Iowa Public Television

Borg: IOWA'S SPECIAL LEGISLATIVE SESSION THIS WEEK FOUND AGREEMENTS JUST AS DIFFICULT AS DURING THE EARLIER REGULAR SESSION. STATEHOUSE JOURNALISTS ANALYZE WHAT HAPPENED AND WHY ON THIS EDITION OF "IOWA PRESS."

Borg: ON THURSDAY OF THIS PAST WEEK, MEMBERS OF IOWA'S GENERAL ASSEMBLY WERE BACK AT THE STATE CAPITOL TO PICK UP WHERE THEY LEFT OFF WHEN THEY ADJOURNED THE REGULAR SESSION IN EARLY MAY. THEY WERE BACK TO CONSIDER UNFINISHED BUSINESS. GOVERNOR TOM VILSACK CALLED THAT SPECIAL SESSION TO GIVE LEGISLATORS ANOTHER CHANCE TO CRAFT AN ECONOMIC DEVELOPMENT PACKAGE THAT HE CALLS THE IOWA VALUES FUND. PRIOR TO RECONVENING, THE DEMOCRATIC GOVERNOR AND THE LEADERS OF THE REPUBLICAN-CONTROLLED IOWA LEGISLATURE NEGOTIATED, BUT THEY DIDN'T HAVE AN AGREEMENT BEFORE THE SPECIAL SESSION CONVENED. THAT'S BECAUSE OTHER ISSUES, SUCH AS CHANGES IN IOWA'S TAX STRUCTURE AND SOME BUSINESS REGULATIONS, ARE ALSO ON THE POLITICAL BARGAINING MATERIAL WORKSHOP. FOR INSIGHTS ON WHAT HAPPENED, WE CALL ON: "DES MOINES REGISTER" POLITICAL COLUMNIST DAVID YEPSEN; "RADIO IOWA" NEWS DIRECTOR KAY HENDERSON; "ASSOCIATED PRESS" SENIOR LEGISLATIVE REPORTER MIKE GLOVER; AND "LEE NEWSPAPERS" DES MOINES BUREAU CHIEF KATHIE OBRADOVICH. KATHIE, I CALLED THAT A WORKSHOP. I COULDN'T QUITE FIND THE WORD THERE FOR WHAT IT WAS -- WHAT THEY WERE DOING IN BARGAINING, BUT BRING US UP TO DATE. THERE WAS CONSIDERABLE HYPE COMING INTO THIS SESSION. BUT WHAT HAPPENED?

Obradovich: GREAT EXPECTATIONS, DEAN, BUT THE SPECIAL SESSION WAS NOT SO SPECIAL. THEY WERE HERE FOR HOURS AND HOURS. THEY PASSED ONE BILL THAT'S HEADED FOR A VETO. THE SENATE PASSED TWO OTHER BILLS THAT CONTAINED JUST ABOUT EVERYTHING THAT WAS LEFT ON THE TABLE, BUT THE HOUSE WENT HOME BEFORE THEY EVEN GOT TO A VOTE, SO IT'S BACK TO THE BACK ROOM, AS YOU SAID, TO TALK ABOUT THE DETAILS AGAIN.

Glover: DEAN, A LOT OF PEOPLE ARE HAVING DIFFICULTY FINDING THE WORDS TO DESCRIBE THIS SPECIAL LEGISLATIVE SESSION, SO WE SYMPATHIZE WITH YOU. BUT "LIMBO" IS A GOOD WORD TO DESCRIBE WHAT THINGS ARE LIKE AT THE STATEHOUSE. THERE WAS SOME PROGRESS. THE SENATE PASSED A PACKAGE OF BILLS THAT THEY HAD REFUSED TO DEAL WITH BEFORE, NOT TO THE LIKING OF THE PEOPLE IN THE HOUSE, NOT TO THE LIKING OF THE GOVERNOR, BUT THEY PASSED SOMETHING. SO WE'RE GOING TO SPEND THE NEXT FEW DAYS TRYING TO HAMMER OUT THE DETAILS. THESE ARE BIG THINGS AND AGREEMENT IN CONCEPT DOES NOT MEAN AGREEMENT IN DETAILS. FOR EXAMPLE, THE GOVERNOR WANTS AN INCOME TAX REVISION THAT'S REVENUE NEUTRAL. THE REPUBLICANS WANT AN INCOME TAX REVISION THAT CUTS TAXES $310 MILLION. THAT'S A BIG DIFFERENCE.

Borg: SO, DAVE, DOES THIS MEAN THAT THE LEGISLATURE IS NOT ADJOURNED -- THE SPECIAL SESSION IS NOT ADJOURNED? THEY'RE GOING TO BE BACK?

Yepsen: THAT'S RIGHT. THEY'RE COMING BACK NEXT WEEK. AS WE SPEAK, KEY LAWMAKERS HAVE AGREED TO MEET TO TALK ABOUT -- TO WORK OUT SOME OF THESE DIFFERENCES. THE SENATE DID PASS A PLAN. THE REPUBLICANS ARE NOW TRYING TO IRON OUT THE DIFFERENCES BETWEEN THE SENATE PLAN AND THE HOUSE PLAN IN SUCH A WAY THAT CAN BE ACCEPTABLE TO THE GOVERNOR. I WAS AT THE CAPITOL LATE THIS AFTERNOON TALKING TO STEW IVERSON. THE GOVERNOR'S LOBBYISTS WERE IN THERE WITH HIM WORKING ON THE LITTLE DETAILS. SO THE FACT IT DIDN'T GET DONE, IT'S FRUSTRATING TO PEOPLE, BUT THINGS ARE MOVING ALONG. WHAT SENATOR IVERSON TOLD ME WAS HE EXPECTS THE HOUSE WILL COME BACK, SAY, ON TUESDAY LATE IN THE AFTERNOON TO START WORK ON PASSING WHAT THEY CAN, AND THE SENATE WILL THEN FOLLOW ON WEDNESDAY.

