Iowa Public Television

Narrator: FUNDING FOR "IOWA PRESS" WAS PROVIDED BY "FRIENDS" OF IOWA PUBLIC TELEVISION; AND BY THE IOWA BANKERS ASSOCIATION... FOR PERSONAL, BUSINESS, AND COMMERCIAL NEEDS, IOWA BANKS HELP IOWANS REACH THEIR FINANCIAL GOALS; AND BY THE ASSOCIATED GENERAL CONTRACTORS OF IOWA... THE PUBLIC'S PARTNER IN BUILDING IOWA'S HIGHWAY, BRIDGE, AND MUNICIPAL UTILITY INFRASTRUCTURE.

STATEWIDE IOWA PUBLIC TELEVISION IS CELEBRATING THE 30TH ANNIVERSARY OF "IOWA PRESS," NOW SERVING THE STATE AS IOWA'S LONGEST-RUNNING NEWS INTERVIEW PROGRAM. WITH THIS WEEK'S EDITION OF "IOWA PRESS," HERE IS DEAN BORG.

Borg: IT'S BEEN A BUSY WEEK AT THE IOWA STATEHOUSE. DURING THE PAST WEEKEND, IOWA'S 150 ELECTED REPRESENTATIVES AND SENATORS RETURNED TO THE STATE CAPITOL. THE SECOND SESSION OF THE 79TH IOWA GENERAL ASSEMBLY CONVENED MONDAY MORNING. AND ON TUESDAY GOVERNOR TOM VILSACK DELIVERED HIS 2002 "CONDITION OF THE "STATE" ADDRESS." AND AT MIDDAY FRIDAY, LEGISLATORS ALSO HAD THE GOVERNOR'S PROPOSED BUDGET FOR FISCAL YEAR 2003. THOSE BUDGET PROPOSALS, OF COURSE, ARE GETTING EXTRA CLOSE ATTENTION BECAUSE EVERYONE IS INTERESTED IN HOW STATE GOVERNMENT CAN RECONCILE ITS SPENDING WITH SLUMPING STATE REVENUE. NOW, THAT'S WHAT WE'LL LEARN AS WE QUESTION GOVERNOR VILSACK. WELCOME BACK TO "IOWA PRESS."

Vilsack: IT'S GREAT TO BE BACK, DEAN.

Borg: AND ACROSS THE TABLE, "DES MOINES REGISTER" POLITICAL COLUMNIST DAVID YEPSEN AND "ASSOCIATED PRESS" STATEHOUSE REPORTER MIKE GLOVER.

Glover: GOVERNOR, BUDGETS BY THEIR VERY NATURE, ARE COMPLEX, COMPLICATED DOCUMENTS, AND YET YOU HAVE TO SELL THIS BUDGET TO AN ELECTORATE USING MORE SIMPLE TERMS. WHAT'S YOUR SOUND BITE, YOUR COMMERCIAL, FOR SELLING THIS BUDGET?

Vilsack: WELL, MIKE, YOU'RE ABSOLUTELY RIGHT. BUDGETS ARE ABOUT PRIORITIES, WHAT IS IMPORTANT TO YOU. IN THE CASE OF THIS YEAR'S BUDGET, EDUCATION AND HEALTH CARE ARE IMPORTANT TO US. WE THINK WE'VE MADE TERRIFIC PROGRESS IN EDUCATION AND IN HEALTH CARE IN TERMS OF IMPROVING TEST RESULTS, EXPANDING ACCESS TO HEALTH CARE, ET CETERA. AND WHAT WE WANT TO BE ABLE TO DO WITH THIS BUDGET, EVEN IN TIGHT DIFFICULT TIMES, IS CONTINUE THAT PROGRESS AND ALSO CREATE A PLATFORM FOR PROSPERITY WITH SOME ECONOMIC DEVELOPMENT INITIATIVES THAT WE PUT ON THE TABLE.

Yepsen: GOVERNOR, YOU'VE PROPOSED IN THIS BUDGET TO SHIFT DOLLARS THAT ARE NOW GOING INTO THE ROAD FUND INTO THE GENERAL FUND. WHY IS IT A GOOD IDEA TO ROB THE ROAD FUND?

Vilsack: WELL, IT'S ABOUT YOUR PRIORITIES, DAVID. THE REALITY IS THAT WE HAVE GOT TO PUT ADDITIONAL RESOURCES IN EVERY ASPECT OF EDUCATION. THE K-12 SYSTEM NEEDS THE RESOURCES IN ORDER TO AVOID HAVING CLASS SIZES BECOME LARGER. THE COMMUNITY COLLEGE SYSTEM WAS HIT VERY HARD LAST YEAR. THEY'RE NOW BEING ASKED TO HELP US GET THROUGH A RECESSION. THE PUBLIC UNIVERSITIES ARE THE ENGINE FOR NEW IDEAS AND GROWTH. PRIVATE COLLEGES ARE IMPORTANT. THERE NEED TO BE ADDITIONAL RESOURCES. AND THE FACT IS THAT OUR GENERAL REVENUES ARE NOT ADEQUATE TO DO THIS, SO WE LOOK AT OTHER STRATEGIES THAT HAVE BEEN EMPLOYED IN THE PAST. AND USING A PORTION OF THE USE TAX FROM THE SALE OF NEW AUTOMOBILES WILL PROVIDE THE RESOURCES. IF THOSE FOLKS ARE CONCERNED ABOUT ROAD CONSTRUCTION, THEY HAVE TO REALIZE THAT $35 MILLION OF THAT MONEY ACTUALLY HAS BEEN SAVED AS A RESULT OF THE DEPARTMENT OF TRANSPORTATION'S EFFICIENCIES. THE BALANCE -- I'D BE HAPPY TO SIT DOWN WITH LEGISLATORS TO TALK ABOUT HOW WE COULD STIMULATE ROAD CONSTRUCTION, IF THEY ARE WILLING TO ACKNOWLEDGE THAT EDUCATION IS A PRIORITY.

Yepsen: THE OTHER THING THAT YOU'RE NOT DOING IS NOW YOU'RE NOT GOING TO PUT AS MUCH MONEY INTO THE CASH RESERVES. WHY IS THAT A GOOD IDEA?

Vilsack: WELL, IT'S A GOOD IDEA BECAUSE IT'S ALL ABOUT CHILDREN, IT'S ALL ABOUT EDUCATION. THE KEY FOR FUTURE GROWTH IN THE STATE IS HAVING THE VERY BEST WORLD-CLASS EDUCATION SYSTEM, AND THAT'S GOING TO REQUIRE RESOURCES. WE'VE ALREADY BEGUN TO SEE SIGNIFICANT PROGRESS IN CLASS-SIZE REDUCTION. WE'VE SEEN INCREASED TEST RESULTS. IN OUR EFFORTS IN THE COMMUNITY COLLEGES AND OUR REGENTS UNIVERSITIES, WE'RE SEEING NEW IDEAS BEING GENERATED. WE'RE SEEING 82 PERCENT OF THOSE YOUNGSTERS GRADUATING FROM HIGH SCHOOL TODAY IN IOWA INTERESTED IN GOING ON TO HIGHER EDUCATION. THAT'S A TREMENDOUS PERCENTAGE. IT'S TREMENDOUS PROGRESS. BUT WE'RE NOT GOING TO BE ABLE TO MAINTAIN IT IF WE TAKE A STEP BACK NOW. WE CANNOT USE THIS BUDGET AS AN EXCUSE FOR TAKING A STEP BACK ON EDUCATION. WE CAN AFFORD TO MAKE THE STEPS NECESSARY TO PRESERVE THE PROGRESS.

