Iowa Public Television

Lamberti: THANK YOU.

Borg: SAME SUBJECT, THOUGH. MM-HMM.

Borg: ALSO WITH US HERE AT THE "IOWA PRESS" TABLE, "LEE NEWSPAPERS" DES MOINES BUREAU CHIEF KATHIE OBRADOVICH, AND "ASSOCIATED PRESS" STATEHOUSE REPORTER MIKE GLOVER.

Glover: SENATOR LAMBERTI, AS DEAN MENTIONED, THE SUPREME COURT, IN EFFECT, CUT THE TAX RATE ON THE STATE'S LAND-BASED CASINO SIGNIFICANTLY IN ITS DECISION. HOW SHOULD THE LEGISLATURE REACT TO THAT? WHAT SHOULD THE LEGISLATURE DO?

Lamberti: WELL, I THINK WE HAVE TO WORK TO TRY TO FIND CONSENSUS, BUT I'M INCLINED TO BELIEVE THAT WE NEED TO TRY TO ESTABLISH A TAX RATE THAT APPLIES TO THE RIVERBOATS AS WELL AS THE RACETRACKS THAT IS, NUMBER ONE, EQUAL, BECAUSE I THINK THE SUPREME COURT HAS SAID WE HAVE TO DO THAT. BUT I BELIEVE IT SHOULD NOT BE AT THE CURRENT 20 PERCENT, BECAUSE IF THIS WAS 1999 OR 2000, I MIGHT BE SITTING HERE SAYING I REALLY DON'T CARE, WE'RE IN A BUDGET SURPLUS SITUATION, AND $40 MILLION DOESN'T HAVE A HUGE IMPACT. GIVEN THE CURRENT BUDGET SITUATION, I DON'T THINK WE COULD AFFORD TO GIVE UP $40 MILLION, SO I THINK WE'RE GOING TO HAVE TO ACT TO FIND AN EQUITABLE RATE THAT WILL PREVENT THE STATE FROM LOSING REVENUE.

Glover: REPRESENTATIVE HATCH, SINCE THIS WOULDN'T HAVE ANY EFFECT ON ANY OPERATIONS IN POLK COUNTY, DO YOU HAVE A VIEW ON WHAT THE NEW TAX RATE OUGHT TO BE?

Hatch: I THINK THERE WAS SOME TALK OF A SPECIAL SESSION, AND I THINK THAT'S ILL-ADVISED. THE SUPREME COURT IS GOING TO REVISIT THIS AT THE REQUEST OF THE ATTORNEY GENERAL, AND THEN THE DISTRICT COURT, OF COURSE, HAS TO MAKE THE DETERMINATION OF HOW MUCH AND IN WHAT METHOD WILL THE MONEY BE RETURNED. AT THAT POINT, I THINK THAT WILL BE CLOSER TO JANUARY. WE SHOULD DISCUSS AND CAN DISCUSS THE EQUITABLE TAX INCREASE FOR THE CASINOS ACROSS THE STATE. AND I THINK JEFF IS RIGHT; I THINK THAT WE HAVE TO INCREASE THE RATE SO THAT WE COVER THIS SHORTFALL AND NOT HURT THE REVENUES IN THE BUDGET FOR THIS YEAR OR NEXT YEAR.

Glover: WHAT'S YOUR VIEW OF WHAT THAT NEW RATE SHOULD BE?

Hatch: WELL, THERE'S -- I GUESS, ABOUT 27 PERCENT WOULD BE A BREAK-EVEN POINT, WHICH THE REVENUES WOULD BE -- THE REVENUES WE WOULD RECLAIM WOULD GO TOWARD THE SHORTFALL. AND I THINK THERE'S TALK -- I KNOW THERE ARE PROJECTIONS GOING TO 30 PERCENT, AND THAT WOULD BE DETERMINED, THE SHORTFALL, IF THERE IS ANY, IN THE MIDDLE OF THE FISCAL YEAR. IF THERE IS A SHORTFALL, WE SHOULD THINK ABOUT RAISING IT HIGHER.

Glover: SENATOR LAMBERTI, (A) DO YOU AGREE WITH REPRESENTATIVE HATCH THAT A SPECIAL SESSION IS NOT A TERRIBLY GOOD IDEA; AND DO YOU AGREE WITH THE RATE THAT HE THINKS NEEDS TO BE PUT IN PLACE?

Lamberti: WELL, FIRST, ON THE ISSUE OF THE SPECIAL SESSION, I GUESS MY ARGUMENT WOULD BE WE OUGHT TO ACT SOONER RATHER THAN LATER. I BELIEVE WITHIN A MATTER OF A COUPLE WEEKS TO A MONTH, WE WILL KNOW WHETHER OR NOT THE SUPREME COURT IS GOING TO REHEAR THIS CASE, WHICH IS EXTREMELY RARE. I THINK IT'S ONLY HAPPENED A COUPLE TIMES. AT THAT POINT, WE KNOW THAT WE ARE GOING TO LOSE $40 MILLION IN REVENUE, AND IT SEEMS TO ME IT'S TIME TO ACT AT THAT POINT. WE'VE GOT A BUDGET SITUATION THAT WE'RE GOING TO BE FACING IN JANUARY THAT MAKES THE ONE WE JUST COMPLETED SEEM SMALL, AND I THINK WE NEED TO ACT SOONER RATHER THAN LATER. OUR FISCAL BUREAUS TOLD US, IF WE LOOK AT AN ANNUALIZED RATE, WE'RE SOMEWHERE IN THE NEIGHBORHOOD OF 24.5 TO 25 PERCENT. IF WE WAIT UNTIL JANUARY, WE'RE NOT GOING TO BE ABLE TO RECOVER THE LOST REVENUE AT THAT RATE, AND IT WOULD HAVE TO BE SIGNIFICANTLY HIGHER, POSSIBLY SOMETHING IN THAT NEIGHBORHOOD OF 27 TO 30 PERCENT.