Henderson: BUT ONE OF THE WORRISOME THINGS FOR ADVOCATES OF OPENNESS AND GOVERNMENT -- AND MANY OF THOSE ADVOCATES ARE JOURNALISTS -- IS THAT THEY'VE DECIDED TO DO THIS IN THE BACK ROOM RATHER THAN USE THE PROCESS WHEREBY THE PUBLIC GETS TO SIT IN ON THE DEBATE AMONGST LEGISLATORS AS THEY GO THROUGH, ITEM BY ITEM, THE THINGS THAT ARE ON THE TABLE. SO ONE OF THE THINGS THAT THEY'VE CHOSEN TO DO IS TO GO INTO WHAT USED TO BE A SMOKE-FILLED ROOM AT THE STATEHOUSE. THEY CAN NO LONGER SMOKE IN THAT ROOM, BUT THEY'RE TRYING TO COME TO AN AGREEMENT BEHIND THE SCENES INSTEAD OF LETTING IOWANS IN ON WHAT THE DEAL IS.

Yepsen: THERE IS SMOKE IN SENATOR IVERSON'S ROOM. [ LAUGHTER ] LET ME RISE IN DEFENSE OF CLOSED, SMOKE-FILLED ROOMS. THE INTEREST GROUPS IN THIS THING ARE SO ADAMANT AND SO INSISTENT ON THEIR POSITION THAT AT SOME POINT IN THAT POLITICAL DISCUSSION, LEADERSHIP SAYS, "THE LOBBYISTS CAN LEAVE THE ROOM AND WE HAVE TO TAKE CARE OF THIS OURSELVES." IT HAPPENED ON THE HOG LOT BILL. YES, IT'S FRUSTRATING. IT'S NOT RIGHT. IT'S NOT THE WAY WE LEARNED HOW GOVERNMENT WORKS IN CIVICS CLASS, BUT AT SOME POINT YOU HAVE TO CUT A DEAL, AND THAT'S WHAT THEY'RE STARTING TO DO. AND SO THAT MEANS PEOPLE HAVE TO GET OFF FROM THE CORNER AND COMMIT POLITICS.

Obradovich: AND THE PROCESS THAT THEY HAVE TO GO THROUGH AS AN ALTERNATIVE TO WHAT THEY'RE DOING HAS A LOT OF LIMITATIONS. IF THE HOUSE AND THE SENATE HAD DECIDED TO TAKE THINGS TO THE HILT, EACH SIDE INSIST ON THEIR OWN VERSION OF THE LEGISLATION, AND SEND IT TO WHAT THEY CALL A CONFERENCE COMMITTEE, A BARGAINING COMMITTEE LIKE KAY WAS TALKING ABOUT WHERE YOU HAVE TO BE IN PUBLIC MEETING AND HASH IT OUT BETWEEN THE HOUSE AND THE SENATE, THERE'S A LIMIT ON -- YOU CAN'T BRING IN ANY TOPICS THAT WEREN'T IN THE TWO BILLS IN ORIGIN. SO YOU'RE LOCKED INTO AN AGENDA. AND WHEN YOU BRING IT BACK TO THE CHAMBERS, YOU HAVE TO VOTE IT UP OR DOWN WITHOUT AMENDMENTS. SO AGAIN, IT'S LIMITED.

Glover: CONFERENCE COMMITTEES DO NOT HAVE A GREAT RECORD FOR OPENNESS EITHER. I CAN RECALL CONFERENCE COMMITTEE REPORTS THAT WERE WRITTEN IN SOME BACK ROOM SOMEWHERE AND THEN WALKED AROUND AND CONFEREES WERE SIGNING.

Yepsen: DEAN, LET ME BACK UP A MINUTE. I THINK THE THING THAT CHANGED THIS WEEK WAS THE SENATE REPUBLICANS DECIDING THAT THEY WERE GOING TO USE SOME MONEY THEY WERE GETTING FROM THE FEDERAL GOVERNMENT IN THIS TAX CUT. YOU'LL RECALL THE NEW FEDERAL TAX BILL THAT WOULD TAX CUT. IT ALSO INCLUDED AID TO THE STATES, AND IOWA GETS ABOUT $180 MILLION. WELL, THIS IS LIKE A -- FOR FIVE MONTHS THEY'VE BEEN STRUGGLING OVER DO WE RAISE TAXES, DO WE BORROW MONEY. ALL OF A SUDDEN IN RIDES CHARLES GRASSLEY WITH $180 MILLION FOR IOWA, AND THE REPUBLICANS ALL SAY, "WELL, LET'S SPEND THAT." SORT OF LIKE THE HERO RIDING IN TO SAVE THE DAY. SO BY SPENDING THIS MONEY INSTEAD OF RAISING TAXES OR BORROWING MONEY, THE REPUBLICANS BROKE A BIG LOGJAM. AND I THINK THAT THAT SENATE REPUBLICAN PLAN THAT WAS PUT TOGETHER LAST WEEK WILL PROBABLY BE WHAT THE FINAL DEAL ULTIMATELY LOOKS LIKE.

Borg: THAT MAYBE ANSWERS MY QUESTION. I WAS GOING TO SAY IF THEY'RE GOING NOW INTO SMALL GROUPS -- OR A SMALL GROUP TO NEGOTIATE, WHY COULDN'T THEY HAVE DONE THAT, MIKE, BEFORE THE SPECIAL SESSION? IS IT BECAUSE THE MONEY JUST BECAME AVAILABLE OUT THERE? IS THAT THE NEW --

Glover: DAVE IS RIGHT; THAT'S A BIG, NEW DEVELOPMENT. THERE'S A PRETTY GOOD SIZED POT OF MONEY THAT WAS THERE THAT WAS NOT ON THE TABLE BEFORE. THAT'S AN ALTERNATIVE FUNDING METHOD, AND THAT GIVES PEOPLE WAYS TO SAVE FACE A LITTLE BIT. THEY CAN SAY, "WELL, I DIDN'T CAVE IN ON MY POSITION NOT TO BORROW MONEY, I DIDN'T CAVE IN ON MY POSITION NOT TO RAISE TAXES, I JUST GOT THIS MONEY OVER HERE," FORGETTING THAT BEFORE THEY WERE THINKING THE IDEA OF AN IOWA VALUES FUND WAS TRULY GOOFY. BUT THE DYNAMICS OF THIS THING AS IT WENT OVER THE SESSION I THINK ALMOST DEMANDED THAT WE GO THROUGH A REGULAR SESSION AND INTO A SPECIAL SESSION JUST BECAUSE THESE ARE SUCH BIG DEALS. ANY ONE OF THE PIECES OF THIS PUZZLE WOULD BE A LANDMARK FOR MOST LEGISLATIVE SESSIONS. AND I THINK LEGISLATORS JUST HAVE TO GET THROUGH IN THEIR MINDS THEY'RE ACTUALLY GOING TO ACCOMPLISH ALL THESE KINDS OF THINGS, AND THAT JUST TAKES TIME.