Glover: EXCUSE ME, GO AHEAD.

Vilsack: WELL, JUST ONE OTHER THING. IT'S ABSOLUTELY IMPERATIVE THAT PEOPLE UNDERSTAND WE ARE NOT REDUCING THE RAINY DAY FUND. IT IS ALREADY 8 PERCENT OF THE STATE BUDGET. STATES THAT STILL HAVE A SURPLUS ACCOUNT HAVE ABOUT 5 PERCENT IN RESERVE. WE'VE GOT 8 PERCENT IN RESERVE. WE'RE NOT TAKING IT DOWN. WE'RE ACTUALLY GOING TO INCREASE IT SLIGHTLY. THIS IS AN OPPORTUNITY FOR US TO PRESERVE THE PROGRESS. THAT'S EXTREMELY IMPORTANT.

Glover: YOU'RE GETTING SOME CRITICISM FOR THIS BUDGET FROM BOTH ENDS OF THE POLITICAL SPECTRUM. ON THE LEFT, CRITICS SAY THE REASON WE HAVE A BUDGET CRUNCH IS BECAUSE WE'VE HAD TEN YEARS OF TAX CUTS AND YOU OUGHT TO STEP BACK IN AND RESTORE SOME OF THAT MONEY. HOW DO YOU RESPOND TO THEM?

Vilsack: WELL, IF BOTH THE LEFT AND THE RIGHT ARE CONCERNED ABOUT MY BUDGET, IT MUST BE RIGHT BECAUSE IT'S IN THE MIDDLE. THE REALITY IS THAT WE ARE THE ONLY STATE THAT I'M AWARE OF THAT IS GOING TO INCREASE THEIR SURPLUS ACCOUNT, PUT MORE MONEY INTO EDUCATION, STILL MAINTAIN OUR COMMITMENT ON THE TAX CUTS, ESPECIALLY AS IT RELATES TO SALES TAX, AND ALSO ENGAGE OURSELVES IN FUNDAMENTAL REFORM OF HOW STATE GOVERNMENT DOES ITS BUSINESS TO MORE EFFECTIVELY AND EFFICIENTLY SERVE THE PEOPLE. THERE IS NO OTHER STATE THAT'S DOING ALL OF THAT AT THE SAME TIME. I THINK WE ARE ON TO SOMETHING HERE IN IOWA. AND I THINK WE NEED TO CONTINUE THE COMMITMENTS THAT WE'VE MADE OVER THE LAST COUPLE OF YEARS, BECAUSE WE'RE BEGINNING TO SEE RESULTS, MIKE. I MEAN WHEN CLASS SIZES WERE REDUCED, SCORES WENT UP. THAT MEANS FOR THE NEXT GENERATION, WE'RE GOING TO HAVE BETTER LEARNERS IN OUR K-12 SYSTEM. EIGHTY-TWO PERCENT OF THESE YOUNGSTERS WANT TO GO ON TO HIGHER EDUCATION. WHY? BECAUSE WE'VE GOT GOOD COLLEGES, COMMUNITY COLLEGES, AND PUBLIC UNIVERSITIES. IOWA STATE IS THE TWELFTH LEADING DEVELOPER OF PATENTS IN THE UNITED STATES OF AMERICA. NEW IDEAS ARE BEING GENERATED SO THIS IS NOT THE TIME TO TAKE A STEP BACK FROM EDUCATION.

Glover: AND ON THE RIGHT, YOU'RE BEING CRITICIZED BY CONSERVATIVES WHO SAY AT A TIME OF ECONOMIC DOWNTURN IS THE TIME TO STEP IN AND CUT TAXES DEEPER AND IT'S NOT A TIME TO INCREASE SPENDING AT ALL. HOW DO YOU RESPOND TO THEM?

Vilsack: WE'RE PROPOSING A SERIES OF TAX CUTS THAT WILL STIMULATE THE ECONOMY THROUGH VENTURE CAPITAL AND ALSO TO ENCOURAGE OUR YOUNG PEOPLE TO STAY IN THE STATE BY SUGGESTING TO THEM THAT IF THEY STAY IN THE STATE AND WORK IN THE STATE THAT WE'LL REDUCE THEIR TAX BURDEN TO GIVE THEM A LEG UP ON A CAREER IN IOWA. I WOULD ALSO SAY THAT OUR SPENDING IS THE LOWEST IN TERMS OF GROWTH OVER THE LAST THREE OR FOUR YEARS, OF ANY THREE OR FOUR-YEAR PERIOD, IN THE LAST THIRTY YEARS. REVENUES ARE DOWN TO THE LOWEST EXTENT IN TWENTY YEARS. THE LAST TWO TIMES THE STATE OF IOWA WAS IN A POSITION LIKE THIS, PAST LEADERS MADE THE DECISION TO RAISE TAXES. WE'RE NOT RAISING TAXES. WE'RE ACTUALLY CUTTING TAXES. THE SALES TAX IS STILL CONTINUING TO GO DOWN ON UTILITY BILLS. WE'RE DOING SOMETHING THAT'S VERY UNIQUE HERE.

Yepsen: GOVERNOR, WHY DIDN'T YOU POSTPONE THE DECLINE IN THE SALES TAX ON UTILITY BILLS? YOU STARTED CUTTING THAT TAX LAST YEAR WHEN UTILITY BILLS WERE GOING THROUGH THE ROOF. THEY'RE COMING DOWN THIS YEAR. PEOPLE ARE HAVING TO USE LESS. WHY NOT JUST POSTPONE THAT TAX CUT FOR A YEAR OR TWO?

Vilsack: SALES TAX IS THE MOST REGRESSIVE TAX THAT WE HAVE. IT HITS THOSE ON FIXED INCOMES. THE REALITY IS THESE ARE TOUGH TIMES FOR A LOT OF IOWANS, AND EVEN THOUGH THE UTILITY BILLS ARE GOING DOWN, IT'S STILL NICE TO KNOW THAT THE GOVERNMENT IS LOOKING FOR WAYS TO PROVIDE OPPORTUNITIES FOR THOSE LIVING ON FIXED INCOMES.

