Borg: At this point in early June it is overly redundant to point out that Iowa's legislature is well over a month past its scheduled adjournment.  The reason for the tardiness is the real issue and that is the stand-off between republicans, who voters returned to major control in last November's elections and democrats, who are clinging to a razor-thin margin in the Iowa Senate but using that margin for sidetracking the fiscal austerity express that is coming from the new republican Governor Terry Branstad and the House of Representatives' new republican majority.  The looming imperative right now is Iowa's new fiscal year, just three weeks away and the question being whether the two sides can compromise -- republicans insisting on spending cuts, democrats contending the state has enough money and an improving economy to mitigate those cuts.  Today we're seeking perspective from Governor Terry Branstad.  Governor, welcome back to Iowa Press. 

Branstad: Thank you, Dean.  I'm glad to be back.

Borg: And all of this intrigue comes at the very time that the caucuses are heating up so we've got plenty of political news here to talk about.

Branstad: Well, there's a lot of activity and a lot of presidential candidates coming here and we also have flooding in western Iowa so we've got a lot going on.

Borg: You sure do.  Across the Iowa Press table Associated Press Senior Political Writer Mike Glover and Radio Iowa's News Director Kay Henderson.

Glover: Governor, as Dean mentioned we've got a lot on our plate and some breaking stuff so let's start with politics if we could and we'll get to that other stuff in a minute.  Newt Gingrich has seen most of his national and Iowa campaign staff quit in mass.  Is that the end for Newt Gingrich?

Branstad: Well, I think his campaign is in real trouble.  Obviously he got off to a bad start and then he took a big vacation and I think that was a big mistake and now I think a lot of the staff has just kind of had it and so whether this is the end for the campaign or not I don't know but it doesn't look very good.

Glover: And when we look at the Gingrich campaign, you mentioned he took a vacation, he took a cruise to the Greek Islands in the heart of the Iowa caucus campaign.  Is that the way you run in Iowa?

Branstad: No, I think you do a cruise after the campaign is over, not before and to announce, and then especially he had a very bad obviously announcement although he drew some pretty good crowds but I think if he really wanted to sustain, get things back on track he should have stayed with it and not taken an extended vacation.  So, I think this caused a lot of the people to say, wait a minute, I don't know if I want to be part of this effort so a lot of them are leaving to support other candidates.

Glover: Does he just not get it?

Branstad: I think he missed the opportunity, obviously, and there's a lot of other candidates out there, though, and a lot of candidates that are working very aggressively to put together their organization and there's going to be a debate in the Iowa Straw Poll and then the caucuses coming up.  So, I think we're going to see a lot of activity from here on.

Henderson: Let's talk about the straw poll, former Massachusetts Governor Mitt Romney who formally kicked off his campaign recently says he's not going to come to the straw poll.  Does that make it irrelevant?

Branstad: No, I don't think so.  Remember, last time Rudy Giuliani and some others skipped the straw poll ...

Henderson: Well, John McCain skipped it and he won the party's nomination.

Branstad: Well, and Romney actually won the straw poll.  I think Romney said he is going to participate in the debate, he is also going to participate in the Iowa caucuses but he is not going to spend as much money and effort on straw polls because he thinks, you know, they're not a real test.  But nevertheless straw poll is a way, especially for a relatively unknown candidate, to be able to become better known.  Last time, of course, Huckabee coming in second in the straw poll gave him some momentum and he ended up wining the Iowa caucuses.  So, whoever does well in the straw poll may well become a contender to rival Romney who right now is the front runner even ahead of Obama in some of the polls.

Henderson: There are many critics of the straw poll, they say it's sort of unseemly for the party to fleece the campaigns in the way it does for money to rent space outside the coliseum in which the speeches are given.  They question whether Iowa has two bites at the apple by having this first straw poll and then the caucuses.  Would it do your party well not to have a straw poll at all?

Branstad: Well, this is something we've had a long tradition, it's been going on for many election cycles, it's been a good fundraiser for the party and it builds enthusiasm and it gives the candidates a chance to build a grassroots organization.  So, I think the party feels that this is a useful tool but I think we need to look at it for what it is, it's not scientific, it's really just a test of organization and the true test is, of course, going to be who wins the Iowa caucuses next winter.