Henderson: AND --

Borg: GO AHEAD.

Henderson: TALKING BY PHONE IS NOT THE SAME AS GOING INTO ROOM FACE TO FACE AND DEBATING AND HASHING THINGS OUT, AND THAT'S HOW SENATE REPUBLICANS GOT WHERE THEY DID ON THURSDAY. ON WEDNESDAY NIGHT THEY MET FOR FOUR HOURS IN A ROOM. STEW IVERSON DID NOT LET THEM EAT -- LEAVE THE ROOM. THEY HAD TO STAY THERE UNTIL THEY CAME UP WITH A PLAN, AND THAT WAS THE THING THAT PUSHED THEM OVER THE EDGE.

Borg: WHILE YOU HAVE THE FLOOR THERE, KAY, I KNOW THAT LATE FRIDAY, THE GOVERNOR TOOK ACTION ON LEGISLATION THAT WAS PASSED DURING THE REGULAR SESSION.

Henderson: RIGHT.

Borg: CAN YOU BRING US UP TO DATE ON THAT?

Henderson: THERE ARE FOUR KEY BILLS THAT WE WERE TAKING A LOOK AT. HE HAD TWO PIECES OF POLICY. ONE WOULD HAVE MADE CLERGY MANDATORY REPORTERS. IT WAS A BILL SPAWNED BY THE CONTROVERSY WITHIN THE CATHOLIC CHURCH AND THE ACCUSATIONS AGAINST PRIESTS. HE VETOED IT BECAUSE THE BILL ALSO MARRIED A PROPOSAL THAT LOWERED THE AGE OF CONSENT, AND THE GOVERNOR SAID THAT IT WOULD MAKE CRIMINALS OF CHILDREN WHEN INDEED THOSE CHILDREN SHOULD BE HELPED, NOT HURT. HE ALSO HAD ANOTHER BILL WHICH MADE IT EASIER FOR CITIES AND COUNTIES TO MERGE. HE DIDN'T LIKE SOME OF THE PROVISIONS OF THAT BILL, SO HE VETOED THAT AS WELL. THERE WERE TWO BUDGET BILLS SITTING ON HIS DESK, AND WE ALL SORT OF SPECULATED THAT HE WOULD VETO A WHOLE BUDGET BILL, BECAUSE THAT WOULD BE A HAMMER THAT HE WOULD BE ABLE TO HOLD OVER LEGISLATORS' HEAD AND SAY YOU HAVE TO COME BACK AND DO THE BUDGET IN ADDITION TO THIS IOWA VALUES FUND. HE DIDN'T DO THAT. HE JUST USED HIS LINE-ITEM VETO POWER TO TAKE OUT PROVISIONS IN THE BILL THAT HE DIDN'T LIKE, LANGUAGE HE DIDN'T LIKE. ONE OF THE PIECES OF LANGUAGE HE DIDN'T LIKE WAS PROVISIONS THAT WERE INSERTED THAT WOULD HAVE SET THE STATE ON THE PATH TO SELLING THE IOWA COMMUNICATIONS NETWORK.

Borg: NOW, GOVERNOR VILSACK, IF HE SIGNED THAT APPROPRIATIONS BILL WITH SOME LINE-ITEM VETOES THERE, HE MUST BE VERY CONFIDENT THAT THERE'S GOING TO BE AN IOWA VALUES FUND FOR ECONOMIC DEVELOPMENT, BECAUSE THE ORIGINAL APPROPRIATION BILL CONTAINS NOTHING FOR THE DEPARTMENT OF ECONOMIC DEVELOPMENT.

Glover: THEY LARGELY -- WHEN THEY PUT TOGETHER THE ECONOMIC DEVELOPMENT BUDGET, THEY LARGELY ZEROED OUT ALL THE SPENDING THE STATE DOES TO TRY TO ATTRACT BUSINESSES, TO LURE BUSINESSES, TO NURTURE BUSINESSES, BECAUSE THE ASSUMPTION WAS THERE WOULD BE AN IOWA VALUES FUND OF SOME SORT. THAT'S THE ASSUMPTION ON BOTH SIDES OF THE PARTISAN AISLE. THE GOVERNOR IS VERY CONFIDENT AT THE END OF THE DAY THAT HE'S GOING TO HAVE SOME KIND OF AN IOWA VALUES FUND. THE WAY BARGAINING WORKS, THOUGH, YOU DON'T SAY, "WELL, OKAY, I'M GOING TO GET AN IOWA VALUES FUND. I'LL TAKE WHATEVER YOU CAN SEND ME." YOU STAND UP THERE AND YOU SHOUT, LIKE THE GOVERNOR DID LAST NIGHT, YOU POUND THE TABLE AT 10:30 AT NIGHT AND SAY, "I'VE GOT TO HAVE THIS AND ALL THAT." THAT'S PART OF THE GAME.

Yepsen: THE GOVERNOR IS A GREAT ACTOR. I MEAN HE CALLS US ALL DOWN TO THE CAPITOL -- TO HIS OFFICE THURSDAY NIGHT AND BEATS UP THE LEGISLATURE FOR NOT PASSING THIS FUND. AND THEN TODAY, ON FRIDAY WHEN HE SIGNS THE BILLS, HE SIGNS ALL THE BUDGET BILLS. HAD HE VETOED ONE OF THEM, IT WOULD HAVE BEEN A HUGE IRRITATION, WOULD HAVE MADE MEMBERS MAD. THIS SENDS A NICE SIGNAL TO LEGISLATORS THAT THEY CAN COME BACK AND FOCUS ON THE VALUES FUND AND NOT HAVE TO DEAL WITH ANOTHER BUDGET BILL.