Yepsen: SPEAKING OF SALES TAX, THERE IS A BILL MAKING ITS WAY AROUND THE LEGISLATURE TO DEAL WITH THE LOCAL OPTION SALES TAX FOR SCHOOLS. PEOPLE ARE SAYING LET'S MAKE IT -- LET'S JUST RAISE THE STATE SALES TAX AND START PUTTING ALL THAT MONEY BACK INTO ALL SCHOOLS RATHER THAN JUST A FEW THAT HAVE THE LOCAL OPTION SALES TAX. WILL YOU SIGN THAT BILL IF IT COMES TO YOU?

Vilsack: DAVID, I HAVE CONCERNS ABOUT THE CONCEPT AT THIS POINT IN TIME. WHEN WE'RE FACED WITH SOME OF THE CHALLENGES IN THE BUDGET THAT WE JUST GOT FINISHED TALKING ABOUT, I'M CONCERNED ABOUT WHERE THAT DEBATE WILL ULTIMATELY END UP. I DON'T WANT TO END UP WHERE WE ENDED UP TEN YEARS AGO AND TWENTY YEARS AGO, FACED WITH SIMILAR CIRCUMSTANCE, HAVING A SALES-TAX INCREASE JUST TO FUND GENERAL OPERATIONS OF STATE GOVERNMENT. SECONDLY, I THINK WE HAVE TO BE VERY CAREFUL ABOUT USING THE SALES TAX AS A VEHICLE FOR FUNDING ONGOING, LONG-TERM EXPENDITURES IN TERMS OF CONSTRUCTIONS OF SCHOOLS. THE REASON BEING THAT WE'RE LOSING A GREAT DEAL OF ACTIVITY AS A RESULT OF NOT FIGURING OUT A WAY TO COLLECT THE SALES TAX ON INTERNET TRANSACTIONS. MANY STATES ARE COPING WITH THIS, AND WE'RE SEEING A DECLINE IN SALES TAX REVENUES IN PART BECAUSE OF THAT. SO I THINK YOU HAVE TO BE VERY, VERY CAREFUL. WHAT I WOULD PREFER TO DO -- WHAT I WOULD PREFER TO DO AT THIS POINT IS TO CONTINUE TO USE THE VISION IOWA PROGRAM THAT WE PUT IN PLACE, $50 MILLION OF STATE RESOURCE, AND THE $50 MILLION THAT SENATOR HARKIN PROCURED, AS A WAY OF BASICALLY BEGINNING THE PROCESS OF GETTING RELIEF TO THE SCHOOLS THAT NEED IT AND FIGURING OUT WAYS TO LEVERAGE RESOURCES. WE ALSO PUT ON THE TABLE TODAY AN EXTENSION OF VISION IOWA THAT COULD POTENTIALLY BE USED IN EVERY SINGLE COUNTY OF THE STATE AND COULD, IF NECESSARY, BE USED FOR SCHOOL CONSTRUCTION AS WELL. SO WE'VE PUT A NUMBER OF VEHICLES ON THE TABLE THAT DON'T REQUIRE AN INCREASE IN TAXES.

Glover: WE'RE LIKELY TO HEAR SOME GRUMBLING FROM LOCAL SCHOOL OFFICIALS. THE ALLOWABLE GROWTH FIGURE IN YOUR BUDGET IS ONE PERCENT. LOCAL SCHOOL OFFICIALS ARE LIKELY TO SAY THAT'S NOT ENOUGH. WHAT DO YOU SAY TO THEM, AND WHAT DOES THIS DO TO PROPERTY TAXES?

Vilsack: WELL, THEY HAVE TO RECOGNIZE THAT THESE ARE DIFFICULT TIMES, AND THAT MOST OTHER STATES ARE CURRENTLY TAKING A LOOK AT REDUCING THE LEVEL OF SPENDING AND A LEVEL OF INVESTMENT IN EDUCATION. WE ARE TRYING TO FIGURE OUT A WAY TO INCREASE IT BY $59 MILLION OF STATE ASSISTANCE. WE'RE ALSO GOING TO PROVIDE THEM SOME TOOLS. WE WERE FORTUNATE TO GET AN E-RATE CLASSIFICATION FOR OUR ICN USE, WHICH WILL ALLOW SCHOOLS TO DRAW DOWN ADDITIONAL RESOURCES. WE BELIEVE THE FEDERAL GOVERNMENT PROBABLY OWES US A LITTLE MONEY ON THE MEDICAID SIDE FOR THE WAY IN WHICH SCHOOLS ARE BASICALLY DEALING WITH SPECIAL NEEDS CHILDREN THAT WE WANT TO ENCOURAGE SCHOOL DISTRICTS TO USE. SO WE THINK WE'RE GOING TO GIVE THEM THE FLEXIBILITY TO MANAGE THROUGH THESE DIFFICULT TIMES. I THINK A LOT OF SUPERINTENDENTS, IF THEY WERE PUSHED ON THIS, WOULD SUGGEST TO YOU THAT THEY ARE -- THEY ARE SURPRISED THAT THE STATE IS COMING UP WITH ANY ADDITIONAL RESOURCE, GIVEN WHAT'S HAPPENING IN SURROUNDING STATES.

Glover: ANOTHER SCHOOL ISSUE IS AN INCREASE IN TEACHER PAY. THE LEGISLATURE LAST YEAR APPROVED A $40-MILLION DOWN PAYMENT WITH THE PROMISE OF MORE MONEY LATER. YOU'RE KEEPING THE STATUS QUO THERE. WHAT DO YOU SAY TO PEOPLE WHO SAY YOU'RE BREAKING YOUR PROMISE ON TEACHER PAY?

Vilsack: WELL, LET ME SUGGEST TO YOU WE'RE NOT KEEPING THE STATUS QUO. THE FIRST THING YOU HAVE TO RECOGNIZE IS THAT $40 MILLION WAS OUTSIDE THE GENERAL FUND. WE ARE ACCEPTING THE CHALLENGE OF BRINGING IT INTO THE GENERAL FUND AND INSTITUTIONALIZING IT INTO THE FUNDING OF SCHOOLS. SECONDLY, AS WE IMPLEMENT THIS TEACHER PROGRAM, WE ARE LEARNING FROM THE FIELD THAT THERE ARE A NUMBER OF PROBLEMS THAT WE HAVE TO FIX AND WE HAVE TO CORRECT. THERE ARE HOLES IN THE PROCESS. THERE ARE GAPS IN THE LEGISLATION THAT WE KNEW WE HAD LAST YEAR AS WE FINISHED OUR WORK LAST SPRING. SO THIS IS AN OPPORTUNITY FOR US TO FLESH-OUT THE DETAILS OF THIS PROGRAM TO MAKE A LONG-TERM COMMITMENT TO BASICALLY SAY THIS IS GOING TO BE A PERMANENT PART OF OUR PLANNING PROCESS; AND WHEN PROSPERITY RETURNS, ADDITIONAL MONEYS WILL BE FORTHCOMING.

Yepsen: GOVERNOR, 60 PERCENT OF THE STATE'S BUDGET GOES TO EDUCATION. NOW, THE OTHER 40 PERCENT, YOU'VE BEEN DOING A LOT WITH CUTTING AND MERGING AND TRYING TO MAKE IT MORE EFFICIENT. WHERE IN THIS BUDGET IS SOMETHING THAT REQUIRES LOCAL SCHOOLS TO BECOME MORE EFFICIENT, TO MERGE, SOMETHING THAT REQUIRES THE REGENTS INSTITUTIONS TO BECOME MORE EFFICIENT?