Obradovich: WELL, WHAT ABOUT THE OTHER FALLOUT FROM THIS CASE? WE'VE BEEN TALKING ABOUT THE FISCAL IMPACT ON ESSENTIALLY THE '03 BUDGET GOING FORWARD, BECAUSE YOU HAVE TO CUT THE TAX RATE. BUT THIS RATE HAS BEEN SET AT WHAT THE SUPREME COURT SAYS NOW IS AN UNCONSTITUTIONAL RATE FOR QUITE SOME TIME, FOR YEARS. WHAT'S THE POTENTIAL FALLOUT AS FAR AS REFUNDS TO THE CASINOS?

Lamberti: IT'S KIND OF HARD TO KNOW RIGHT NOW WHAT THE DAMAGES ARE ACTUALLY GOING TO BE. THE ESTIMATES WE'VE RECEIVED COULD AS HIGH AS $100- TO $110 MILLION. WE WON'T KNOW THAT UNTIL THE CASE GOES BACK TO THE DISTRICT COURT. BUT, OF COURSE, THAT'S A PROBLEM ON TOP OF A BUDGET SITUATION THAT, AGAIN, IS GOING TO BE MUCH MORE DIFFICULT THAN THE ONE WE JUST COMPLETED.

Obradovich: REPRESENTATIVE HATCH, DO YOU AGREE WITH THAT FIGURE AND, IF SO, WOULD IT BE WISE FOR THE STATE TO TRY TO SETTLE THAT?

Hatch: WELL, THAT FIGURE IS PROBABLY VERY ACCURATE; HOWEVER, THAT MONEY, AS YOU KNOW, GOES TO SPECIAL FUNDS, NOT THE GENERAL FUND. SO ITS IMPACT ON THE GENERAL FUND IN THE FUTURE IS LESS SIGNIFICANT THAN THE $116 MILLION WOULD APPEAR. IT GOES TO THE ENVIRONMENTAL FIRST FUND AND ALSO TO AN INFRASTRUCTURE FUND. AND THOSE FUNDS ARE STILL IN EXISTENCE, AND THEY DO HAVE SURPLUSES, EVEN THOUGH WE HAVE TAKEN SOME MONEY OUT OF THEM TO BALANCE THIS YEAR'S BUDGET. SO THE IMPACT ON THE GENERAL FUND FOR RETROACTIVE FEES ARE LESS THAN WHAT IT WOULD APPEAR.

Obradovich: BUT A LOT OF THAT MONEY IS GOING INTO THE GENERAL FUND THIS YEAR, ISN'T THAT RIGHT, SENATOR LAMBERTI?

Lamberti: RIGHT NOW, IF YOU LOOK, WE HAVE ESSENTIALLY MOVED A LOT OF MONEY OUT OF OUR INFRASTRUCTURE FUND, WHICH IS GAMBLING FUND, TO BALANCE OUR STATE BUDGET, OUR GENERAL FUND BUDGET. AND AS WE LOOK AT THE LOSS OF $40 MILLION OVER THE NEXT YEAR, WE HAVE A BUDGET RIGHT NOW THAT'S OUT OF BALANCE. AND AS WE LOOK TO THE $100- OR $110 MILLION WE HAVE TO REPAY, I MEAN, WE'RE CERTAINLY GOING TO BE LOOKING ABOUT CAN WE STRUCTURE THAT OVER MULTIPLE YEARS TO LESSEN THE BLOW AT THE STATE, BUT THAT WILL HAVE AN IMPACT ON OUR GENERAL FUND.

Glover: WHAT ABOUT KATHIE'S QUESTION; SHOULD THE STATE BEGIN ENTERING NEGOTIATIONS WITH THESE CASINOS TO COME UP WITH A SETTLEMENT?

Lamberti: THAT'S PROBABLY PREMATURE ON THE BACK TAXES, BECAUSE WE DON'T KNOW WHAT THAT FIGURE IS YET. BUT AT SOME POINT, YES, I THINK WE'RE GOING TO HAVE TO GO ABOUT STRUCTURING THAT OVER MULTIPLE YEARS.

Borg: SENATOR LAMBERTI, GIVEN THE FACT THESE ARE EXTRAORDINARY TIMES, BUT ISN'T THE FACT THAT, YOU KNOW, HERE WE ARE FACED WITH AN ANNUALIZED MAYBE $40 MILLION OR A LITTLE MORE AND YOU'RE ADVOCATING A SPECIAL SESSION TO SAVE $24 MILLION AT THE MOST, ISN'T THAT REALLY PROOF THAT THE STATE IS VERY MUCH TIED SOME OF ITS LIFEBLOOD TO GAMBLING?

Lamberti: I THINK WE'RE MORE DEPENDENT NOW ON GAMBLING THAN WE WOULD HAVE BEEN A COUPLE YEARS AGO, JUST AS A RESULT OF THE TIGHT BUDGET THAT WE HAVE. BUT FROM A REAL PRACTICAL STANDPOINT, WE GENERATE ABOUT $200 MILLION A YEAR OFF GAMBLING. THAT'S ABOUT 4, 4.5 PERCENT OF OUR BUDGET. SO TO SAY IN ROUND NUMBERS THAT WE'RE HEAVILY DEPENDENT ON GAMBLING, NO, BECAUSE I THINK MOST OF THAT FLOWS INTO OUR INFRASTRUCTURE FUND, ENVIRONMENT FIRST, AND WE CAN MAKE SOME ADJUSTMENTS THERE. AND IF I HAD TO, CAN I TAKE $40 MILLION OUT OF THE BUDGET? YES, WE COULD DO THAT. IT WOULD BE DIFFICULT BUT WE COULD DO IT. SO I'M NOT SURE THAT WE'RE OVERLY DEPENDENT ON GAMBLING. WE'RE JUST -- HAVE THAT COMBINED WITH A BUDGET SITUATION THAT WE HAVEN'T SEEN FOR MANY, MANY YEARS.