Obradovich: THE OTHER THING ABOUT THE BUDGET IS THAT VILSACK HAS BEEN VERY CONSISTENT ALL ALONG, SAYING THAT THE BUDGET IS NOT THE ISSUE IN THIS SESSION. THE ISSUE -- AND HE DOESN'T WANT THE BUDGET TO BE THE ISSUE BECAUSE THERE'S A LOT OF ICKY THINGS IN THE BUDGET THAT NOBODY LIKES. THERE'S A LOT OF BUDGET CUTS. THERE'S A LOT OF PAIN IN THE BUDGET. NOBODY WANTS TO FOCUS ON THAT. HE WANTS PEOPLE TO LOOK AHEAD, FOCUS ON THE VALUES FUND, FOCUS ON THE WAYS TO IMPROVE THE STATE'S ECONOMY IN THE FUTURE. AND BY VETOING BUDGET BILLS, HE BRINGS THE FOCUS BACK TO THAT BUDGET, WHERE HE DOESN'T WANT IT.

Glover: WHAT HE WANTS THE CONVERSATION TO BE -- AND KATHIE IS RIGHT -- HE WANTS THE CONVERSATION TO BE ABOUT, LOOK WHAT I'M ABOUT TO DO FOR YOU, NOT LOOK AT WHAT I JUST DID TO YOU.

Borg: KAY, BRING US UP TO DATE ALSO ON -- THE SENATE HAS A VERSION NOW OF THE IOWA VALUES FUND. DOES THE HOUSE HAVE A VERSION?

Henderson: THE HOUSE PASSED A VERSION IN REGULAR SESSION, AND 79 MEMBERS OF THE HOUSE ENDORSED IT. THAT MEANS BOTH REPUBLICANS AND MANY DEMOCRATS ENDORSED IT, WHEREBY THE STATE WOULD BORROW MONEY USING, AS COLLATERAL, WHAT IS CALLED THE STREAMLINE SALES TAX. WHAT THAT REALLY MEANS IS THAT IOWA WILL START COLLECTING THE SALES TAX ON INTERNET PURCHASES. IN THE MIX OF THE FINANCING DIAGRAM IS ALSO THE USE OF GAMBLING TAXES. THEIR IOWA VALUES FUND WAS IN THE NEIGHBORHOOD OF $800 MILLION. WHAT PASSED THE SENATE LATE THURSDAY NIGHT IS A FUND THAT'S ROUGHLY $500 MILLION, AND IT'S WHAT THEY CALL PAY AS YOU GO. THEY DON'T WANT THE STATE TO BORROW. AND AS DAVID MENTIONED EARLIER, THEY WOULD USE $100 MILLION FROM THE FEDS TO SORT OF JUMP-START THAT FUND IN THE FIRST YEAR. AND IN SUBSEQUENT YEARS, THEY EXPECT THE STATE TO BEGIN COLLECTING SALES TAX REVENUE FROM INTERNET SALES AND ELECTRONIC SALES.

Borg: AND ISN'T THERE SORT OF A PHASE-IN, ALSO, OF HELP THAT WOULD BE GIVEN TO BUSINESSES? THAT IS, ISN'T THAT AN OBJECTION OF THE DEMOCRATIC GOVERNOR THAT ALL OF THE MONEY DOESN'T BECOME AVAILABLE, MIKE?

Glover: HE ARGUES THAT THE REAL IMPACT OF AN IOWA VALUES FUND, WITHOUT GETTING INTO THE MERITS OF IT AND ENDORSING IT ONE WAY OR THE OTHER, HE ARGUES THAT AN IOWA VALUES FUND NEEDS TO HAVE A BIG POT OF MONEY UP FRONT TO DO THESE PROJECTS TO MAKE THINGS AVAILABLE THAT'S GOING TO BRING BUSINESSES HERE RIGHT NOW. HE ARGUES IF YOU DRIZZLE THIS MONEY OUT OVER SEVEN YEARS OR SO, THERE IS NEVER ONE CRITICAL BALANCE POINT WHERE YOU CAN ACTUALLY BEGIN LURING PEOPLE HERE. REPUBLICANS, FOR THEIR PART, SAY THEY'RE OPPOSED TO BORROWING, THAT THEY'RE WILLING TO DO THIS FUND AS LONG AS THEY PAY FOR IT AS THEY GO, THAT IOWA HAS A LONG TRADITION OF PAYING FOR THINGS AS YOU GO. THOSE ARE THE TWO ARGUMENTS.

Yepsen: ONE OF THE FLASH POINTS THAT REMAINS IS THE SIZE OF THE TAX CUT. FOR REPUBLICANS -- FOR THE GOVERNOR TO GET REPUBLICANS TO ENDORSE ANY KIND OF AID TO BUSINESS, THAT'S A BIG DEAL. I MEAN REPUBLICANS AREN'T BIG ON PUMP PRIMING, ON SPENDING GOVERNMENT MONEY TO PICK WINNERS AND LOSERS. SO HE'S GOT THEM TO GO ALONG WITH THAT TO THE TUNE OF $500 MILLION. BUT IN RETURN, THE REPUBLICANS ARE SAYING, "AH-HA, IF WE'RE GOING TO DO THIS FOR YOU, GOVERNOR, THEN YOU'RE GOING TO DO SOMETHING FOR US." WE'RE GOING TO HAVE TO REFORM REGULATIONS ON BUSINESS. IT'S VERY CONTROVERSIAL WITH DEMOCRATIC CONSTITUENCY GROUPS. AND WE'RE GOING TO HAVE TO CUT SOME TAXES TOO. SO ONE OF THE PIECES OF THIS THAT I THINK IS STILL A BONE OF CONTENTION IS THE SIZE OF THE TAX CUT. THE REPUBLICANS HAVE COME WITH A TAX CUT -- AN INCOME TAX CUT THAT THEY SAY IN THE FIRST COUPLE OF YEARS IS BASICALLY REVENUE NEUTRAL. IN OTHER WORDS, IT DOESN'T REALLY TAKE THAT MUCH FROM THE TAXPAYERS, BECAUSE ON THE OTHER END THEY'RE GOING TO QUIT GETTING RID OF THE SALES TAX ON UTILITY BILLS. AND THEN OVER TIME THE SIZE OF THE TAX CUT WILL RISE. VILSACK HAS A PROBLEM WITH THAT, AND SO THERE'S A LOT OF ARGUING GOING ON OVER JUST HOW THIS IS GOING TO WORK AND HOW IT'S GOING TO BE CALIBRATED. AND TO MAKE IT EVEN MORE COMPLICATED, DEAN, IT'S ALL PREDICATED ON WHETHER OR NOT VOTERS IN IOWA PASS A CONSTITUTIONAL AMENDMENT IN 2006 TO SAY THAT IT TAKES A SUPERMAJORITY OF THE LEGISLATURE TO INCREASE TAX RATES. SO THEY'VE GOT TO WORK THROUGH THAT COMPLEXITY.