Vilsack: WELL, THE REGENTS INSTITUTIONS ARE ALREADY UNDERGOING AN EXTENSIVE REVIEW OF THEIR STRATEGIC PLANNING PROCESS. THEY RECENTLY HIRED A FIRM TO COME IN AND TAKE A LOOK AT THEIR PREVIOUSLY ADOPTED STRATEGIC PLAN TO DETERMINE WHAT CHANGES NEEDED TO BE MADE, WHERE DUPLICATION IS OCCURRING AND RECOMMENDATIONS WILL BE FORTHCOMING. RELATIVE TO THE LOCAL SCHOOL DISTRICTS, I THINK WE'VE ALREADY PUT IN PLACE THE KIND OF ACTIVITY YOU'RE SUGGESTING WHEN WE TOOK A LOOK AT THE GUARANTEE -- THE BUDGET GUARANTEE AND BASICALLY BEGAN THE PROCESS OF PHASING THAT OUT. NO DOUBT THAT THAT'S GOING TO HAVE A SIGNIFICANT IMPACT ON SCHOOLS AND THEIR DECISION MAKING IN THE FUTURE.

Borg: I WANT TO GO BACK ON "VISION IOWA". WE MADE SOME COMMENTS ABOUT THAT EARLIER. YOU'RE PROPOSING TO CREATE A FUND OF $99 MILLION, AND IT WILL ALLOW ALL OF IOWA'S 99 COUNTIES TO QUALIFY FOR A MILLION DOLLARS IF THEY CAN DEVELOP SOMETHING AND A PARTNERSHIP AND SOME LOCAL FUNDING, TOO. BUT ISN'T THAT REALLY DISTORTING THE OVERALL CONCEPT OF "VISION IOWA", WHICH WAS TO CREATE BIG THINGS AND MULTIMILLION-DOLLAR GRANTS? YOU ALREADY HAD THE "CAT" PROGRAM, WHICH ALLOWED FOR SMALLER PROJECTS.

Vilsack: THAT'S PRECISELY WHY I WAS SHAKING MY HEAD, DEAN. THIS WHOLE "VISION IOWA" PROGRAM STARTED WITH THE COMMUNITY ATTRACTIONS AND TOURISM PHILOSOPHY. IT IS INDEED IMPORTANT FOR US TO HAVE THE LARGER PROJECTS, BUT THERE'S ALSO THE NEED AND THE OPPORTUNITY TO LEVERAGE ADDITIONAL RESOURCES IN EVERY SINGLE COUNTY AND PROVIDING FLEXIBILITY TO USE IT FOR SOMETHING BEYOND TOURISM AND CULTURAL ACTIVITIES. FOR EXAMPLE, THERE ARE COMMUNITIES THAT WANT TO WIRE THEMSELVES TO THE INTERNET, THAT WANT TO BRING THE 21ST CENTURY TO THEIR DOORSTEP. THIS RESOURCE, LEVERAGED WITH CITY AND COUNTY RESOURCES AND PRIVATE INVESTMENT, COULD WELL DO THAT. THERE ARE COMMUNITIES THAT ARE TRYING TO STRUGGLE: HOW ARE WE GOING TO MEET OUR LAW OWN ENFORCEMENT NEEDS WITH REGIONAL JAILS? MAYBE A COUPLE OF COUNTIES CAN WORK TOGETHER TO CREATE THAT REGIONAL JAIL. MAYBE THAT WILL SPUR ADDITIONAL DISCUSSIONS ABOUT HOW CAN WE REGIONALIZE APPROACHES TO ECONOMIC DEVELOPMENT, LAW ENFORCEMENT, EDUCATION. SOME MAY WANT TO USE IT FOR REGIONAL HIGH SCHOOL. ALL OF THESE OPPORTUNITIES ARE OUT THERE AND THIS IS A VEHICLE FOR BASICALLY PROMOTING THAT LEVERAGE THAT WE'VE SEEN -- THE MAGIC OF "VISION IOWA" IS THE LEVERAGE THAT'S OCCURRED.

Glover: I'LL TRY NOT TO PUT MY TONGUE TOO MUCH IN MY CHEEK WHEN I ASK THIS, BUT AREN'T YOU BETTING ON GAMBLING BOTH IN THE VISION IOWA PROGRAM AND IN YOUR LARGER BUDGET OVERALL? I MEAN, THERE ARE BUDGET REFERENDUMS THIS YEAR ABOUT WHETHER THOSE LOCAL GAMBLING OPERATIONS OUGHT TO CONTINUE. IS THIS BUDGET AT RISK IF THOSE REFERENDUMS DON'T PASS?

Vilsack: NO, I DON'T BELIEVE SO, FOR SEVERAL REASONS. FIRST OF ALL, THE REFERENDUMS, EVEN IF THEY WERE TO FAIL, THERE IS A LAG TIME, A PERIOD OF TIME FROM THE TIME THAT THE LICENSES ACTUALLY EXPIRE TO THE TIME THAT WE WOULD BEGIN SEEING A LOSS OF REVENUE. IN ADDITION, THE COMMITMENTS WE'VE MADE ON "VISION IOWA" AND "CAT" AND SOME OF THE OTHER PROGRAMS THAT WE'VE TALKED ABOUT, IN THE SCHEME OF THINGS, ARE RELATIVELY SMALL. "VISION IOWA" COSTS $15 MILLION A YEAR FROM THE INFRASTRUCTURE FUND. THE "CAT" FUND IS AT $12 MILLION A YEAR. SO IF IT BECAME NECESSARY, ADJUSTMENTS WOULD HAVE TO BE MADE TO MEET THE COMMITMENTS THAT WE'VE MADE. SO I DON'T THINK WE ARE. AND AS I TRAVEL AROUND THE STATE -- I'VE BEEN TO ALL 99 COUNTIES -- I DON'T SENSE THEY'RE ANTICIPATING MANY OF THE COUNTIES THAT CURRENTLY HAVE ACTIVITIES -- GAMING ACTIVITIES, THAT THERE IS A REAL PUSH TO DEFEAT THOSE REFERENDUMS. NOW, THERE MAY BE ONE OR TWO EXCEPTIONS TO THAT BUT, GENERALLY SPEAKING, I DON'T SENSE THAT.

Glover: SOME SUGGEST THAT POLK COUNTY IS A COUNTY WHERE THAT COULD BE THE CASE, WHERE THE GAMBLING LICENSE COULD BE AT RISK. DO YOU THINK THAT'S TRUE?