Borg: And in that true test there's also a question as to whether or not philosophically Iowans are enough of a cross-section of the United States in order to pick a presidential candidate in the caucuses.

Branstad: Well, first of all, I have a lot of trust in Iowans and I think Iowans have a lot of common sense and those people that diminish the importance of Iowa and have tried to circumvent the state in the past, I use Giuliani as an example, that hasn't worked.  But I think it is important to compete and I would point out, you know, I ran a campaign for governor in the primary where we focused on jobs and restoring fiscal responsibility and those are the issues that need to be addressed at the national level as well and I think the candidate that focuses on those issues as well as the social issues can do well in Iowa.

Glover: You talked about some issues earlier, let's talk about some now.  Flooding.  You're doing some flooding tours, you're dealing with flooding in western Iowa.  What are your contingency plans?  What options do you have?

Branstad: Well, first of all, we have already designated all of the counties bordering on the Missouri River as a disaster.  I have been to Sioux City, I'm going to be in Council Bluffs also and I'm going to be viewing those areas.  We are working with the local emergency management people.  General Derek Hill is the director of our homeland security and emergency management, I'll be working with him.  The local emergency management directors in all those counties have been working.  We've also been working with companies like MidAmerican Energy which has a lot of power plants along the river and other businesses to do all we can to ...

Borg: When you say working with them what do you mean?

Branstad: Well, we have supplied them with material and done things that we can to facilitate them protecting their property.  So, they are putting these big giant sandbags, I forget the term that they use for them, and then there's also these cement barriers they're looking to put around to try to prevent the flooding from getting into these power plants and other industries along the river.  Also the communities are, some of them are putting up temporary levees and sandbagging.  So, there's just a lot going on and it is being coordinated through our homeland security and emergency management people at the state level and also the emergency management directors in all the counties along the river.  We have also been cooperating with our neighboring states, with South Dakota and Nebraska, I've talked with those governors, we have helped South Dakota with some equipment, a helicopter and we also have closed, with the help of the Coast Guard, closed the Missouri River and the Sioux River in the area of Dakota Dunes to boat traffic so people can't get in and vandalize the homes, many people have moved their furniture and things out of the homes and yet they're still building a berm to try to protect the homes in South Dakota and in Nebraska as well as in the Sioux City area and, of course, we've got it all the way down to Hamburg where we've got issues to contend with and trying to reinforce the levees and do all we can to try to mitigate the damage from this flood.

Glover: Is there anything that could have been done to prevent this?  Could you have headed this off in advance?

Branstad: Well, the real question comes to the management of the river by the Corp of Engineers which is federal and I think after it's all over we'll want to do a review of this and determine what could have been done different.  Right now I think we all need to work together, we need to work with the Corp, we need to work with the local governments, we need to work with the private industries, do all we can to mitigate the damage and the problems that are caused.  But your question is a good one and that is could there be a better management?  I have felt for a long time that the downstream states have not been adequately protected in the flood mitigation work of the Corp of Engineers.  So, that's something that we'll certainly want to talk to them about down the road.

Glover: What do you mean by that?

Branstad: Well, I guess the question really comes on the release of water.  Could they have released it sooner, maybe not release as much as they are right now, questions like that.  But those are all questions that, you know, right now it is their responsibility, they are managing it, we are cooperating and working with them but in the long-term I want to make sure that there's adequate preparation that goes into it.

Glover: It seems to me that by the tone of what you're saying that you have come to the conclusion that it should have been handled differently.

Branstad: Well, I have felt that way for a long time.  I mean, going back to when I was governor before I have always had concerns about the way it was managed and I've even communicated that to other governors but right now that we're in the midst of this flood fight we all need to work together, not spend our time pointing fingers at each other but saying, how can we do this better and how can we protect the property as best we can and there will be plenty of opportunity after the fact to assess what can we do going forward better to manage and control this whole Missouri River basin.  It's a huge basin and obviously this goes clear up to Montana and Wyoming and places like that.

