to October. So it's unclear.

Yepsen: Jason, why can't they get these budget forecasts right? What's the problem?

Noble: Well, the economy is dynamic, there's a lot of different factors there and the way that the state does this, they have this revenue estimating conference, a member of the Governor's administration, an advisor from the Legislative Services Agency and an outside accountant and they craft these numbers and sometimes they're right and sometimes they're wrong. It's tough to predict how a whole state economy is going to shift and what that's going to mean for revenues in the state budget.

Henderson: There is also a school of thought that it was woefully underestimated the tax cut that was provided by the previous year's legislature in the form of cutting the sales tax on the inputs in manufacturing and the idea is that the reason that sales tax revenue sort of flatlined was because it was underestimated by tens of millions of dollars, the benefit that manufacturers in Iowa would gain by not paying those sales taxes on things like screws and hydraulic fluid that they use in the manufacturing process.

Yepsen: So, James, don't they just plug those "loopholes"?

Lynch: It's not quite that easy. As anyone who has been around the Capitol knows that every loophole has its defenders. You call it a loophole, I call it a tax incentive, economic development incentive. So yeah, and there's talk about tax credits, looking at tax credits and these tax incentives but that's not a short-term, that's not something that is going to happen in the short-term in a special session. That is a long process.

Henderson: But there is growing sentiment, even among republicans that the kind of tax benefits that were awarded to Apple for putting a data center in Waukee, Iowa are just too extravagant. You had Pat Grassley who is the Chair of the House Appropriations Committee, a republican say, not quite sure giving this company $20 million in state tax breaks is a worthwhile move for 50 jobs.

Noble: On the other end you've got democrats who clearly see this as an issue they can campaign on saying this is corporate welfare, you're just giving away state dollars to rich companies instead of investing it in education or human services or other necessary things.

Henderson: And you also have a core of republicans who say it's time for the state to quit picking winners and losers. So there is a debate festering inside the Republican Party as well as the complaints coming from the other quarter of democrats.

Rodriguez: I think it's important to note that, again, tax credits are not new, they have been a part of the budget for a long time. The cost has gradually increased and that has people skeptical about, again, what Jason noted, how we could be spending money on this when we have these other issues. And the timing of this is just really bad. You've got the Governor of course talking about how great this is when you also have various state agencies announcing a lot of cuts that affect a lot of different people here in the state.

Yepsen: James, isn't this a game though that the state of Iowa is forced to play? Other states are giving tax breaks. We've got Toyota thinking about moving to the state, we wonder what they'll ask for. But the reason I'm asking you this question is Rockwell Collins up in your neighborhood has been sold. Will there be another push for some tax credits or tax breaks to keep some kind of presence of that company in Cedar Rapids?

Lynch: It's probably too early to know but it wouldn't be surprising. The Governor has said she has talked with Rockwell Collins and the folks from United Technologies that bought Rockwell and they seem pretty upbeat about staying in Iowa. But they might be saying, we'll stay if we get some tax credits, if we get some incentives. They already get a pretty big tax incentive from the state of Iowa in the form of a research and development tax credit that is a refundable tax credit. If they don't have any liability the state writes them a check and it amounts to around $13 million a year from the state to Rockwell, a company with over $5 billion worth of sales in recent years.

Yepsen: Kay, is this a little bit of change in tone by republicans at the Statehouse? I hear republicans talking about getting rid of federal deductibility and a way to make the state tax returns simpler and fairer. Now we see, you mentioned Pat Grassley talking about tax credits, these are not things we used to hear from republicans.

Henderson: Well, the problem is how many years ago was it that we heard one of the legislators say, we're going to start with a blank sheet of paper and we're going to come out with a new tax plan. The reason we have so many tax credits is because they can't do a major overhaul of the entire tax system, including corporate taxes and individual income taxes. And so I'm unsure if they can address the tax credit issue without addressing the entire tax system and who pays what. And the problem here for Kim Reynolds who really wants to have a tax plan advancing in the legislature so that in 2018 when she's seeking re-election as Governor she can show Iowans that she spearheaded this through the legislature.

Rodriguez: I just want to note that there was some conversation this past legislative session to try to tackle this issue with tax credits, potentially bring up some type of bill but it didn't go anywhere. I expect it will come back next session because Reynolds has indicated that tax reform, tax cuts as other people see it, that is a priority for her as Governor. And a lot of people who, businesses that were against this idea of touching these tax credits argued that we can't have this conversation unless we talk about tax reform. So I can't see how one doesn't happen without the other next year.

Yepsen: And, Barbara, how can Iowa have this discussion about its income tax system when we don't know what the federal government is going to do, if anything, about the federal code?

Rodriguez: It's actually a fair point. I've had conversations with republicans in the Senate about some plans that they've been talking about and I've asked that question and they say, we're hoping that they'll figure that out in the next couple of months but there's a lot of other things happening on the federal level.