Glover: IF THIS DOESN'T HAPPEN -- AND I THINK THIS IS LIKELY TO HAPPEN IN SOME FORM OR FASHION OR ANOTHER, BUT THAT'S NOT 100 PERCENT SURE. IF THIS DOESN'T HAPPEN, THAT WILL BE THE ANCHOR THAT DRAGS IT DOWN. THERE ARE REALLY STILL BIG DIFFERENCES BETWEEN THE GOVERNOR WITH THE LEGISLATURE OVER THAT INCOME TAX PACKAGE, AND THEY'RE DIFFERENCES THAT MAY NOT BE BRIDGEABLE. THERE IS A GROUP OF PEOPLE AT THE STATEHOUSE THAT DOESN'T WANT THIS PACKAGE TO PASS. AND IF THEY CAN BE HARD CORE AND ARGUE FOR A BIG TAX CUT THAT ENDS THE TAX BREAK ON THE SALES TAX TO UTILITIES, WHICH IS A PRETTY GOOD MIDDLE-INCOME TAX BREAK, IF THEY CAN ARGUE THAT AND KEEP THAT DIFFERENCE THERE, THAT PACKAGE CAN DRAG THE WHOLE THING DOWN.

Borg: KATHIE, ELABORATE ON WHAT MIKE HAS JUST OPENED HERE, AND THAT IS THE POLITICS THAT ARE INVOLVED. THERE'S THE DEMOCRATIC GOVERNOR, REPUBLICAN-CONTROLLED LEGISLATURE, THERE'S PHILOSOPHICAL DIFFERENCES THERE, AS DAVE HAS ALREADY OUTLINED, BUT THEN INTRAPARTY SQUABBLING AMONG REPUBLICANS.

Obradovich: EXACTLY. AMONG REPUBLICANS, YOU'VE GOT FOLKS LIKE CHRISTOPHER RANTS, WHO CONCLUDED THAT GOVERNOR VILSACK WON THE ELECTION AND HE'S GOING TO BE THE GOVERNOR FOR FOUR YEARS AND THEY MIGHT AS WELL WORK WITH HIM. THEN YOU'VE GOT A FACTION WITHIN THE REPUBLICAN PARTY WHO SAYS THAT ANYTHING THAT REPUBLICANS DO THAT GIVES VILSACK SOMETHING MAJOR THAT THEY WANT -- THAT HE WANTS AND THAT REPUBLICANS REALLY DON'T LIKE IS SOMETHING FOR DEMOCRATS TO USE IN THE NEXT ELECTION. SO YOU'VE GOT THAT. YOU'VE GOT DEMOCRATS, THEN, WHO ARE DISAGREEING WITH EACH OTHER AS WELL. VILSACK WANTS THE VALUES FUND AND HE'S WILLING TO ACCEPT, AS DAVID SAID, SOME THINGS FROM REPUBLICANS -- OR FOR REPUBLICANS IN ORDER TO GET THAT. DEMOCRATS IN THE LEGISLATURE, THOUGH, DO NOT LIKE THIS INCOME TAX CUT. THEY DO NOT LIKE -- AT LEAST IN THE SENATE, THEY DON'T LIKE THE PROPERTY TAX CUT -- OR PROPERTY TAX REFORM THAT'S ASSOCIATED WITH THIS. AND THEY REALLY, REALLY HATE THE REGULATORY REFORMS, WHICH INCLUDE THINGS LIKE CHANGES TO UNEMPLOYMENT COMPENSATION AND THINGS THAT IMPACT WORKERS, CONSUMERS, OTHERS. THERE'S A LOT OF DEMOCRATIC CONSTITUENCY GROUPS OUT THERE RIGHT NOW THAT ARE KIND OF MAD AT THE GOVERNOR, INCLUDING THE STATE TEACHERS UNION, WHO IS RUNNING ADS AGAINST SOME OF THESE PROGRAMS.

Glover: ONE OF THE THINGS YOU'VE GOT GOING HERE IS YOU'VE GOT THE BEGINNINGS OF A REPUBLICAN AND DEMOCRATIC GUBERNATORIAL PRIMARY. THIS SITTING GOVERNOR JUST GOT REELECTED AND HE SAID HE'S NOT GOING TO RUN FOR A THIRD TERM AND A LOT OF PEOPLE ARE INTERESTED IN TRYING TO REPLACE HIM. SO YOU'VE GOT A BUNCH OF REPUBLICANS THAT ARE POSITIONING THEMSELVES ON THE IDEOLOGICAL SCALE FOR A REPUBLICAN GUBERNATORIAL PRIMARY, AND A BUNCH OF DEMOCRATS DOING THE SAME THING.

Yepsen: I THINK THE REPUBLICANS LAST WEEK WORKED OUT THEIR FAMILY FEUDS, IF YOU WILL. THEY USED -- BY AGREEING NOT TO BORROW MONEY AND NOT TO RAISE TAXES FOR THE VALUES FUND, ALL REPUBLICANS CAN BE LOVEY-DOVEY AND HAPPY AND THEY PASS IT WITH 29 REPUBLICAN VOTES. THE FEUD INSIDE THE DEMOCRATIC PARTY THAT KATHIE DESCRIBED IS MUCH BIGGER AND IT'S REAL AND THERE'S ANIMOSITY UP THERE. DEMOCRATIC CONSTITUENCY GROUPS THAT SEE GOVERNMENT -- THAT NEED GOVERNMENT MONEY TO SPEND DON'T LIKE THE IDEA OF GIVING THAT $180 MILLION TO A VALUES FUND. THEY WANT IT FOR THEIR OWN DEALS. THEY DON'T LIKE THE IDEA. THE STATE OF IOWA, DEAN, FOR EXAMPLE, BECAUSE OF THE FEDERAL TAX CUT, WILL GET A WINDFALL. IF THE FEDERAL GOVERNMENT GIVES YOU MORE MONEY BACK BECAUSE OF FEDERAL DEDUCTIBILITY, THAT CREATES MORE STATE TAXABLE INCOME, TO THE TUNE OF ABOUT $40 MILLION. THOSE GROUPS WANT TO SPEND IT; THEY DON'T WANT TO GIVE IT BACK TO THE TAXPAYER. TODAY THE GOVERNOR -- FRIDAY AFTERNOON THE GOVERNOR THREW A LITTLE BONE TO THE DEMOCRATIC PARTY: HE VETOED THE CHARTER BILL. WHAT THAT IS DESIGNED TO DO IS TO MAKE SOME OF THE RANK AND FILE DEMOCRATS IN COUNTY COURTHOUSES ALL OVER THE STATE HAPPY THAT THEY DON'T HAVE TO WORRY ABOUT MERGED GOVERNMENTS NOW.