Henderson: Governor, anybody who has lived in Iowa for the past two decades realizes that flooding is not a rare occurrence anymore.  Has the state been aggressive enough in restricting development in flood prone areas?

Branstad: Well, you know, it's interesting.  Let's take Hamburg as an example.  I have been to Hamburg to fight floods before but it's been the Nishnabotna River.  This time the Nishnabotna is a tributary in western Iowa that goes in to the Missouri, this time it is the Missouri River backed up from the breach down in Missouri that is the problem.  So, sometimes the challenge comes from the different area or, in this case, a lot of the flooding is coming from snow melt and rain up in Montana and Wyoming.  So, I think we've got to, you know, we can only do so much in preparation and we need to have a good coordinated effort, I think we have that but we are facing a lot of natural disasters.  Look at all the tornados in the country this year.  So, it's just one of those things that we have to deal with and whatever emergency comes our way.

Glover: Let's move back to the statehouse if we could.  Legislative leaders have told us during this past week that they are moving towards an agreement on a new state budget in negotiations with your office.  Democrats have suggested that as part of that agreement there could be some additional spending on education programs.  Tell us a little bit about that agreement and what you're moving towards and will there be additional education spending? 

Branstad: Well, first of all, we have basically already said that we are going to fully fund the school aid formula which was not done last year and the year before there was a big 10% across-the-board cut so the first thing we want to do is restore stability and predictability.  And then we have agreed as a compromise in the second year, with the biennium, to provide two percent allowable growth to schools.  In addition to that we're going to have an education summit this summer, the 25th and 26th of July, focusing on the future of education and the way we fund education in the future trying to focus more on student performance and doing a better job of teacher preparation in preparing principals to be leaders in their schools.  So, we want to dramatically change and improve the way we fund education for the future.  We also have agreed to additional funding for the community colleges.  But I would also say we need to make sure that the budget that is approved is sustainable for the long-term, that we spend less than we take in each year and that it is not only sustainable for this year but it doesn't create a budget cliff for next year and that we have a budget that balances projected out for five years.

Glover: And are the leaders telling us what is going on accurately?  Are you moving towards a budget agreement?

Branstad: Well, we've heard this story before so I'm cautiously optimistic that it can get worked out but there's a lot of details that have to be worked out.  The House of Representatives has passed a comprehensive budget that also includes, and this is very important, addressing the commercial property tax and reducing that high commercial property tax and also limiting increases in other classes of property.  To me that is critically important.

Henderson: We'll talk about that in detail in a few moments.  But back to this idea of resolving this now rather than pushing it off until after July 1st, are you assuring Iowans now that there will not be a government shutdown?

Branstad: Well, yes.  As the Governor, first of all, the legislature has a responsibility to pass a budget, we have always passed a budget before the end of the fiscal year.  I know the federal government last year didn't even have a budget, they ran the whole year on a continuing resolution.  They also spent 40% more than was taken in.  We don't want to follow that example.  We need to see the legislature fulfill its responsibility and pass a budget.  If they fail to is what you're asking -- I have executive powers to use in an emergency situation to continue to provide service to Iowans.  I intend to try to do that as best we can without disruptions until the legislature fulfills its responsibility.

Henderson: So, there's still the prospect that this won't get resolved?

Branstad: Well, there's always a prospect until they pass it and I sign it into law but we have never let that happen before.  I think the legislature understands their obligation, their responsibility to pass a reasonable budget, one that is balanced, one that spends less than we take in, one that is sustainable for the long-term.  If they do that I'll look forward to signing it.

Borg: Governor, much of the contention here has been, and you have been pretty well beat up by the democrats over education funding -- do I understand you said we're going to fully fund the ...

Branstad: It's interesting that they would beat me up over education funding because Governor Culver cut ten percent across-the-board in October of 2009 and last year they purposely underfunded schools by $216 million and just left it to local school boards ...

Borg: That is the state formula.

Branstad: That is the school aid formula.  And so what we did, what I recommended and I made this clear from the get go, we're going to fully fund the school aid formula and meet the state's obligation.

Borg: Allowable growth.