Vilsack: WELL, I THINK IT'S A VERY COMPLEX SITUATION IN POLK COUNTY BECAUSE YOU HAVE NOT ONLY THE CASINO, YOU ALSO HAVE RACING. AND THERE'S A NATURAL TENSION BETWEEN THOSE TWO ISSUES. I THINK LEGISLATORS ARE GOING TO BE WORKING THROUGH THAT PROCESS TO TRY TO DETERMINE HOW THE REFERENDUM SHOULD BE STRUCTURED. ONE LEGISLATOR IS SUGGESTING SORT OF A SPLIT VOTE. IT WILL BE INTERESTING TO SEE HOW IT TURNS OUT. AT THIS POINT, I'M SURE THAT IT'S GOING TO BE A SUBJECT OF CONVERSATION AND DISCUSSION IN POLK COUNTY. BUT AGAIN, I DON'T SENSE, WHEN IT COMES RIGHT DOWN TO IT, THAT YOU'RE GOING TO SEE MUCH CHANGE ABOUT THE NATURE OF THE BUSINESS. THE MISTAKE THAT SOME PEOPLE MAKE IS THAT IF THE STATE GETS OUT OF THE BUSINESS, THAT'S GOING TO END GAMING IN IOWA. IT'S NOT. WE HAVE NATIVE AMERICAN RESERVATIONS AND SETTLEMENTS THAT HAVE CASINOS THAT WOULD SIMPLY ENLARGE THEIR OPPORTUNITY RATHER SIGNIFICANTLY. AND THE REALITY IS WE DON'T COLLECT ANY FEES OR TAXES FROM THOSE ACTIVITIES.

Borg: ON THE OTHER HAND -- GO AHEAD, MIKE.

Glover: THERE WAS A SUGGESTION AT ONE POINT THOSE CASINOS COULD WAGE WAR ON THE OTHER GAMBLING OPERATIONS. DO YOU SEE ANY EVIDENCE OF THAT?

Vilsack: I DON'T SEE ANY EVIDENCE OF THAT AT THIS POINT.

Borg: ON THE OTHER HAND, CEDAR RAPIDS IS -- THEY'VE GOT A GRASS-ROOTS OPERATION THERE NOW TRYING TO INVESTIGATE WHETHER OR NOT TO PUT GAMBLING BOTH ON THE CEDAR RIVER. IS THAT SOMETHING YOU SUPPORT IN ORDER TO EXPAND GAMBLING AND THE GAMBLING REVENUE TO THE STATE?

Vilsack: I DON'T THINK THAT THERE'S MUCH OF A CHANCE OF THAT HAPPENING, AND I REALLY DON'T THINK THAT THERE'S A GREAT DEAL OF SENTIMENT WITHIN THE STATE FOR AN EXPANSION OF WHAT WE HAVE. I MEAN, I THINK WE HAVE QUITE A BIT RIGHT NOW. I'M NOT SURE THAT I WOULD BE FAVORABLY INCLINED TOWARDS EXPANSION.

Yepsen: GOVERNOR, FOR MOST OF IOWA HISTORY, WE'VE BEEN A PAY-AS-YOU-GO STATE. TODAY IN THIS BUDGET, YOU'RE SUGGESTING THAT WE BORROW MORE MONEY FOR "VISION IOWA". YOU'VE SUGGESTED THAT IF WE NEED TO BUILD MORE ROADS, WE NEED MONEY TO BUILD HIGHWAYS, THAT YOU WOULD BE AMENABLE TO TALKING ABOUT BORROWING MONEY, HIGHWAY BONDING. WHY IS IT A GOOD IDEA FOR IOWA TO START BORROWING MORE MONEY?

Vilsack: IT'S THE TIMING OF IT. IF THIS WERE THE 1980S AND THE 1970S WHEN WE HAD HIGH INTEREST RATES AND HIGH INFLATION, THAT WOULD NOT BE A VERY GOOD IDEA, BUT TODAY WE HAVE SOME OF THE LOWEST INTEREST RATES IN THE PAST TWENTY, THIRTY YEARS. IT'S AN OPPORTUNITY FOR US TO STIMULATE GROWTH AND DEVELOPMENT AT A VERY, VERY REASONABLE COST. THE UNIVERSITY OF IOWA HOSPITALS AND CLINICS IS PUTTING FORWARD A VERY AGGRESSIVE PLAN TO EXPAND AND TO CONSTRUCT OPERATIONS AND BUILDINGS ON THE HOSPITAL CAMPUS FOR THE REASON THAT WE HAVE A CHANCE TO BE AND TO CONTINUE TO BE A WORLD-CLASS HEALTH CARE CENTER.

Yepsen: DO THEY NEED STATE MONEY FOR THAT?

Vilsack: WELL, THEY NEED AUTHORITY. THEY NEED AUTHORITY. THEY NEED REVENUE BONDS THAT THEY CAN GENERATE. THERE IS THE POSSIBILITY WITH "VISION IOWA" OF A SIGNIFICANT RETURN TO THE STATE AS A RESULT OF THESE ACTIVITIES. THESE MONEYS DON'T GET INVESTED OUTSIDE OF THE STATE; THEY GET INVESTED "IN" THE STATE. THEY CREATE CONSTRUCTION JOBS. THEY CREATE ONGOING JOBS. THEY CREATE OPPORTUNITIES FOR LOCAL HARDWARE STORES, LOCAL CONTRACTORS, LOCAL CEMENT MIXERS, ALL OF THESE PEOPLE TO GET THE OPPORTUNITY TO WORK IN ALL PARTS OF THE STATE, IN ALL PARTS OF THE STATE.

Yepsen: ANOTHER BIG ISSUE FACING YOU AND THE LEGISLATURE, MEDICAID, THE HEALTH CARE PROGRAM THAT DELIVERS HEALTH CARE TO POOR IOWANS. IT'S IN THE HOLE. IT'S RUNNING A DEFICIT. YOU'VE PUT IT SOME ON THE TABLE TODAY, SOME IDEAS FOR WHAT YOU WANT TO DO. THE LEGISLATURE IS NOW SAYING: "WELL, YOU'RE NOT PERMANENTLY SOLVING THE PROBLEM." TWO-PART QUESTION: WHAT DO YOU WANT TO DO; AND HOW DOES IT SOLVE THE PROBLEM?