Borg: BUT ISN'T THE INTRAPARTY SQUABBLE AMONG REPUBLICANS, WHICH YOU SAY MAY BE HEALED OR AT LEAST HEALING OVER, ISN'T THAT MORE SERIOUS TO PASSING ANYTHING HERE THAN WOULD BE ANYTHING AMONG THE DEMOCRATS? THEY'RE IN THE MINORITY?

Yepsen: IT WOULD HAVE BEEN, DEAN, IF IT HADN'T BEEN HEALED. NOW THAT IT'S BEEN HEALED, REPUBLICANS FEEL THEY CAN DO THIS ONLY WITH REPUBLICAN VOTES ON BOTH SIDES. WE'LL SEE IF LEADERS CAN PULL THAT OFF.

Borg: BECAUSE THE GOVERNOR SAID, "I'M REALLY THE ONLY DEMOCRATIC VOTE THAT COUNTS."

Yepsen: WHICH ALSO IRRITATED THE HECK OUT OF DEMOCRATS WHEN THE GOVERNOR CAME OUT HERE AND SAID THAT! THEY'RE SAYING, "WAIT A MINUTE, YOU KNOW, WE COUNT FOR SOMETHING TOO." SO THE DEMOCRATIC MINORITY IS VERY IRRITATED. AND REMEMBER THIS, THE MAJORITY PARTY ALWAYS SETS THE AGENDA. THE OLD SAYING IS THE MINORITY PARTY SETS THE CLOCK.

Glover: ONE OF THE OTHER DYNAMICS THAT'S AT WORK HERE THAT A LOT OF DEMOCRATS DON'T LIKE TO SAY PUBLICLY -- BUT I THINK THEY FEEL IT -- IS WHAT IS THE IOWA VALUES FUND. THE IOWA VALUES FUND IS A HALF-BILLION-DOLLAR PACKAGE, MOST OF WHICH IS GOING TO BUSINESSES. AND A LOT OF DEMOCRATS -- JUST REFLEXIVELY, THE IDEA OF GIVING A HALF BILLION DOLLARS TO BUSINESSES JUST DRIVES THEM ABSOLUTELY NUTS.

Obradovich: THE OTHER WAY THESE INTRAPARTY SQUABBLES MAY STILL PLAY OUT IS THE FACT THAT, IN THE HOUSE AT LEAST, THEY WERE ABLE TO LOSE SOME REPUBLICANS, BECAUSE A LOT OF DEMOCRATS VOTED FOR THE VALUES FUND, A LOT OF DEMOCRATS VOTED FOR PROPERTY TAX REFORM. NOW ALL OF THOSE FOUR BILLS ARE ROLLED INTO ONE. SO IF DEMOCRATS DON'T WANT TO VOTE FOR THIS GOD-AWFUL REGULATORY REFORM THAT THEY HATE, THEY'RE GOING TO HAVE TO VOTE AGAINST THE ENTIRE PACKAGE. ON THE OTHER HAND, SOME OF THE SENATE CHANGES -- THEY MAY LOSE SOME REPUBLICANS WHO WOULD HAVE VOTED FOR IT. SO THAT'S ONE OF THE REASONS THEY'RE STILL TALKING AND WHY I DON'T THINK ALL OF THE INTRAPARTY REPUBLICAN SQUABBLES ARE HEALED IS BECAUSE YOU STILL HAVE TO PUT THAT PUZZLE TOGETHER.

Borg: WELL, KAY, YOU GO AHEAD. YOU SAY WHAT YOU WANT AND I'M GOING TO ASK YOU A QUESTION TOO.

Henderson: ONE OF THE OTHER SQUABBLES THAT'S GOING ON IS THAT CITIES AND COUNTIES AROUND THE STATE ARE LAYING OFF POLICE AND FIREFIGHTERS AND, BOY, THE HUE AND CRY IS REACHING THE STATEHOUSE. AND GOVERNOR VILSACK HAS PROPOSED USING PART OF THE ECONOMIC STIMULUS MONEY THAT'S COMING IOWA'S WAY FROM THE FEDERAL GOVERNMENT TO GIVE COUNTIES AND CITIES A WAY TO MAKE UP SOME OF THAT BUDGET SHORTFALL THAT WAS, IN THE BEGINNING, CREATED BY THE STATE, THE STATE CUT AID TO CITIES AND COUNTIES. THE GOVERNOR PROPOSED USING ABOUT $40 MILLION -- I MEAN $60 MILLION. REPUBLICANS ON THE HOUSE SIDE DECIDED THAT, YOU KNOW, THAT'S A GOOD IDEA, WE'RE GETTING A LOT OF HEAT BACK HOME, SO LET'S GIVE THEM $40 MILLION. AND NOW THE SENATE HAS THROWN THAT WHOLE THING HAYWIRE BECAUSE THEY DECIDED THEY'RE GOING TO USE THE WHOLE POT OF MONEY FOR ECONOMIC DEVELOPMENT.

Glover: JUST A CAUTIONARY NOTE. I KNOW THAT THE MOMENTUM IS THERE, THE FIX IS GOING TO BE IN, THIS THING IS GOING TO HAPPEN. I DON'T THINK THIS IS A DONE DEAL. THERE ARE TOO MANY PEOPLE, TOO MANY FORCES THAT ARE ALLIED AGAINST THIS THING TO MAKE IT A COMPLETELY DONE DEAL. THE LEGISLATURE, WHETHER IT'S THE IOWA LEGISLATURE, WHETHER IT'S CONGRESS, WHETHER IT'S THE UTAH LEGISLATURE, LEGISLATURES ARE INHERENTLY CONSERVATIVE BODIES IN THE TRADITIONAL SENSE OF THE WORD CONSERVATIVE, WHICH IS THEY DON'T LIKE CHANGE. IT'S ALWAYS EASIER FOR A LEGISLATURE TO DO NOTHING THAN TO DO SOMETHING, AND THESE ARE VERY BIG SOMETHINGS.