Borg: IS THAT THE WAY YOU SEE IT TOO, REPRESENTATIVE HATCH?

Hatch: YES, WE FEEL THAT WE'RE DEPENDENT ON GAMBLING BECAUSE OF THE SHORT REVENUES THAT WE HAVE, BUT WE HAVE OTHER OPTIONS. WE HAVE SEVERAL OTHER POOLS WHERE BETWEEN $4- AND $600 MILLION SET THAT WE CAN TAP INTO, AND WE HAVE TAPPED A LITTLE BIT INTO SOME OF THOSE ALREADY. BUT THAT'S BEEN THE DEBATE BETWEEN THE REPUBLICANS AND THE DEMOCRATS THIS LAST YEAR. ARE THOSE POOLS AVAILABLE TO US? IF THEY ARE, WHEN ARE THEY AVAILABLE TO US AND HOW DOES IT AFFECT THE PRIORITIES THAT BOTH PARTIES ARE ADVOCATING. AND SO I THINK THE NEXT LEVEL OF DISCUSSION IS NOT SO MUCH DO WE HAVE ENOUGH MONEY, BECAUSE I THINK WE DO. AND WE CERTAINLY HAVE ENOUGH MONEY SITTING IN DIFFERENT POOLS NOT TO INCREASE TAXES THIS NEXT YEAR. THE QUESTION IS HOW WILL IT AFFECT OUR PRIORITIES AND ARE WE WILLING TO GO INTO SOME OF THOSE POOLS TO PROTECT OUR PRIORITIES.

Glover: SENATOR LAMBERTI, THE QUESTION TO YOU IS, IF WE ENTER INTO NEGOTIATIONS WITH THE GAMBLING INDUSTRY AT A TIME WHEN MONEY IS AT A PREMIUM, WHEN EVERYBODY IS SCRAMBLING TO LOOK FOR WAYS TO AVOID EVEN DEEPER CUTS, IS THE POTENTIAL FOR EXPANSION OF GAMBLING LYING THERE?

Lamberti: OH, CERTAINLY. I MEAN, IF WE'RE LOOKING AT A JUDGMENT AGAINST THE STATE OF $100 MILLION, WHICH IT WOULD BE VERY DIFFICULT FOR US TO PAY, I FIND IT HARD TO BELIEVE THAT SOME OF THE GAMBLING INTERESTS WON'T BE COMING TO US AND ASKING FOR EXPANSION. THE PROBLEM WITH GAMBLING DEBATES IS IT'S VERY HARD IN THE LEGISLATURE TO FIND CONSENSUS, BECAUSE WE HAVE PEOPLE WHO WANT TO EXPAND GAMBLING AND WE HAVE PEOPLE WHO WANT TO RESTRICT GAMBLING. AND ALL OF THOSE FORCES WILL COME TO PLAY. AND I THINK IT'S -- WITHOUT US SITTING DOWN AT THE TABLE AND ADDRESSING THIS ISSUE AND WAITING TILL JANUARY TO ADDRESS IT, WE'RE NOT GOING TO KNOW MUCH MORE BETWEEN NOW AND JANUARY THAN WE KNOW RIGHT NOW.

Glover: AND I'VE HEARD THE ARGUMENT MADE THAT BUDGET PRESSURE TIPS THE BALANCE IN FAVOR OF EXPANDING GAMBLING. SOME PEOPLE WHO DON'T LIKE GAMBLING MIGHT BE WILLING TO EXPAND IT BECAUSE THEN THEY WOULDN'T HAVE TO INCREASE TAXES.

Lamberti: WELL, I'M NOT SURE IT WILL TIP THE BALANCE ENOUGH TO BE THE DETERMINING FACTOR, BECAUSE I STILL THINK THAT WE HAVE SHOWN THAT WE CAN DEAL WITH THE BUDGET REGARDLESS OF THE WHOLE GAMBLING ISSUE. BUT CERTAINLY WE HAVE AGAIN, A BUDGET SITUATION THAT'S GOING TO BE MUCH MORE DIFFICULT THAN THE ONE WE JUST COMPLETED.

Glover: REPRESENTATIVE HATCH, DO NEGOTIATIONS WITH THE GAMBLING INDUSTRY INEVITABLY END UP WITH PRAIRIE MEADOWS TOO?

Hatch: NO, I THINK PRAIRIE MEADOWS IS GOING TO -- I THINK MOST OF THE PEOPLE IN POLK COUNTY LIKE PRAIRIE MEADOWS AS IT IS NOW. AND I THINK EXPANDING PRAIRIE MEADOWS INTO TABLE GAMES IS AN OPTION THAT WILL BE PRESENTED TO THE LEGISLATURE. I THINK, FROM OUR PERSPECTIVE -- WE'RE BOTH FROM POLK COUNTY -- WE'RE GOING TO LOOK AT THE REFERENDUM THIS FALL AND SEE HOW WELL THAT PASSES OR IF IT'S DEFEATED --

Glover: WELL, LOOK AHEAD TO THAT REFERENDUM. WHAT'S GOING TO HAPPEN WITH THAT?