Branstad: Well, they were supposed to set allowable growth last year and they never did.  So, what I said for this year we have to straighten out this big fiscal mess that we inherited, $900 million of one-time money used for ongoing expenses, not funding entitlement programs like indigent defense, also using one-time money for, $540 million for Medicaid, so we had to do all of those and we didn't have a lot of other money but what we did, we met our commitments and obligations.

Henderson: What about the allegation that this budget plan that you and House republicans have developed is starving state government rather than really making tough decisions saying we don't want a Department of Human Rights anymore, we're going to eliminate it, we don't want this program to continue, we're going to -- instead you have just sort of bleeding state government to the point rather than making those very tough decisions?

Branstad: Well, first of all, remember I took office in January and I had to submit a budget before the end of January.  I started even after I was elected before I took office but I had a real mess to contend with.  For one thing, Governor Culver gave the state employees union their first demand which was increases that account for those people that are not at the top of their pay range, fifteen percent over two years.  This wasn't even negotiated, that was their first demand, no negotiations, nobody representing the taxpayers.  We've got to live with that and that has got to come out of these agency budgets.  Also, last year they gave a very lucrative early retirement program and 2000 state employees took them up on it.  I don't blame anybody for taking them up on this lucrative offer but it wasn't paid for last year, it is paid for over the next five years out of the agency budgets, $5,000 a year bonus for five years plus their health insurance which costs between $12,000 and $17,000 per employee and that is coming out of the budget.  So, we had to deal with all of that and still we put together a budget that is sustainable for the long-term.  So, I think it's a pretty significant feat and remember what happened last year when they got done, they used a whole lot of one-time money, in fact, $84 million they delegated to the governor to cut and what did he do, he waited until a week before leaving office and stuck us with that.  So, we had to supplement I think $40 million to protect the health and safety of Iowans.  This is the mess we inherited, that's why it's taken a long time to resolve it but the good news is we have a budget that is balanced, spends less than we take in and it is sustainable for the long-term.

Glover: You touched on the issue of what happens after July 1st if we don't have a new budget.  Flesh that out in detail.  What do you do after July 1st?  What are your powers?  What can you do?  What will continue?  What won't continue?

Branstad: Well, first of all, the governor has emergency powers and I don't intend to use those unless it is absolutely necessary.  The legislature has an obligation to pass a budget, we anticipate that they will meet their responsibility and pass the budget before the end of the fiscal year.  If they fail to do so then it falls on me as the chief executive to see that the safety, health and well-being of Iowans is protected and that means we're going to do all we can to as seamlessly as possible continue services to people and protect the health, safety and well-being of Iowans.

Glover: What services continue?  What services don't?

Branstad: Well, we don’t know the details of that but I will say we're going to try to do as best we can to continue services across-the-board to meet the needs of Iowans.

Henderson: When is the right time to tell Iowans that plan?

Branstad: Well, I guess when it happens but I don't think it needs to happen or will it happen because really it's up to the legislature for fulfilling its responsibility.  So, it is all what if the legislature doesn't do what it's supposed to do.  Well, the legislature in Iowa has always finished their budgets on time.  I have no reason to believe that they won't.

Henderson: You mentioned earlier the property tax reform plan that you have advanced, the bill that passed the House this past week included a broader proposal than you had offered.  It covered commercial and industrial property but it didn't go as far as you did.  It also included some other components to deal with residential and ag land.

Branstad: A two percent limit on residential and ag and I strongly support that.  If we don't do that we're going to see a massive increase in those classes of property.

Henderson: So, you support this thing that cleared the House, the Senate democrats have advanced something different which would be a tax credit.  Are you confident that in the end something actually will happen in regards to property tax policy?

Branstad: Yes.  This thing has been talked about for 30 years and two previous governors failed to get it done, I'm committed to seeing that it gets done and I want it to be significant, I want to make sure that it makes Iowa more competitive and the whole goal here is create jobs, make Iowa more attractive for investments and also the House passed bill includes substantial remodeling as well as new commercial property which would immediately get the reduction to 75%.  Personally I recommended going to 60%, the House passed bill also does provide tax relief by raising the foundation level through the school aid from 87.5% to 90%.  Now we need to negotiate this ...