Vilsack: WELL, FIRST OF ALL, WE HAVE PUT FORWARD A PROPOSAL TO LEGISLATIVE LEADERS THAT WOULD ESSENTIALLY DEAL WITH THE 4.3-PERCENT CUT, AS WELL AS WHAT MAY BE PERCEIVED AS AN UNDERFUNDING BY THE LEGISLATURE TO BEGIN WITH IN THIS AREA OF THE BUDGET. WE BELIEVE IF WHAT WE HAVE PROPOSED IS ENACTED, IT WILL BASICALLY TAKE CARE OF THE PROBLEM AS IT'S DEFINED TODAY. THE REALITY IS THAT MEDICAID HAS ALWAYS BEEN A PROBLEM FOR THE STATE OF IOWA AND FOR EVERY STATE. HOWEVER, OUR STATE HAS BEEN VERY RESPONSIBLE IN THE WAY IT'S MANAGED THE MEDICAID BUDGET. IT REPRESENTS ABOUT 9 PERCENT OF OUR BUDGET. IN MOST STATES, IT'S ABOUT 20 PERCENT. SO WE'VE BEEN VERY REASONABLE IN HOW WE'VE APPROACHED THIS. WE'VE ALSO UNDERTAKEN AN EFFORT TO TRY TO GET THE FEDERAL GOVERNMENT TO BE A BETTER PARTNER, AND WE'VE ALSO BEGUN A VERY EXTENSIVE REVIEW OF HOW AND WHERE WE SPEND MONEY IN MEDICAID, TO DETERMINE WHETHER OR NOT THERE MAY BE SOME EXCESS, SOME PLACES WHERE WE COULD POTENTIALLY GO IN AND REDUCE OUR EXPENDITURES WITHOUT NECESSARILY REDUCING SERVICES. THIS IS WHAT'S IMPORTANT WITH REFERENCE TO THE MEDICAID DISCUSSION BETWEEN MYSELF AND THE LEGISLATORS. WE BELIEVE THAT THE MEDICALLY NEEDY PROGRAM THAT CURRENTLY AFFECTS ABOUT $4,000 IOWANS SHOULD NOT BE ELIMINATED. WE BELIEVE IT FOR TWO REASONS. ONE, BECAUSE IT'S THE RIGHT THING TO DO FOR THESE PEOPLE. THEY ARE POOR. THEY HAVE NET WORTHS LESS THAN $10,000. THEY HAVE INCOMES OF ABOUT $450 A MONTH. THEY CAN'T AFFORD THE COST OF HEALTH CARE. AND, TWO, IT'S THE FISCALLY RESPONSIBLE THING TO DO BECAUSE IF THEY DON'T GET CARE FROM THIS PROGRAM, THEY COULD BE SHIFTED TO A MORE EXPENSIVE PROGRAM, THE STATE INDIGENT CARE PROGRAM, AND THAT DOESN'T MAKE SENSE TO US. SO WE'RE FIGHTING TO PRESERVE THAT PROGRAM. AND WE THINK WE'VE PUT SOMETHING ON THE TABLE, BUT WE'RE HAPPY TO SIT DOWN WITH LEGISLATORS TO WORK IN A BIPARTISAN FASHION.

Glover: IS IT YOUR VIEW THAT THE MEDICAID PROBLEM, WHICH IS GOVERNMENT HEALTH CARE FOR THE POOR, CAN BE SOLVED WITHOUT CUTTING SERVICES TO PEOPLE OR WITHOUT CUTTING THE NUMBER OF PEOPLE SERVED?

Vilsack: WELL, I THINK A WAY OF DOING IT IS BY TAKING A LOOK AT REIMBURSEMENT RATES. CLEARLY YOU RUN A RISK IF YOU CUT REIMBURSEMENT RATES TOO DEEPLY THAT YOU WILL, IN FACT, DENY ACCESS TO FOLKS. AND THAT'S WHAT I THINK THERE'S THE CONCERN NOW. I THINK WE DO HAVE TO AND WE ARE WORKING WITH LEGISLATIVE LEADERS TO TAKE A LOOK AT SOME OF THE OPTIONAL SERVICES THAT ARE CURRENTLY BEING PROVIDED. BUT I THINK IT'S REALLY IMPORTANT TO CONTINUE PROGRAMS LIKE THE MEDICALLY-NEEDY PROGRAM, BECAUSE THESE PEOPLE HAVE TO GET BASIC HEALTH CARE. THEY JUST HAVE TO.

Glover: THERE'S ANOTHER PROGRAM THAT YOU PROPOSED IN THIS BUDGET, AN ENDOWMENT FOR CHILDREN, WHERE AFTER YOU GET STATE RESERVE FUNDS BUILT UP, YOU WOULD DIVERT THAT EXTRA MONEY INTO AN ENDOWMENT FOR CHILDREN. IS THAT A REAL PROPOSAL? I MEAN, REALISTICALLY, WON'T IT BE YEARS BEFORE THOSE FUNDS ARE BUILT UP?

Vilsack: NOT NECESSARILY. IT DEPENDS ON WHEN PROSPERITY RETURNS. BUT I'LL TELL YOU, IT IS A VERY REAL PROGRAM AND I'LL TELL YOU WHY. ONE OF THE PROBLEMS THAT WE HAD WITH THE BUDGET -- THE SYSTEM THAT WE SET UP WAS THAT WHEN THE RESERVE ACCOUNTS BECOME FULLY FUNDED, THE EXCESS ROLLS OVER INTO THE NEXT YEAR'S BUDGET AND YOU TREAT IT AS IF IT WAS ONGOING REVENUE AND YOU SPEND IT AS IF IT WAS ONGOING REVENUE. AND IT'S NOT; IT'S ONE-TIME MONEY. AND THAT CREATES A PROBLEM IN THE FUTURE. I WANT TO AVOID THAT PROBLEM. AT THE SAME TIME, IT IS VERY DIFFICULT TO CONVINCE LEGISLATORS OF THE IMPORTANCE OF INVESTING AND PREVENTION. IT'S VERY DIFFICULT TO CONVINCE THE PUBLIC OF THAT. THAT'S A HARD CONCEPT. BUT IF WE DO THE RIGHT THING FOR CHILDREN AGE ZERO TO SIX, IF WE ENHANCE THEIR EDUCATIONAL OPPORTUNITY, IF WE ENCOURAGE EARLY LITERACY, IF WE SUPPORT THESE CHILDREN, THEN WE WILL HAVE A LOT LESS EXPENSE IN THE FUTURE. AND WE HAVE TO HAVE A MECHANISM THAT DOESN'T PIT THEM AGAINST ANY OTHER ASPECT OF THE BUDGET, BECAUSE THEY'LL LOSE THAT BATTLE. THEY'VE LOST IN THE PAST. THAT'S WHY WE PROPOSED THE ENDOWMENT. IT IS A VERY REAL PROPOSAL.

Yepsen: GO BACK TO THIS ISSUE OF THE EMERGENCY FUND. BEFORE YOU EVER DO THE CHILD ENDOWMENT FUND, YOU'VE GOT THE RESERVE FUNDS. DO YOU WANT TO FILL THOSE UP AGAIN? YOU'RE PROPOSING IN THIS BUDGET TO DIVERT SOME MONEY THIS YEAR. HOW LONG DO YOU DIVERT -- AT WHAT POINT DOES THIS -- DO THE GENERAL -- DOES THE EMERGENCY FUND GO BACK TO BEING 10 PERCENT?