Hatch: WELL, I THINK PEOPLE ARE EXCITED ABOUT THE OPPORTUNITY TO CONTINUE TO HAVE A REVENUE FLOW FROM PRAIRIE MEADOWS IN POLK COUNTY GOING INTO SOCIAL SERVICE AND HOUSING ISSUES. THAT IS A NICE CUSHION THAT PEOPLE FROM POLK COUNTY HAVE BEGUN TO UNDERSTAND AND RELIED ON, WHICH IS ONE OF MY FRUSTRATIONS WITH VISION IOWA BECAUSE THEY TIED POLK COUNTY'S HANDS VERY TIGHTLY; THAT WOULD JEOPARDIZE SOME OF THOSE PROGRAMS. THIS NEW RULING NOW OPENS UP THE OPPORTUNITY FOR POLK COUNTY AND PRAIRIE MEADOWS TO CONTINUE TO FUND CHARITABLE ORGANIZATIONS, WHICH ARE REALLY ESSENTIAL TO PROVIDE HUMAN SERVICE PROGRAMS TO THIS COUNTY. I THINK BECAUSE OF THAT, THE PEOPLE OF THIS COUNTY WILL PROBABLY APPROVE THAT REFERENDUM.

Glover: SENATOR LAMBERTI, HOW WILL YOU VOTE?

Lamberti: I'M INCLINED TO PROBABLY SUPPORT IT, AND I THINK MOST OF THE PEOPLE IN POLK COUNTY WILL. I BELIEVE IT WILL BE FAIRLY CLOSE, BUT I BELIEVE THAT PEOPLE WILL SUPPORT IT AND IT WILL PASS.

Obradovich: AS LONG AS WE'RE TALKING ABOUT BUDGET HERE, DEAN MENTIONED THAT THE GOVERNOR THIS WEEK SAID THAT THINGS ARE LOOKING UP AND THAT POTENTIALLY THE STATE MIGHT END UP WITH A $70-MILLION BALANCE AT THE END OF THE YEAR, AS OPPOSED TO -- OR $70 MILLION MORE THAN THEY EXPECTED TO HAVE. AND I JUST WONDER, SENATOR LAMBERTI, IF YOU AGREE THAT THINGS ARE LOOKING UP AND, IF SO, WHAT THE IMPACT MIGHT BE ON NEXT YEAR.

Lamberti: THINGS ARE STARTING TO LOOK UP, BUT I WOULD SAY VERY SMALL AT THIS POINT. THE EFFECT IS VERY SMALL AND IT'S WAY PREMATURE TO BE GETTING TOO EXCITED ABOUT THE FACT THAT WE MAY END THE YEAR WITH $50- TO $70 MILLION MORE THAN WE ANTICIPATED. REMEMBER, WE'RE STILL GOING TO THE END OF THE YEAR WITH NEGATIVE REVENUE GROWTH, ABOUT 2 PERCENT. AS WE LOOK TO BUDGET YEAR '04, THE PROJECTIONS WE HAVE RIGHT NOW IS WE'RE GOING TO BE $400 MILLION SHORT. THAT'S TWICE THE AMOUNT OF EITHER '01, '02, OR '03 THAT WE JUST SOLVED, AND SO I THINK WE'RE FAR FROM BEING OUT OF THE WOODS. WE ARE STARTING TO SEE AN UPTURN, AND I THINK THAT'S GOOD AND I DO THINK THAT WE'RE GOING TO START TO SEE A RECOVERY. BUT THAT $400-MILLION SHORTFALL IS AT A FIGURE OF 3-PERCENT REVENUE GROWTH, WHICH I THINK WOULD BE EXTREMELY OPTIMISTIC FOR US TO HIT. SO WE HAVE A LOT OF DIFFICULT DECISIONS. AND THE FACT OF THE MATTER IS THAT WE'VE SPENT ABOUT THAT SAME NUMBER, $400 MILLION IN ONE-TIME MONEY. AND LET'S FACE IT, MOST OF OUR RESERVES ARE GONE. WE'VE BORROWED MONEY FROM IMPORTANT PROGRAMS LIKE OUR SENIOR LIVING TRUST, OUR TOBACCO ENDOWMENT, THAT WE HAVE TO PAY BACK. AND SO WE'VE GOT VERY DIFFICULT DECISIONS AHEAD OF US. AND TO BE GIVING ANYBODY THE INDICATION THAT WE'RE GOING TO HAVE MORE MONEY TO SPEND NEXT YEAR I THINK IS JUST BEING A LITTLE MISLEADING.

Obradovich: REPRESENTATIVE HATCH, DO YOU THINK THE GOVERNOR'S OPTIMISM SEEMS TO BE MISPLACED?

Hatch: I THINK THE GOVERNOR IS LOOKING AT THE OPPORTUNITY TO PROVIDE GOOD NEWS TO US, AND THE REVENUES ARE COMING IN FASTER THAN THEY ANTICIPATED. WE HAVE TO REMEMBER THAT WE'RE ONE OF 44 STATES THAT HAVE FOUND THEMSELVES IN THIS DEFICIT POSITION. AND I THINK THE GOVERNOR, FROM OUR PERSPECTIVE, HAS MANAGED THIS CRISIS EXCEEDINGLY WELL.

Obradovich: WELL, DO YOU AGREE WITH SENATOR LAMBERTI'S FIGURE THAT IT'S GOING TO BE A $400-MILLION DEFICIT NEXT YEAR?

Hatch: WELL, I THINK WE FEEL THAT IT'S GOING TO BE ANOTHER TOUGH YEAR, AND IT COULD EXCEED THE CRITICAL NATURE OF THIS YEAR, WHICH REQUIRES, AGAIN, A DISCUSSION ON PRIORITIES AND HOW TO RAISE REVENUE OR MATCH REVENUE NEEDS. AND THAT'S WHERE -- THAT'S GOING TO BE A DIFFICULT DECISION.

Glover: WHEN YOU TALK ABOUT RAISE REVENUE, THAT SOUNDS LIKE THE "T" WORD, "TAXES." IS IT TIME FOR THE STATE TO BE LOOKING AT THAT?