Henderson: For homeowners because they paid property taxes to go to their schools so that would help them?

Branstad: Well, it would help all classes of property, ag, residential, industrial, commercial as well.

Glover: Under the proposal working with the legislature the state would fund, if it lives up to its promise which it never does, it would fund about half ...

Branstad: Well, now, that's not true.  When I was Governor we did live up to our promise and the House passed bill is a standing appropriation which means it's going to happen automatically and in the five year budget I put together we put that money into -- that's all the reason why we need a multi-year budget so the legislature is not spending money that was committed for property tax replacement in future years.  I'm committed to seeing that is fulfilled.

Glover: You can tell cities and counties you're not going to lose any more because of this property tax cut?

Branstad: That's correct.  They're not going to lose any money, they're going to gain, they're not going to get a big windfall from having property taxes go way up but they're not going to lose.

Henderson: There's another tax proposal in that bill that hasn't gotten a lot of attention, it is an increase in the earned income tax credit.  To boil it down that would benefit low income Iowans who are paying taxes now but might not in the future.  You vetoed that out of a bill earlier.  Are you going to accept it in the final analysis here?

Branstad: I vetoed that out of the bill earlier because I wanted to send a real clear signal unless we get a reduction in the commercial property tax that is meaningful I'm not going to accept it.  So, if it is part of a deal that gets us substantially reduced commercial property tax and limits property tax to protect property taxpayers overall I'm willing to accept that as part of it but it's got to be part of a bigger property tax reduction bill that does provide real relief for commercial property, something that has been promised for years and never delivered on.

Glover: And does this package meet those criteria?

Branstad: Well, we'll see it in its final form.  We are going to continue to work with both the House and the Senate ...

Glover: You know the outcome ...

Branstad: Well, we don't know where it's going to end up and there's been a lot of discussions both publicly and privately and I am one that believes that I want to review it, I want to work with them, I want to see it in its final form and make sure that it meets the criteria that we set out.  The budget needs to be balanced and it needs to spend less than we take in every year and it needs to be sustainable for the long-term, we need to provide real property tax relief for commercial and industrial property as well as limit the other classes of property and we need to have this new partnership for economic progress so we can have an effective marketing tool which involves the private sector and the expertise of the people in the private sector that they're involved with the innovation council working with Debi Durham and the professional developers in the department.

Borg: Just a few minutes ago you, again, repeated your displeasure with the union negotiations negotiated by Governor Culver with the state workers union.  I'm wondering how do you feel about the state Board of Regents this week raising salaries in about the same percentage, two to four percent, as you have just been critical about other state workers?

Branstad: Well, first of all it's a matter of fairness.  If you give it to one group of people I don't, I'm not going to criticize the Regents for treating their employees comparable to the other ones.  I think doing it in the first place is the mistake.  But when you do it I think it is unfair to discriminate against one group of employees because they're not in the union. So, I'm not going to be critical of that, I'm just saying as a public policy going forward first of all I think Governor Culver violated which has always been the agreement that the negotiations turn over to the new governor, Bob Ray did that for me, I did that for Vilsack, Vilsack did that for him.  He didn't do that, in fact, he didn't even negotiate it, he just took this and the bad thing is the Regents are going to have to eat that out of their budget.  We're going to have to eat it out of the state budget and so are the agencies.

Henderson: You have drawn a line in the sand and said you want a two-year budget, this plan that the House advanced does sort of do that.  I have a question here.  Social conservatives are upset that you haven't drawn a line for some of the social issues.  The abortion issue regarding a Nebraska doctor who wants to open a clinic in Council Bluffs is unresolved.  Are you going to draw a line on that?

Branstad: I have made it very clear that I am very supportive of the House passed bill that would stop this Dr. Carhart from moving from Nebraska to Iowa.  Unfortunately, in fact, the House sent that bill back to the Senate so the Senate has opportunity to take action on that.  They should.

Borg: I'm sorry but we're out of time.  I'm sorry to interrupt.  We'll be back next weekend regular Iowa Press times at 7:30 Friday night and 11:30 Sunday morning.  I'm Dean Borg.  Thanks for joining us today.