Iowa Public Television

Borg: HIGH-PROFILE SPECIAL INTERESTS AWAIT IOWA GOVERNOR TOM VILSACK'S DECISIONS ON CONTROVERSIAL ECONOMIC DEVELOPMENT AND TAX LEGISLATION. PERSPECTIVE FROM THE IOWA SENATE'S DEMOCRATIC MINORITY LEADER, MIKE GRONSTAL, ON THIS EDITION OF "IOWA PRESS."

Borg: AS WE BEGIN THIS EDITION OF "IOWA PRESS," WE DON'T KNOW IF IOWA'S DEMOCRATIC GOVERNOR AND THE REPUBLICAN-CONTROLLED IOWA GENERAL ASSEMBLY HAVE A DEAL. GOVERNOR VILSACK, YOU RECALL, CALLED THE LEGISLATURE INTO SPECIAL SESSION MAY 29. THE GENERAL ASSEMBLY SENT BACK TO GOVERNOR VILSACK ITS VERSION OF HIS TOP PRIORITY, A MULTIMILLION-DOLLAR ECONOMIC DEVELOPMENT FUND. BUT ALONG WITH THAT MONEY, IN A TAKE-IT-OR-LEAVE-IT PACKAGE, THE REPUBLICAN LEADERS TUCKED IN INCOME AND PROPERTY TAX REFORM, A $300-MILLION CUT IN INCOME TAXES, AND EASING OF BUSINESS AND INDUSTRY LABOR REGULATIONS. WELL, LAST WEEK ON "IOWA PRESS," WE QUESTIONED TWO REPUBLICANS, THE SENATE'S MAJORITY LEADER STEWART IVERSON OF DOWS AND CHUCK GIPP OF DECORAH WHO HAS THE SAME JOB IN THE HOUSE OF REPRESENTATIVES. THIS WEEK, COMMENTS FROM THE DEMOCRATIC CAUCUS. COUNCIL BLUFFS SENATOR MIKE GRONSTAL LEADS THE SENATE'S MINORITY DEMOCRATS. SENATOR GRONSTAL, WELCOME BACK TO "IOWA PRESS."

Gronstal: THANKS FOR HAVING ME.

Borg: AND ACROSS THE TABLE, TWO STATEHOUSE REPORTERS YOU KNOW WELL: COLUMNIST DAVID YEPSEN OF "THE DES MOINES REGISTER" AND "RADIO IOWA" NEWS DIRECTOR KAY HENDERSON.

Henderson: SENATOR, THIS PAST WEEK, THE U.S. SUPREME COURT RULED THAT IOWA LEGISLATORS AND GOVERNOR HAVE A PERFECT RIGHT TO TAX THE RACETRACK CASINOS IN IOWA AT A RATE THAT'S HIGHER THAN THE TAX ON THE RIVERBOAT CASINOS. WHAT SHOULD LEGISLATORS DO IN THE WAKE OF THAT RULING?

Gronstal: ACTUALLY, THE RULING WAS THAT THAT TAX IS NOT UNCONSTITUTIONAL UNDER THE FEDERAL CONSTITUTION. NOW THAT CASE IS REMANDED TO THE IOWA SUPREME COURT, WHERE THEY HAVE AN OPPORTUNITY TO LOOK AT THE IOWA CONSTITUTION AND THE UNIFORM APPLICATION LANGUAGE IN THE IOWA CONSTITUTION AND MAKE SOME DECISION AS TO WHETHER THAT APPLIES. WE DON'T KNOW WHAT THEY'LL DO. WE HAD AN OPPORTUNITY, DURING THE SPECIAL SESSION AND DURING THE REGULAR SESSION, TO PASS COMPROMISED LEGISLATION THAT WOULD PRESERVE, ESSENTIALLY, THE STATE'S REVENUES. WE SHOULD HAVE DONE THAT. WE SHOULD HAVE TAKEN THAT UP IN THE SENATE. IT PASSED THE HOUSE 93 TO 7, AND I THINK THERE'S CLEARLY ENOUGH VOTES TO PASS IT IN THE IOWA SENATE. IT WAS NOT BROUGHT UP FOR DEBATE. I THINK THAT WAS A MISTAKE. I ALSO THINK WE COULD PROBABLY GET AN AGREEMENT TO COME BACK IN SPECIAL SESSION. AND REGARDLESS OF WHAT HAPPENS ON THE REST OF WHAT THE SPECIAL SESSION PRODUCED, WE COULD COME BACK AND FIX THAT ONE ITEM. THAT'S WHAT I THINK WE OUGHT TO DO.

Henderson: BUT WHY SHOULDN'T WE JUST WAIT UNTIL THE STATE SUPREME COURT RULES ON THIS BEFORE LEGISLATORS JUMP INTO THE FRAY?