Hatch: I THINK IT'S TIME FOR THE STATE TO TALK ABOUT NEW STRATEGIES OR EQUALIZING THE WORDS OF STRATEGY. FOR EXAMPLE, PEOPLE THINK OUR ONLY STRATEGY IS TO RAISE TAXES. IT ISN'T. WE'RE ONE OF THE LOWEST DEBT STATES IN THE COUNTRY, AND WE SHOULD BE USING DEBT FINANCING, IDENTIFY A SMALL REVENUE STREAM THAT WE EITHER HAVE, OR A NEW ONE, LET'S SAY CIGARETTES, BOND FOR INFRASTRUCTURE, AND CREATE -- CONTINUE TO CREATE THE INFRASTRUCTURE NEEDS AND MEET THE INFRASTRUCTURE NEEDS OF THIS STATE, SOME OF THE EDUCATION NEEDS, SOME OF THE ISSUES THAT WERE TAKEN OFF THE TABLE, LIKE TECHNOLOGY FOR OUR SCHOOLS, COMMUNITY COLLEGE TECHNOLOGY, AND IDENTIFY THAT THOSE COULD BE BONDED AND WE COULD GO INTO DEBT FINANCING TO DO THAT. OTHER STATES DO. AND IOWA HAS A VERY GOOD BOND RATING. THERE ARE OTHER STRATEGIES THAT WE COULD USE BESIDES GETTING -- BEFORE WE GET TO A TAX INCREASE. I THINK MOST OF US WANT TO AVOID THAT.

Borg: YOU'RE SHAKING YOU'RE HEAD, I DON'T KNOW IF IN AGREEMENT, SENATOR LAMBERTI, ON PERSONAL BONDING?

Lamberti: NO, I AGREE WITH THE PART THAT WE DON'T NEED TO RAISE TAXES, BUT I THINK WE HAVE TO BE A LOT MORE DISCIPLINED ABOUT THE BUDGET. AND I AGREE, THERE'S PLENTY OF MONEY IN OUR BUDGET TO DEAL WITH OUR PRIMARY FUNCTIONS, WHICH ARE PUBLIC SAFETY, EDUCATION, AND TAKING CARE OF THE POOREST AMONG US AND OUR ELDERLY. PLENTY OF MONEY IN THE BUDGET. I MEAN, OUR BUDGET HAS GROWN AT A RATE, EVEN WITH THE CUTS, AT A RATE SIGNIFICANTLY ABOVE THE RATE OF INFLATION. SO WE HAVE TO GET OUR SPENDING UNDER CONTROL. I'M NOT OPPOSED TO SOME BONDING, AND WE DO SOME BONDING. BUT I THINK ONE OF THE THINGS WE'RE FACING AS WE COME UP THIS YEAR -- LAST YEAR WE BORROWED A HALF BILLION DOLLARS BECAUSE WE DID NOT HAVE SUFFICIENT RESERVES TO CASH FLOW. WELL, WE'VE NOW TAKEN OUR RESERVES AND SIGNIFICANTLY DEPLETED THOSE. MY GUESS IS WE'RE GOING TO SEE BONDING ALREADY AT THE STATE LEVEL, OR BORROWING AT THE STATE LEVEL, TO SIMPLY FUND OUR CASH FLOW NEEDS. AND WE HAVE ADEQUATE RESOURCES TO FUND OUR INFRASTRUCTURE NEEDS.

Glover: WHAT ABOUT THE CIGARETTE TAX SUGGESTION?

Lamberti: I'M NOT INCLINED TO SUPPORT THAT. I AM INCLINED TO SUPPORT THE CONCEPT OF WHEN WE RUN MEDICAID SURPLUSES IN GOOD YEARS THAT WE MAY WANT TO SET SOME OF THAT ASIDE FOR THE BAD YEARS.

Hatch: I WOULD LIKE TO REMIND JEFF THAT BORROWING OF THE $500 MILLION FOR CASH FLOW NETTED THE STATE A COUPLE MILLION DOLLARS BECAUSE OF THE BOND MARKETS. SO BORROWING ON ITS OWN SOMETIMES PROVIDES US WITH ADDITIONAL REVENUE. SECONDLY, BONDING FOR ESSENTIAL SERVICES, WHICH MAY INCLUDE ENVIRONMENTAL PROTECTION, IS VERY ESSENTIAL. JEFF IS A RECIPIENT OF BONDING THAT WE DID FOR UNDERGROUND STORAGE TANKS. IT DIDN'T HELP THE POOR. IT DIDN'T HELP THOSE ESSENTIAL KIND OF COMMUNITIES THAT WE TALK ABOUT. IT HELPED EVERY MA AND PA STORE, EVERY CASEY'S, EVERY KUM & GO, EVERY 7-ELEVEN, EVERY AMOCO. WE CREATED THE LARGEST PUBLIC INSURANCE COMPANY IN THE COUNTRY BECAUSE WE BONDED. BECAUSE OF THAT, WE SOLVED AN ENORMOUS POTENTIAL PROBLEM AND IT HELPED THE PUBLIC GOOD. THOSE ARE THE AREAS THAT I THINK WE COULD TAKE A LOOK AT IN STATE GOVERNMENT, SHIFT SOME OF THE REVENUES THAT WE HAVE IN THE GENERAL FUND TO A BONDING SOURCE THAT WOULD NOT INCREASE ANY TAXES, NOT INCREASE ANY KIND OF PROPERTY TAXES, PROVIDE THE ESSENTIAL SERVICES, AND CONTINUE TO SHOW THAT GOVERNMENT HAS AN ESSENTIAL ROLE ON EVERY LEVEL OF LIFE IN IOWA.