Yepsen: THE WHOLE THING WITH LOCAL GOVERNMENTS, IT'S JUST ONE MORE GROUP OF PEOPLE THAT'S OUT THERE TRYING TO BEAT THIS THING UP AND DEFEAT IT. AT BOTH ENDS OF THE IDEOLOGICAL SPECTRUM, DEAN, VERY CONSERVATIVE REPUBLICANS AND VERY LIBERAL DEMOCRATS. THEY DON'T LIKE THIS THING, AND THERE'S SOME AWFULLY UNHOLY ALLIANCES THAT HAVE FORMED UP THERE TO TRY TO KILL THIS THING. AND SO MIKE IS RIGHT. THIS IS -- I THINK PROSPECTS LOOK GOOD BUT I WOULD NOT SAY IT'S A DONE DEAL.

Glover: AND REPUBLICAN AND DEMOCRATIC GUBERNATORIAL POLITICS GET INTO THIS IN AN INTENSE WAY, BECAUSE IOWANS FOR TAX RELIEF MAY NOT HAVE A HUGE IMPACT IN THE GENERAL ELECTION, BUT LET ME TELL YOU, IN A REPUBLICAN GUBERNATORIAL PRIMARY, YOU WANT TO KNOW WHERE THEY'RE AT. THE SAME WITH LABOR. LABOR DOESN'T LIKE THIS BUSINESS REGULATION BILL, AND IF I'M IN A DEMOCRATIC PRIMARY, I'VE GOT TO WONDER ABOUT WHAT I'M GOING TO DO TO MARK SMITH AND THE FEDERATION OF LABOR BY VOTING FOR IT.

Borg: AND I KNOW YOU'RE RIGHT IN WHAT YOU SAY ABOUT THE CITIES AND TOWNS LOBBYING AGAINST WHAT'S HAPPENING THERE, BECAUSE I WAS IN MAYOR PAUL PATE'S OFFICE ON THURSDAY AFTERNOON AND THEY WERE REALLY INSENSED ABOUT THE MONEY THEY THOUGHT WAS COMING THEIR WAY AND NOW IT'S STARTING TO SLIP AWAY. KAY, I WAS GOING TO ASK YOU, THOUGH, CHUCK LARSON IS CHAIR OF THE IOWA REPUBLICAN PARTY, BUT HE'S ALSO A LEGISLATOR. HE'S THROWN DOWN AN ULTIMATUM THERE, HASN'T HE, THOUGH? ISN'T HE A ROADBLOCK, ALSO, TO GETTING SOMETHING PASSED?

Henderson: HE HAS BEEN A ROADBLOCK. HE DOES NOT WISH FOR REPUBLICANS IN THE LEGISLATURE TO HAND GOVERNOR VILSACK ANYTHING WHICH COULD BE HIS LEGACY. AND THIS IOWA VALUES FUND AND, COUPLED WITH THAT, INCOME TAX CUTS COULD INDEED BE TOM VILSACK'S LEGACY AS A DEMOCRATIC GOVERNOR. BUT IN THE MEANTIME CHUCK LARSON HAS REALLY OFFENDED ALL THE SENATE REPUBLICANS, AND SO THERE WAS SOME TALK, YOU KNOW, THAT STEWART IVERSON MAY WISH TO LEAVE AT SOME POINT AND, YOU KNOW, CHUCK LARSON MIGHT BE HIS SUCCESSOR. HE'S OFFENDED SO MANY PEOPLE WITHIN THAT SENATE REPUBLICAN CAUCUS, HE COULD NEVER MUSTER ENOUGH VOTES TO BE ITS LEADER.

Yepsen: IN FAIRNESS TO SENATOR LARSON, HE WAS ONE OF THE SENATORS WHO CAME UP WITH THE IDEA OF USING THIS $180 MILLION TO CREATE THIS VALUES FUND SO THEY DIDN'T HAVE TO RAISE TAXES AND THEY DIDN'T HAVE TO BORROW MONEY. SO IN FAIRNESS, I MEAN, I THINK HE DID HELP LEAD -- FASHION A COMPROMISE HERE THAT CAN BRING SOME CONSENSUS. BUT IT'S TOUGH FOR SOMEONE TO BE IN THE IOWA LEGISLATURE AND CHAIR OF A PARTY. THOSE ARE TWO OFTEN CONFLICTING HATS THAT ARE TOUGH FOR ANYBODY TO DO.

Borg: MIKE HAS SAID THIS MAY NOT HAPPEN. HE'S THROWN OUT THE POSSIBILITY IT MAY NOT HAPPEN. BUT IF IT DOES, WHAT DO YOU ENVISION, THE REST OF YOU HERE, AS BEING THE POSSIBLE OUTCOME OF THIS VISION FUND, ALSO THE BUSINESS REGULATION AND THE INCOME TAX RESTRUCTURING? KATHIE, DO YOU WANT TO TAKE A CRACK AT IT?

Obradovich: THE GOAL IS THAT IOWA BECOMES A PLAYER IN THE BIOTECH INDUSTRY. A LOT OF THIS MONEY IS SET ASIDE FOR WESTERN IOWA BIOTECH DEVELOPMENT, BUILT AROUND A PLACE CALLED TRANS OVA, WHICH IS IN SIOUX CENTER, IOWA. THERE WOULD BE THINGS LIKE PROTEIN LABS AND GENETICS AND A LOT OF INVOLVEMENT WITH THE UNIVERSITIES, AND THOSE THINGS WOULD CREATE A LOT OF SYNERGY, PEOPLE HOPE, THAT AREN'T GOING TO HAPPEN WITHOUT THIS FUND. THE OTHER PART, THOUGH, IS THAT SOME OF THESE PROJECTS ARE GOING TO BE RISKY. AND IF THIS DOES GO FORWARD, I THINK IT WILL TEST IOWANS' RESOLVE TO FAIL A LITTLE BIT ALONG THE WAY.