Lynch: One of the things that complicates this too from the economic development standpoint with the tax credits and incentives is that while everybody right now is focused on $20 million for Apple, you can find similar examples of a lot fewer dollars involved in communities all over this state. So if you start saying we're going to take away these tax incentives, the people in Cedar Rapids, the people in What Cheer, the people in Sigourney all over the state are saying, but wait, that's how we got XYZ company to come here is that tax credit. If they lose that tax credit they might move out of state, they might close a factory. 

Yepsen: Why not just make them get rid of this refundable, refundability portion, whereas if you want to give somebody a tax break great, but they should be paying some Iowa taxes in the first place, not just be given a check.

Lynch: That seems logical and I think that's probably one of the tax credits that is on a lot of people's, is being targeted. On the other hand, when you talk about taking that away you're talking about a company with 8,000 employees in Iowa, you're talking about big companies, John Deere, Rockwell, some of the largest manufacturers in the state.

Yepsen: Well, we're all going to be talking a lot more about these issues but I want to move on to some other things. Jason, give us your sense of the republican primary for Governor, Ron Corbett versus Kim Reynolds.

Noble: Well, you've got Kim Reynolds, the sitting Governor and you've got Ron Corbett, the Mayor of Cedar Rapids. And what has really struck me about the early going of this race is that Ron Corbett is really going after the sitting Governor of his own party and he is hitting her on fiscal responsibility and the way this budget has been deteriorating over the last few months. And he is saying, why haven't you given us a tax reform plan? Why haven't you given us a water quality plan? And he is really going to make a race of this at a time where more widely people are questioning what his lane is, what his opportunity is in this race.

Yepsen: What is the handicap on this race, James? Isn't she favored here?

Lynch: Yeah. And when I talk to people, republicans, democrats, anybody, nobody sees a path for Ron Corbett to get the nomination. However, when you listen to his arguments they're really basic republican arguments, republican principles he's talking about. Budget dependability, balancing the budget, all of these things, they're really core republican principles and so he may start to gain some traction among republicans if they start listening to him and say, yeah that's --

Henderson: And the rhetoric is amazing. He used the phrase mortal sin to describe something that Reynolds was contemplating in terms of fiscal policy on the state level. So this thing is going to get even dicier between the two of them.

Lynch: He suggested she will cook the books to balance the budget and avoid a special session. These are yeah, pretty --

Rodriguez: I thought it was interesting he tried to very early on note how much money he has raised. He noted a million dollars but you look at the specifics it's a little over $800,000, just to really send that message very early that I'm a viable candidate and I'm not going to go down without a fight. So I thought that was really interesting as well.

Noble: On the other side of it, the Republican Party of Iowa, the whole sort of republican establishment in the state of Iowa is firmly behind Kim Reynolds and that is going to be a huge hurdle for Ron Corbett to overcome.

Henderson: But it may be to her benefit because it may toughen her up for whoever she may face on the democratic side for the general election.

Rodriguez: And just this week she announced new staff, just trying to really, a new field director. We don't know the specifics of how much either campaign is going to be spending yet but this is clearly an indication that she's taking this seriously.

Yepsen: James, there's a convention of wisdom around that Kim Reynold is doing pretty well in Central Iowa and Western Iowa but that Corbett, being Mayor of Cedar Rapids, will run stronger over there in the eastern part of the state. Do you buy that?

Lynch: I think it's a fair assumption. He's known over there. He probably will run better there than maybe in Western Iowa where he isn't as well known. But he's spending a lot of time going all over the state, visiting every small town library in the state, giving them a copy of his biography. So he's out there and it will be interesting to see how he does sort of on her turf in Central Iowa.

Yepsen: Kay, on the democratic side, what is your handicap of that?

Henderson: Well, you have a lot of energy behind Nate Boulton, a first-term State Senator who gained notoriety during the legislative session as sort of being the voice of democrats against some of the republican initiatives that cleared easily through the last legislative session. You have John Norris who has been a mechanic on innumerable campaigns who is sort of handing out apples at events to call attention to her. And then you have Fred Hubbell who is an interesting candidate who has been racking up high profile endorsements around the state who is well known within sort of the donor class, if you will, of democrats.

Noble: Because he comes from the donor class.

Henderson: Exactly, because he comes from the donor class and he seems to be running an aggressive campaign. You have Kathy Glossen who comes from labor. So it's a really interesting dynamic because you have people who are the voices of the disparate parts of the Democratic Party and it will be interesting to see who is able to cross those planes and draw support from other sections.

Yepsen: And Jason, you've got to get 35% to win a primary outright in Iowa. With a field like that isn't this going to go to convention?

Noble: Every single candidate is looking at not only how to get the votes on primary election day, but also how to line up the support if this thing goes to convention. And you'll hear it when you talk to the operatives, the activists are talking about the caucus to convention strategy because that's very much in play here.