Borg: SENATOR LAMBERTI, I WANT TO DIRECT YOUR ATTENTION TO SOME NEWS THAT BROKE THIS WEEK, THAT IS, WE'VE ALREADY HEARD ABOUT ENRON AND THE EFFECT THAT'S HAD ON THE NATIONAL ECONOMY AND THE STOCK MARKET. THEN COMES WORLDCOM AND NOW XEROX, WITH THAT NEWS STILL UNFOLDING. STATES, INCLUDING IOWA, HAVE LOST MILLIONS OF DOLLARS IN INVESTMENTS BECAUSE OF WORLDCOM. IS THERE A LESSON TO BE LEARNED HERE, AND HAVE YOU BEEN THINKING ABOUT THAT AND THE EFFECTS ON IOWA?

Lamberti: WELL, I MEAN THE IMMEDIATE EFFECT IS WE'RE LOOKING AT POTENTIAL JOB LOSSES THAT COULD BE VERY SIGNIFICANT AS YOU START LOOKING AT SOME OF THESE BIG COMPANIES. BEYOND THAT, THERE NEEDS TO BE A RESTORATION OF CONFIDENCE IN THE MARKET OR WE'RE GOING TO BE FACING SOME PRETTY SIGNIFICANT PROBLEMS. I'M NOT SURE THAT IS PRIMARILY A STATE FUNCTION. IT'S REALLY A FUNCTION OF THE FEDERAL GOVERNMENT, THE SEC, AND SOME OF THEM RESTORING INTEGRITY, AND IN THE BUSINESS COMMUNITY, THAT THEY HAVE TO RESTORE INTEGRITY IN WHAT THEY'RE DOING IN TERMS OF THEIR FINANCIAL ACCOUNTING. AND THAT'S GOT TO HAPPEN QUICKLY.

Glover: BUT THE STATE IS A FAIRLY BIG INVESTOR THROUGH SOME FAIRLY LARGE RETIREMENT FUNDS. HAVE THEY BEEN IMPACTED BY ANY OF THIS?

Lamberti: YES, THEY HAVE.

Glover: HOW BADLY?

Lamberti: WE DON'T KNOW WHAT THE FULL IMPACT IS. I THINK IT'S A LITTLE PREMATURE BECAUSE WE DON'T KNOW, FOR EXAMPLE, WITH WORLDCOM AND SOME OF THOSE, WHERE ARE THEY HEADED. ARE THEY HEADED TO BANKRUPTCY? THAT APPEARS THAT COULD BE LIKELY.

Glover: IS THERE ANY DOUBT ABOUT THAT?

Lamberti: PROBABLY NOT. IT APPEARS THAT THEY ARE. AND I KNOW WE'RE ONE OF THE LARGER INVESTORS, OUR PENSION FUND, OUR IPERS FUND. SO THERE CERTAINLY IS AN IMPACT ON THAT, BUT HOW IT AFFECTS THE OVERALL PERFORMANCE OF THE FUND, I DON'T BELIEVE WE'VE HAD THE NUMBERS BACK AT THIS POINT TO KNOW.

Glover: REPRESENTATIVE HATCH, IS THERE A WORRY THERE?

Hatch: YEAH, THERE'S A WORRY, NOT ONLY FOR THE STATE BUT FOR THE EMPLOYEES OF THE STATE THAT HAVE SUNK THEIR WHOLE LIFE SAVINGS INTO IT. MY BROTHER WORKED FOR ENRON. HE LOST A HALF MILLION DOLLARS IN HIS PENSION. AND I THINK THAT WE CAN'T FORGET THAT THESE HEADLINES THAT WE SEE EVERY DAY IN THE NEWSPAPER, BIG STORIES LIKE TODAY WITH WORLDCOM AND SMALLER HEADLINES PACKED IN THE BUSINESS SECTION OF THE NEWSPAPER HAVE A DIRECT IMPACT ON PEOPLE THAT WE ARE SUPPOSED TO REPRESENT. THAT CONCERNS US. I BELIEVE AS A GOVERNMENT WE HAVE AN OBLIGATION TO SEARCH FOR THOSE ANSWERS AND TO PROTECT OUR EMPLOYEES AND OUR CITIZENS. AND I THINK THAT WE NEED -- FOR EXAMPLE, ONE WAY OF DOING THAT IS THAT IF WE'RE GOING TO LOOK AT TAX CUTS FOR BUSINESSES IN THE FUTURE, WE NEED TO HAVE A DIRECT POLICY, A SIGNIFICANT POLICY THAT THOSE TAX CUTS HAVE A PRECISE AND DIRECTED RESULT THAT WE WANT TO PROVIDE, NOT SO MUCH FOR THE COMPANY, BUT WHAT KIND OF RESULTS WILL IT PROVIDE. WILL IT PROVIDE GROWTH? EMPLOYMENT? WILL IT STABILIZE THE MARKET? THOSE ARE THE REASONS YOU WANT TO GIVE TAX CUTS. IN THE PAST TEN YEARS, WE'VE BEEN GIVING TAX CUTS TO ANY CORPORATION THAT CAN GATHER ENOUGH STEAM TO CONVINCE THE LEGISLATURE THAT IT WOULD BE GOOD FOR THEM, WITHOUT ANY DIRECT RESPONSE.

Obradovich: WELL, REPRESENTATIVE HATCH, IS IT TIME TO PUT SOME OF THOSE TAX CUTS ON HOLD? I MEAN RIGHT NOW THE STATE IS EXPECTING TO SEE SOME OF THE SIGNIFICANT FISCAL IMPACT OF TAKING THIS -- ANOTHER PENNY OF SALES TAX OFF OF UTILITIES. THERE ARE A VARIETY OF OTHER TAX CUTS THAT YOU'VE MENTIONED. SHOULD THE STATE BE LOOKING AT THOSE?