Vilsack: WE PROPOSE ADEQUATELY FUNDING EDUCATION UNDER THE CIRCUMSTANCES. OUR RAINY DAY FUND INCREASES. IT DOES NOT NECESSARILY INCREASE AT THE RATE IT WOULD OTHERWISE INCREASE, BUT OUR EDUCATIONAL SUPPORT IS THERE. IT WILL GROW AND IT WILL GROW ULTIMATELY TO 10 PERCENT WHEN THE -- WHEN THE PROSPERITY RETURNS. RIGHT NOW, DAVID, WE ARE AT 8 PERCENT. WE ARE ABOVE THE NATIONAL AVERAGE IN TERMS OF THE AMOUNT OF RESERVE. I DON'T KNOW OF ANOTHER STATE THAT'S TRYING TO DO WHAT WE'RE TRYING TO DO: MAINTAIN AND INCREASE THE SURPLUS, MAINTAIN TAX CUTS, SUPPORT EDUCATION, AND ALSO REFORM GOVERNMENT.

Yepsen: ANY IDEA HOW LONG YOU THINK IT WILL BE BEFORE IT'S BACK UP TO 10 PERCENT AND YOU CAN START PUTTING MONEY INTO THIS CHILD ENDOWMENT FUND?

Vilsack: THERE WAS A FOURTH GRADER AT JEFFERSON HIGH SCHOOL HERE IN DES MOINES WHO ASKED ME THE QUESTION THE OTHER DAY. WHAT DO YOU -- THIS IS A FOURTH GRADER ASKED ME THIS QUESTION. HE SAID, "WHEN DO YOU EXPECT THE ECONOMY TO TURN AROUND?" I THOUGHT TO MYSELF, THIS YOUNG MAN IS GOING TO BE THE NEXT ALAN GREENSPAN. I DON'T KNOW WHEN THE ECONOMY IS GOING TO TURN AROUND. IF THE PREDICTORS ARE CORRECT, WE SHOULD BEGIN TO SEE SOME ACTIVITY AROUND THE MIDDLE OF THE YEAR. AND AS WE DO, I THINK IT WILL REBOUND STRONGLY BECAUSE OF SOME OF THE STEPS THAT HAVE BEEN TAKEN, SOME OF THE STEPS THAT WASHINGTON, D.C. IS CONSIDERING STIMULATING. IT'S CERTAINLY GOING TO TAKE OFF IN THIS STATE. IF WE CREATE VENTURE CAPITAL AND WE CREATE AN OPPORTUNITY FOR -- FOR THE DEVELOPMENT OF HUMAN CAPITAL IN THIS STATE, I THINK YOU'LL SEE SIGNIFICANT ADVANCEMENTS IN THE NOT-TOO-DISTANT FUTURE.

Glover: LET'S TALK ABOUT THE ECONOMY. YOU HAVE A SERIES OF PROPOSALS TO STIMULATE THE ECONOMY IN YOUR BUDGET, A VENTURE CAPITAL FUND, A TAX BREAK TO ENCOURAGE VENTURE CAPITAL, SOME TAX BREAKS TO ENCOURAGE PEOPLE TO STAY HERE. YOU SAID YOU SUPPORT SOME TAX BREAKS FOR SMALL BUSINESSES. THE LEGISLATURE HAS PROPOSED ADDING TO THE CAPITAL GAINS TAX BREAK. HOW MUCH OF WHAT'S BEING DEBATED IN THE LEGISLATURE CAN YOU SIGN?

Vilsack: WELL, I WANT TO FOCUS ON VENTURE CAPITAL BECAUSE IT'S PRETTY CLEAR THE STATE OF IOWA, IN TERMS OF ITS ECONOMIC DEVELOPMENT EFFORTS, IS -- HAS A NEED FOR VENTURE CAPITAL. WE NEED ENTREPRENEURSHIP TO BE FOSTERED IN THE STATE. WE HAVE TREMENDOUS PUBLIC UNIVERSITIES CREATING GREAT IDEAS. THEY'RE JUST NOT BEING COMMERCIALIZED. WE'VE DONE A PRETTY GOOD JOB IN THE LAST COUPLE OF YEARS OF GROWING THE WORK FORCE, OF PUTTING MORE PEOPLE TO WORK, INCREASING THE WAGE LEVELS OF JOBS BEING CREATED BY STATE HELP. BUT WHAT WE NEED TO DO NOW IS TO FOSTER THAT SPIRIT OF ENTREPRENEURSHIP, BRING THE NEXT MICROSOFT, IF YOU WILL, HERE. THAT'S GOING TO REQUIRE VENTURE CAPITAL, AND IT'S GOING TO REQUIRE HUMAN CAPITAL. SO MY FOCUS, AND I BELIEVE THE LEGISLATURE'S FOCUS, OUGHT TO BE ON THOSE ISSUES. AT THE SAME TIME, IF WE'RE GOING TO LOOK AT ECONOMIC STIMULUS IN A BROADER SENSE, IF WE'RE GOING TO TALK ABOUT CAPITAL GAINS TAX AND STOCK OPTIONS AND THOSE KINDS OF THINGS, WE CANNOT AFFORD TO FORGET ABOUT THE 100,000 IOWANS WHO ARE CURRENTLY WORKING AT MINIMUM WAGE. MANY OF THEM ARE WOMEN. MANY OF THEM ARE RAISING CHILDREN. MANY OF THEM HAVE JUST TRANSITIONED FROM WELFARE TO WORK. PART OF THAT -- 98 PERCENT OF THE WELFARE RECIPIENTS FIVE YEARS AGO HAVE TRANSITIONED TO WORK. WE OUGHT TO MAKE A COMMITMENT. IF WE'RE GOING TO PROVIDE MILLIONS OF DOLLARS OF RELIEF FOR THESE FOLKS OVER HERE, WE OUGHT TO AT LEAST BE ABLE TO FIGURE OUT A WAY TO RAISE THE MINIMUM WAGE.

Yepsen: DO WE HAVE THE MAKINGS OF A DEAL HERE, WHERE YOU'RE WILLING TO SIGN A CAPITAL GAINS TAX BREAK FOR YOUNG ENTREPRENEURS? THAT'S HOW BILL GATES STARTED TO PAY HIS PEOPLE, WITH STOCK OPTIONS, NOT INCOME? YOU'LL TAKE THAT IF THE LEGISLATURE WILL PASS THE MINIMUM WAGE?

Vilsack: WELL, THE FIRST FOCUS OUGHT TO BE VENTURE CAPITAL. THERE'S NO QUESTION ABOUT THAT.

Yepsen: BUT EVERYBODY AGREES TO THAT.

Vilsack: AND THAT'S WHY IT OUGHT TO BE -- THAT'S WHY IT OUGHT TO BE THE FOCUS, BECAUSE THERE IS AGREEMENT, THERE IS CONSENSUS, AND THERE IS ALSO A RECOGNITION. AND I APPRECIATE THIS ON THE PART OF THE LEGISLATURE, THAT THEY WANT TO PROVIDE EVERY IOWAN THE OPPORTUNITY TO PARTICIPATE IN THIS PROCESS, SO I APPRECIATE THAT. THAT'S WHAT WE -- WE OUGHT TO GET THAT JOB DONE FIRST. AND THEN WE OUGHT TO SEE WHAT THE COST IS OF THE VARIOUS TAX PROPOSALS. AND WE NEED TO TAKE A LOOK AT WHAT THE LEGISLATURE'S ATTITUDE IS ABOUT THE TAX CREDIT FOR COLLEGE STUDENTS, BECAUSE THE REALITY IS, IF YOU BUILD A LOT OF FINANCIAL CAPITAL AND YOU DON'T HAVE THE HUMAN CAPITAL TO TAKE ADVANTAGE OF IT, YOU'VE GOT HALF THE EQUATION.