Yepsen: I THINK, DEAN, IN THE PAST WE'VE TRIED TAX CUTS, AND THEY HAVEN'T WORK THE WAY A LOT OF PEOPLE HOPED THEY WOULD. AND WE TRIED TO BRIBE BUSINESSES AND SPEND MORE MONEY, AND THAT HASN'T WORKED THE WAY A LOT OF PEOPLE -- NOW WE'RE GOING TO TRY BOTH OF THE ABOVE. THERE'S A LITTLE BIT OF EVERYTHING HERE. I THINK IT'S A RECOGNITION BY PEOPLE IN THE POLITICAL CENTER THAT NOBODY HAS GOT ALL THE RIGHT ANSWERS, THAT THERE IS A POINT TO EVERYBODY'S POINT OF VIEW, SO WE'RE GOING TO TRY BOTH OF THE ABOVE. THE SECOND THING IS LET'S NOT RAISE OUR EXPECTATIONS. THIS IS GOING TO BE A $500-MILLION FUND, IF IT'S ANYTHING. THE GROSS STATE PRODUCT OF IOWA, DEAN, IS OVER $90 BILLION. YOU CAN'T DRIVE A SPIKE WITH A TACK HAMMER, AND YOU'RE NOT GOING TO CHANGE THE COURSE OF IOWA'S ECONOMY WITH SOME DINKY, LITTLE $500-MILLION FUND. GOVERNMENT PLAYS AROUND THE MARGINS OF ECONOMIC GROWTH. IT'S FAR MORE IMPORTANT TO IOWA'S ECONOMY WHAT'S HAPPENING TO THE VALUE OF THE DOLLAR IN THE WORLD; IT'S PLUMMETING. FARM COMMODITY PRICES -- WE'LL SELL MORE GOODS. THOSE THINGS ARE MORE IMPORTANT TO IOWA'S ECONOMIC FUTURE THAN WHAT THE POLITICIANS AT THE STATE CAPITOL ARE DOING.

Henderson: BUT I THINK GOVERNOR VILSACK'S IDEA HERE IS THAT, EVEN THOUGH THIS IS A DROP IN THE BUCKET, THAT YOU CREATE A NEW MIND-SET AMONG IOWANS, THAT WE DON'T HAVE TO SIT AROUND AND LET THE COAST GROW, THAT MAYBE WE INDEED CAN GROW HERE, THAT PEOPLE CAN RAISE A FAMILY HERE, PEOPLE WHO GREW UP CAN COME BACK HERE BECAUSE THERE'S SOMETHING HAPPENING HERE. IT STARTED WITH THE WHOLE CONCEPT OF BUILDING CULTURAL ATTRACTIONS, AND NOW IT'S GROWN INTO THIS.

Glover: KATHIE -- KATHIE MADE A VERY GOOD POINT WHEN SHE SAID IT'S GOING TO BE A TEST FOR IOWANS WHO ARE TRADITIONALLY RISK AVERSE. THEY DON'T LIKE TO TAKE CHANCES. THEY DON'T LIKE TO TAKE RISKS. THEY DON'T LIKE TO BORROW MONEY. WELL, THOSE ARE ALL THE THINGS YOU DO IN YOUR PERSONAL LIFE. YOU BORROW MONEY TO BUY A HOUSE. YOU TAKE RISK WHEN YOU QUIT YOUR JOB AND GO BACK TO SCHOOL. YOU TAKE RISK WHEN YOU TAKE A NEW JOB. YOU CAN'T ADVANCE WITHOUT TAKING RISKS, AND THIS WILL TEST THAT.

Obradovich: ONE OF THE REASONS THEY -- ORIGINALLY, ONE OF THE IDEAS THEY KICKED AROUND FOR THIS WAS THE "BRING IT ON FUND." AND WE ALL KIND OF SNICKERED AT THAT IDEA, "BRING IT ON FUND." BUT IT SAYS, "HEY, LOOK AT US, YOU KNOW. WE'RE TRYING TO DO SOMETHING THAT'S A BIG MARKETING TOOL FOR THE STATE."

Borg: ARE THERE -- YOU MENTIONED THE ISEA, THE TEACHERS UNIONS, RUNNING ADS. AND I THINK THE ADS SAY WE'RE FOR THE FUND -- THE ECONOMIC DEVELOPMENT FUND, BUT WE'RE AGAINST THE INCOME TAX CUTS. ARE THERE LOSERS IF THIS THING GOES THROUGH? WILL ISEA BE A LOSER?

Glover: SURE, SURE. THE IOWA STATE EDUCATION ASSOCIATION, THE TEACHERS UNION, WOULD BE A LOSER IF A BIG INCOME TAX CUT GOES THROUGH, BECAUSE TEACHERS ARE PAID WITH PUBLIC MONEY AND THERE WILL BE LESS PUBLIC MONEY COLLECTED IN THE STATE. SO, YES, THEY WOULD BE A LOSER. THERE WILL BE LESS MONEY AVAILABLE TO SPEND ON SCHOOLS, LESS MONEY AVAILABLE FOR EVERYTHING. LABOR WOULD BE A LOSER IF THIS GOES THROUGH BECAUSE THEY HATE THIS BUSINESS REGULATION BILL BECAUSE IT DOES THINGS LIKE MAKE IT TOUGHER FOR WORKERS WHO ARE INJURED ON THE JOB TO SUE THEIR EMPLOYER. BUSINESS -- OR LABOR TENDS TO HATE THAT. SO THEY WOULD BE LOSERS UNDER ALL THIS. IOWANS FOR TAX RELIEF, IF YOU BELIEVE THEM, WOULD BE A BIG LOSER IN ALL THIS BECAUSE PART OF IT COULD FORESEE THE END OF FEDERAL DEDUCTIBILITY. SO THERE WOULD BE CLEAR LOSERS.

Yepsen: IF IT DOESN'T GO THROUGH, DEAN, TOM VILSACK IS THE BIGGEST LOSER --

Borg: AND WE HAVE TO LEAVE IT RIGHT THERE. THANK YOU VERY MUCH FOR YOUR INSIGHTS. WE'LL BE TRACKING THIS AS WE GO ALONG AND GET THE POLITICAL IMPLICATIONS AS THE LEGISLATION EVOLVES. AND THAT'S IT FOR THIS WEEKEND'S EDITION OF "IOWA PRESS." I HOPE YOU'LL JOIN US NEXT WEEKEND, 6:30 FRIDAY AND SUNDAY AT NOON. UNTIL THEN, I'M DEAN BORG. THANKS FOR JOINING US TODAY.