Hatch: WELL, ONE GOOD THING, ABOUT EVERY TWO YEARS WE HAVE AN ELECTION. AND THE THING THAT I'M LOOKING FORWARD TO IS BRINGING SOME OF THOSE QUESTIONS TO THE CAMPAIGN. I PERSONALLY BELIEVE THAT WE SHOULD SUSPEND TAX CUTS IN THE FUTURE.

Obradovich: WHAT DO YOU THINK, SENATOR LAMBERTI?

Lamberti: I DON'T BELIEVE WE SHOULD. I THINK MOST PEOPLE WILL TELL YOU, IN A DOWN ECONOMY, THE LAST THING YOU WANT TO DO IS RAISE TAXES. AND THAT'S EFFECTIVELY WHAT THAT WOULD BE, SUSPENSION OF SOMETHING THAT YOU'VE ALREADY PROMISED. WE CAN MANAGE THIS SITUATION. IT WOULD BE NICE IF WE HAD A LITTLE MORE LEADERSHIP AND COOPERATION FROM THE GOVERNOR. QUITE FRANKLY, HE'S BEEN SLOW TO ACT. AND THE REASON HE WANTS TO HIT ON THINGS LIKE WE'VE SEEN A SLIGHT UPTICK IN REVENUES IS BECAUSE THE LAST THING HE REALLY WANTS TO TALK ABOUT IS THE BUDGET. WE CAN MANAGE IT. WE'VE DEMONSTRATED WE CAN MANAGE IT, AND WE'RE JUST GOING TO HAVE TO MAKE THE HARD CHOICES.

Hatch: LET ME SAY THAT THE MANAGEMENT OF THE BUDGET, THE GOVERNOR HAS DONE EXCEEDINGLY WELL. IT'S THE DEVELOPMENT OF THE BUDGET. WHEN THE MANAGER HAS A BAD BUDGET, THEN IT'S DIFFICULT AND IT'S UP FOR CRITICISM. THESE BUDGETS, IN THE PAST COUPLE OF YEARS, HAVE HANDICAPPED OUR MANAGER, OUR GOVERNOR, IN PROVIDING THE SERVICES THAT WE NEED IN THIS STATE. AND IT'S THE LEGISLATURE THAT CREATES THE BUDGET. IT'S NOT THE GOVERNOR. HE DOESN'T SPEND ANYTHING THAT THE LEGISLATURE DOESN'T AUTHORIZE. AND WHEN YOU PREVENT THAT, WHEN WE DON'T SEE THE REVENUES, WHEN WE PUT TOGETHER A BUDGET THAT FALLS SHORT ON REVENUE, THAT'S OUR FAULT, THAT'S OUR RESPONSIBILITY, NOT THE GOVERNOR'S.

Glover: SENATOR LAMBERTI, NEXT WEEK THERE WILL BE THE APPOINTMENT OF A PROGRAM ELIMINATION COMMISSION TO LOOK AT GETTING AWAY FROM SOME PROGRAMS. HOW IS THAT GOING TO WORK, AND ARE WE GOING TO ACTUALLY ELIMINATE SOME PROGRAMS?

Lamberti: WELL, IT WILL WORK BY WE MAKE FIVE APPOINTMENTS, FOUR OF WHICH WILL BE FROM THE CAUCUSES OF BOTH THE HOUSE AND THE SENATE AND ONE BY LEGISLATIVE COUNCIL. AND THEY ARE GIVEN THE JOB OF TRYING TO IDENTIFY SAVINGS EQUIVALENT TO 2 PERCENT OF OUR BUDGET. THAT INCLUDES PROGRAMS, THE SALE OF ASSETS, AND SO FORTH. NOW, WE'VE BEEN DOWN THIS ROAD BEFORE WHERE WE TRIED TO ELIMINATE THINGS, AND WE KNOW IT'S VERY DIFFICULT. I'M HOPEFUL THEY'LL COME UP WITH A LIST OF RECOMMENDATIONS. ONE THING WE DID A LITTLE DIFFERENT THAN WHAT WE'VE DONE IN THE PAST IS WE'VE MODELED IT SOMEWHAT AFTER THE FEDERAL BASE CLOSING COMMISSION, WHERE WE SAY THEY'RE GOING TO PRESENT SOMETHING TO THE LEGISLATURE AND IT'S OUR INTENT THAT WE VOTE IT UP OR DOWN WITHOUT AMENDMENT BECAUSE WE KNOW HOW DIFFICULT IT IS TO GET RID OF THINGS. WE JUST, IN OUR LAST SPECIAL SESSION, PROPOSED THE ELIMINATION OF 12 PROGRAMS, SUSPENSION OF 15. ALL BUT ONE OF THOSE, THE LANGUAGE ACTUALLY REMAINS IN THE BOOKS, SO IT KEEPS COMING BACK YEAR AFTER YEAR. THAT SHOWS HOW DIFFICULT IT IS TO GET RID OF THINGS. BUT I'M HOPEFUL BECAUSE I BELIEVE THERE ARE THINGS THAT WE CAN GET RID OF, AND I'M LOOKING FORWARD TO THEIR REPORT WHEN THEY GIVE IT IN DECEMBER.

Glover: REPRESENTATIVE HATCH, YOU'RE SHAKING YOUR HEAD.