Yepsen: Barbara, there was talk in the last session about changing that 35% threshold. There were some who wanted to go to require instead of a convention to require a runoff primary. Wouldn't that be a cute way for republicans to play games with the democrats, to require them to have a runoff primary instead of go to convention?

Rodriguez: The thing about that though is that it didn't go very far during the legislative session. So I feel like there are so many other things going on for next year that I would find it really interesting if it got all the way to become law in time. But I see you're, it's possible.

Lynch: It's a republican controlled legislature, they could do it if they wanted to. I don't know if they want to mess around with those laws. Both parties have had the situation with big fields of candidates, republicans have had a couple of congressional races in recent years go to convention.

Rodriguez: And I think I want to note that there's probably a part on the republican side where they want democrats to stay busy through the summer because that means a shorter period of time for one standalone candidate to really challenge who ends up securing the republican nomination.

Henderson: Bottom line problem though is the cost and the real cost is because there are lots of candidates for local races and so counties are going to have to spend a lot on runoffs for really low level elections.

Yepsen: We've got just a few minutes left. One election, one vote, Jason, that is going to come up is this and it's a new thing, this recertification vote that public employee unions have to hold. Tell us about that and what's going to happen.

Noble: This feels pretty inside -- not something you'd normally think about but it has potentially really large implications for the labor movement in Iowa and for democratic politics.

Yepsen: It's new, it comes out of --

Noble: Yeah, part of this union kind of reform package that changed public sector unions in the state, these public sector unions now have to recertify, have a recertification vote ahead of every new contract which means all the members of a local bargaining unit have to vote to keep the union. And so this is happening starting next week, next Tuesday there's going to be about a dozen bargaining units across the state. In October there's going to be almost 500 bargaining units that are going to have to vote on whether to stay in business.

Yepsen: Barbara?

Rodriguez: I just want to note that when people think about this whole gutting collective bargaining rights, we think about what happened in Wisconsin, part of measuring the strength of unions in Wisconsin now is these recertification votes and how many weren't able to maintain their union. And so years after the fact there's just less membership in Wisconsin. And so this is the part where we look at Iowa and see whether we're going to be another Wisconsin.

Henderson: The latest data I saw was that law went into effect in Wisconsin in 2011, they have one-third the number of union members now.

Yepsen: To be continued. We've only got a couple of minutes left. I want to turn to DACA, a big, hot issue in Washington. What is the -- how is this going to play in Iowa? Will this have any effect in this state?

Lynch: It will have some effect. The numbers, there seem to be some discrepancies, but I think there's somewhere around 3,000 DACA or Dreamers in Iowa and maybe almost double that, that are eligible for DACA, which protects children who came here illegally because their parents came here, protects them from deportation.

Yepsen: Barbara, would there be a move to ban sanctuary cities in Iowa? Do you think that will come up?

Rodriguez: There was some legislation introduced last session and it passed in the State Senate where it wasn't brought up in the House. Reynolds has indicated, she was asked about it this week, that she would support such legislation. So it's very possible that a sanctuary cities ban could be on the table.

Yepsen: Kay, we've got just about a minute left. Secretary Vilsack, former Secretary Vilsack being a little bit critical today of President Trump hiring Sam Clovis to be an undersecretary of agriculture. Bill Northey has been made an undersecretary of agriculture. What's going on here?

Henderson: Well, I think there has been a lot of criticism coming out of Washington, D.C. of Sam Clovis, the former Iowa radio show host and so his nomination is much more in jeopardy than is Bill Northey's to be an undersecretary in charge of programs that farmers in Iowa are well aware of. The real interesting part of the Northey situation is when will he leave and when will Governor Kim Reynolds name his replacement?

Yepsen: Well, what is your answer to your own question?

Henderson: I think around Christmastime or the first of the year we'll know. And we have Pat Grassley who is the grandson of Senator Grassley, we have Dan Zumbach who is a popular State Senator and his daughter works for U.S. Senator Joni Ernst. He's well liked, business people like him. So it could be a very interesting selection that the Governor makes.

Noble: And the important thing with that is that whoever she appoints them becomes the front runner for the 2018 re-election of the Secretary of Agriculture.

Yepsen: A lot of changes in the political faces in Iowa. And we'll be talking about them as this season of Iowa Press goes on. I'm out of time. Thank you all for your time. And we're happy you've joined us for the first episode of this 45th season of Iowa Press on Iowa Public Television. Next week we'll return with another edition at our regular times covering controversial topics at the Iowa Department of Human Services with Director Jerry Foxhoven and Iowa Senator Matt McCoy. Iowa Press Friday night at 7:30 and Sunday at Noon on our main IPTV channel with a rebroadcast on our .3 World channel Saturday morning at 8:30. For all of us here at Iowa Public Television, I'm David Yepsen. Thanks for joining us today.

Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. I'm a dad. I am a mom. I'm a kid. I'm a kid at heart. 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.