Yepsen: ONE IMPEDIMENT TO ECONOMIC GROWTH IN THIS STATE HAS BEEN THE LACK OF HIGH-SPEED INTERNET ACCESS IN MANY COMMUNITIES... SMALL, EVEN SOME NOT TO SMALL. WHAT IS IN YOUR PROGRAM TO TRY TO DO SOMETHING ABOUT THAT?

Vilsack: WELL, THERE ARE A COUPLE OF THINGS. AS YOU KNOW, WE'VE HAD THE TELECOMMUNICATIONS INDUSTRY MEETING ON AN ONGOING BASIS IN THE FORM OF AN ALLIANCE TO MAKE A SERIES OF RECOMMENDATIONS. AND THEY MADE THEIR FIRST ANNUAL REPORT TO US WITH A SERIES OF RECOMMENDATIONS. THEY WANT MORE COORDINATION AND CONSOLIDATION OF ACTIVITIES WITHIN STATE GOVERNMENT AS IT RELATES TO TELECOMMUNICATIONS. THEY WANT GREATER FLEXIBILITY WITH SOME OF THE PROGRAMS THAT WE HAVE, SUCH AS THE CDBG PROGRAM, WHERE WE WERE USING FUNDS FOR SEWER AND WATER, USING FUNDS FOR DAY CARE CENTERS. CAN WE NOT ALSO PROVIDE FLEXIBILITY FOR THOSE FUNDS TO BE USED TO HELP WIRE A COMMUNITY? AND THE "VISION IOWA" PROGRAM THAT WE TALKED ABOUT EARLIER COULD ALSO POTENTIALLY BE USED IF THAT'S THE DECISION THE COMMUNITY MAKES. SO THESE TWO TOOLS, CDBG AND "VISION IOWA", COULD CREATE GREAT FLEXIBILITY. THE INTERESTING THING ABOUT THE ALLIANCE WORK IS THAT THEY FOUND A SUBSTANTIAL PERCENTAGE IN RELATIONSHIP TO OTHER STATES OF IOWANS ARE CONNECTED OR HAVE ACCESS TO INTERNET, ABOUT 35 PERCENT HIGH SPEED, WHICH IS VERY HIGH FOR THE NATION AS A WHOLE. THEY ALSO FOUND THAT MANY, MANY IOWANS HAVE ACCESS TO THE INTERNET AT WORK. SO THERE'S A GROWING -- BEGINNING TO BE A GROWING MARKET AND DEMAND FOR THOSE SERVICES. NOW WHAT WE HAVE TO DO IS PROVIDE THE CAPITAL AND THE DIRECTION FROM STATE GOVERNMENT. WE'VE MADE SEVERAL PROPOSALS TO DO THAT.

Glover: YOU MENTIONED EARLIER IN THE PROGRAM AN EFFORT BY THE STATE TO BEGIN LOOKING AT WAYS -- SINCE WE'RE ON THE TOPIC OF THE INTERNET -- OF COLLECTING SOME TAXES FOR COMMERCE ON THE INTERNET. HAVE YOU COME TO ANY SOLUTIONS ON THAT?

Vilsack: WELL, SEVERAL STATES -- THIS IS A FRUSTRATING THING FOR ME BECAUSE I DON'T THINK LEGISLATORS FULLY UNDERSTAND WHAT WE'RE TALKING ABOUT HERE. RIGHT NOW SALES TAX IS SUPPOSED TO BE COLLECTED ON TRANSACTIONS INVOLVING THE SALE OF GOODS OVER THE INTERNET, BUT IT'S NOT, BECAUSE THE RETAILERS DO NOT HAVE THE RIGHT OR DO NOT HAVE THE LEGAL RESPONSIBILITY TO COLLECT THE TAX, SO THEY DON'T. STATES ARE WORKING TOGETHER TO TRY TO DEVELOP A UNIFORM SYSTEM ACROSS THE COUNTRY FOR SALES TAX. NOW, THAT UNIFORM SYSTEM DOESN'T MEAN, AS SOME LEGISLATORS HAVE SUGGESTED, THAT EVERY STATE WILL CHARGE THE SAME RATE OF SALES TAX OR EVEN THAT EVERY STATE WILL MAKE THE SAME DECISIONS ABOUT WHAT WILL BE SUBJECT TO TAX. WHAT IT DOES MEAN IS THAT RIGHT NOW THERE'S 7,500 DIFFERENT DEFINITIONS FOR ITEMS THAT ARE SUBJECT TO TAX. THERE'S A DIFFERENCE, FOR EXAMPLE, BETWEEN ONE STATE'S DEFINITION OF BEVERAGE AND ANOTHER'S. IF YOU COULD SET UP A UNIFORM SYSTEM OF DEFINITIONS, THEN RETAILERS WOULD VOLUNTARILY COLLECT THE MONEY IN EXCHANGE FOR A SINGLE AUDIT BY ONE STATE EACH YEAR. IN EXCHANGE FOR CONVENIENCE, THEY WOULD COLLECT THE TAX. SOME HAVE ESTIMATED THAT THE STATE IS LOSING UP TO A HUNDRED MILLION DOLLARS. I THINK THAT'S WAY HIGH, BUT LET'S SAY IT'S ONLY $25 MILLION. WOULD THAT NOT HELP THIS YEAR? I THINK IT WOULD.

Borg: THANK YOU, GOVERNOR, WE'RE OUT OF TIME. THANK YOU FOR SPENDING TIME WITH US TODAY. WE'LL BE TRACKING THE ISSUES THAT WE'VE BEEN TALKING ABOUT THROUGHOUT THE LEGISLATIVE SESSION HERE ON "IOWA PRESS." THAT'S IT FOR THIS WEEK'S EDITION OF "IOWA PRESS." WE'LL BE BACK NEXT WEEK AT THE REGULAR "IOWA PRESS" TIMES: 6:30 FRIDAY NIGHT; AT NOON ON SUNDAY. UNTIL THEN, I'M DEAN BORG. THANKS FOR JOINING US TODAY.

Narrator: FUNDING FOR "IOWA PRESS" WAS PROVIDED BY "FRIENDS" OF IOWA PUBLIC TELEVISION; AND BY THE IOWA BANKERS ASSOCIATION... FOR PERSONAL, BUSINESS, AND COMMERCIAL NEEDS, IOWA BANKS HELP IOWANS REACH THEIR FINANCIAL GOALS; AND BY THE ASSOCIATED GENERAL CONTRACTORS OF IOWA... THE PUBLIC'S PARTNER IN BUILDING IOWA'S HIGHWAY, BRIDGE, AND MUNICIPAL UTILITY INFRASTRUCTURE.