Hatch: YEAH, I THINK THAT WAS A POLITICAL HOAX, PUTTING TOGETHER A PROGRAM ELIMINATION COMMISSION THAT REALLY DOESN'T HAVE ANY AUTHORITY. IT'S NOT LIKE THE BASE CLOSING COMMISSION THAT HAD THE AUTHORITY AND THEN THE CONGRESS COULDN'T AMEND IT, HAD TO VOTE IT UP OR DOWN. THAT HAS SOME TEETH. THIS DOESN'T AND IT'S JUST GOING TO PROVIDE ANOTHER WAY IN WHICH WE'RE -- THE LEGISLATURE IS GOING TO AVOID THEIR RESPONSIBILITY. AND WE NEED TO HAVE I THINK A HARD LOOK NOT ONLY OF SPENDING, WHICH IS WHAT WE'VE BEEN DOING THE LAST COUPLE OF YEARS, BUT OF OUR REVENUE SOURCES, THE PROGRESSIVITY OF OUR TAX SYSTEM, THE USE OF OTHER REVENUES, THE USE OF OTHER FUNDS THAT WE HAVE AVAILABLE FOR THIS HARD TIME. WE'RE TALKING ABOUT CUTTING PROGRAMS THAT DRAMATICALLY AFFECT PEOPLE'S LIVES. LET ME GIVE YOU AN EXAMPLE. BROADLAWNS HOSPITAL LAST WINTER ELIMINATED PRESCRIPTION DRUG SERVICES TO OUTPATIENTS. AS A RESULT, A DOCTOR TOLD ME THE OTHER DAY, JUST TWO DAYS AGO, THAT HE KNOWS THAT PEOPLE HAVE DIED BECAUSE THEY COULDN'T AFFORD THE PRESCRIPTIONS THAT KEPT THEM GOING. CRITICALLY INJURED IS ONE ISSUE; DEATH IS ANOTHER. AND WE'RE GETTING AT THAT POINT WITH OUR MEDICAID SERVICES TO THE POOR. THE ELDERLY ARE NOT GETTING THE SERVICES THAT THEY NEED. BROADLAWNS, A COUNTY HOSPITAL, HAS NOW ELIMINATED THE INDIGENT CARE CENTER FOR POLK COUNTY. THIS IS NOT ABOUT MOVING CHESS PIECES ON A BOARD; THEY'RE TALKING ABOUT TAKING CHESS PIECES OFF THE BOARD. WHEN YOU DO THAT WITHOUT THE KNOWLEDGE OF ITS IMPACT OR CONSEQUENCES AND REFUSING TO LOOK AT OTHER WAYS OF DIVIDING UP YOUR REVENUE OR INCREASING REVENUE OR GETTING OTHER FUNDS, I THINK THAT'S A PROBLEM AND I THINK THIS COMMISSION IS JUST A HOAX.

Obradovich: WELL, SENATOR, THE LEGISLATORS MUST HAVE HAD SOME PROGRAMS IN MIND WHEN THIS PROGRAM ELIMINATION COMMISSION WAS COME UP WITH. SPECIFICALLY WHAT KIND OF PROGRAMS DO YOU THINK THE STATE IS DOING THAT PEOPLE CAN DO WITHOUT AT THIS POINT?

Lamberti: I THINK THEY'D BE SIMILAR TO THE ONES WE'VE ALREADY OFFERED UP, AND WE WANT THEM TO CONTINUE. PART OF THE PROBLEM IS -- AND THAT'S WHY WE SAY WE WANT THIS WITHOUT AMENDMENT -- IS BECAUSE WHEN WE START THROWING INDIVIDUAL ITEMS OUT THERE, WE START -- THEY ALL HAVE CONSTITUENCIES AND IT BECOMES VERY DIFFICULT TO GET RID OF THEM. YOU KNOW, IT'S INTERESTING, FOR THREE AND A HALF YEARS WE'VE HEARD THIS GOVERNOR TALK ABOUT EFFICIENCY IN GOVERNMENT, ABOUT REORGANIZING GOVERNMENT, AND OVER THREE AND A HALF YEARS WE'VE ESSENTIALLY GOT NOTHING EXCEPT A BUNCH OF LIP SERVICE. WE'VE GOT A LITTLE BIT OF REORGANIZATION, DNR THAT SAVED US LESS THAN A MILLION DOLLARS. WE GOT THE PROPOSED REORGANIZATION OF THE DEPARTMENT OF MANAGEMENT, ICN, THAT ACTUALLY WOULD HAVE COST US MONEY. SO YOU CAN'T HAVE IT BOTH WAYS. YOU CAN'T SAY THAT I'M FOR EFFICIENCY AND REORGANIZATION BUT THEN NOT BE WILLING TO DO ANYTHING. WE HAVE TAKEN THE LEAD ON TRYING TO DO THIS AND IDENTIFY PROGRAMS THAT, EVERY TERM AS WE HAVE CUT THE BUDGET, THE GOVERNOR HAS SAID WE HAVE NOT SPENT ENOUGH MONEY.

Obradovich: IS THERE NO ROOM LEFT, REPRESENTATIVE HATCH, TO FIND MORE ECONOMIES? SHOULD THERE BE MORE REORGANIZATION?

Hatch: YES, THERE COULD BE MORE REORGANIZATION. THE GOVERNOR HAS REORGANIZED THE DEPARTMENT OF TRANSPORTATION AND SAVED OVER $35 MILLION. THE DNR WAS A $5-MILLION SAVINGS. AND THE RESPONSE OF THE LEGISLATURE, WHEN HE SUBMITTED HIS REORGANIZATION FOR ADMINISTRATIVE AGENCIES, FELL ON DEAF EARS. SO YOU WANT TO BLAME THE GOVERNOR FOR THINGS THAT THE LEGISLATURE REFUSES TO ACT ON.

Borg: YOU'RE SHORT ON MONEY; I'M OUT OF TIME. THANK YOU VERY MUCH FOR BEING WITH US. THAT'S IT FOR THIS WEEK'S EDITION OF "IOWA PRESS." WE'LL BE BACK FRIDAY AT 6:30, SUNDAY AT NOON. I HOPE YOU'LL WATCH AT THOSE TIMES. I'M DEAN BORG. THANKS FOR JOINING US TODAY.

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