Gronstal: WELL, THE DOWNSIDE POTENTIAL FOR THE STATE IS SIGNIFICANT. WE COULD END UP IN A SITUATION WHERE WE OWE THE TRACKS $110-, $111 MILLION, PLUS WE WOULD LOSE $40 MILLION IN REVENUE FOR THIS FISCAL YEAR AND $40 MILLION IN REVENUE FOR NEXT FISCAL YEAR. THAT'S OBVIOUSLY, I THINK AT THIS POINT, UNACCEPTABLE, AND WE CAN AVOID THAT PROBLEM BY MAKING THIS DECISION NOW.

Borg: AS LONG AS WE'RE TALKING ABOUT GAMBLING IN IOWA, I WANT TO ASK SHOULD WE EXPAND OR CONSIDER EXPANDING GAMBLING IN IOWA. I'LL GIVE YOU A SCENARIO. THIS PAST TUESDAY THE CITY OF CEDAR RAPIDS -- OR THE GREATER CEDAR RAPIDS METRO AREA REJECTED A ONE-CENT LOCAL OPTION TAX THAT WOULD HAVE PAID FOR A DIG DEVELOPMENT CALLED RIVER RUN, OR AT LEAST GIVEN THE LOCAL MATCHING FUNDS FOR A VISION IOWA GRANT. NOW A GROUP IS WELL ORGANIZED AND MAY BE LOOKING TOWARD A NOVEMBER REFERENDUM ON RIVERBOAT GAMBLING, EXCEPT THAT YOU'VE GOT TO HAVE A LICENSE TO DO THAT. DO YOU THINK THAT THE STATE RACING AND GAMING COMMISSION OUGHT TO BE LOOKING AT MORE LICENSES AND EXPANDING GAMBLING?

Gronstal: I THINK THEY ARE LOOKING AT THAT AND I THINK THAT'S -- I THINK GAMBLING IS A REALITY IN THIS STATE. IT EXISTS AND I THINK THEY HAVE -- THEY HAVE IDENTIFIED SOME UNDERSERVED MARKETS, AND THAT WOULD INCLUDE CEDAR RAPIDS. AND I THINK THE COMMISSION IS, IN FACT, GOING TO LOOK AT RAISING -- THEY HAVE A SELF-IMPOSED MORATORIUM ON ADDITIONAL LICENSES. I THINK THE MEMBERS OF THAT RACING AND GAMING COMMISSION ARE LOOKING AT THAT RIGHT NOW. THERE ARE SOME SPECIAL CHALLENGES FOR COMMUNITIES LIKE CEDAR RAPIDS OR DES MOINES. THE CRUISING REQUIREMENT IS FAIRLY PROBLEMATICAL. TO FIND A PLACE ON A RIVER IN DOWNTOWN DES MOINES OR DOWNTOWN CEDAR RAPIDS WHERE YOU CAN ACTUALLY CRUISE A RIVERBOAT OF ANY SIGNIFICANT SIZE WOULD BE PRETTY PROBLEMATICAL. SO I'M NOT SURE THEY CAN IN FACT GET THAT DONE.

Yepsen: SENATOR, YOU MENTIONED THAT THERE WAS A COMPROMISE THAT HAD BEEN TALKED ABOUT ON THIS ISSUE, THAT YOU WOULD LIKE TO REACH A COMPROMISE. WHAT DO YOU THINK THE NEW SHAPE OF GAMBLING SHOULD BE IN IOWA IF THE LEGISLATURE WERE TO MEET? WHAT WOULD YOU LIKE TO SEE IN A GAMBLING COMPROMISE BILL?

Gronstal: WELL, THE FIRST THING I'D LIKE TO SEE IS I'D LIKE TO SEE US DISPOSE OF THE TAX ISSUE AS A SEPARATE ISSUE, NOT CONNECT IT TO OTHER ISSUES. THE WHOLE ISSUE OF EXPANDING GAMING OR LIFTING SOME OF THE CRUISING REQUIREMENTS, THOSE KINDS OF THINGS ARE MUCH MORE PROBLEMATICAL TO DEVELOP CONSENSUS ON IN THE LEGISLATURE. THERE'S STILL A SIGNIFICANT NUMBER OF PEOPLE THAT OPPOSE ANY EXPANSION OF GAMBLING. SO I THINK THE MOST IMPORTANT THING FOR US TO DO IS TO DISPOSE OF THE TAX ISSUE SO THAT THAT ISN'T CONNECTED TO WHATEVER EXPANSION OR WHATEVER CHANGE IN THE REGULATIONS WE'RE GOING TO ESTABLISH.

Yepsen: SENATOR, AS DEAN MENTIONED IN THE INTRODUCTION, THE ISSUE OF THE VALUES FUND AND ALL THE PIECES THAT GO WITH IT IS IN FRONT THE GOVERNOR. SHOULD HE SIGN IT OR VETO IT?

Gronstal: MY PREFERENCE WOULD BE THAT HE VETO THE POLICY BILL AND FIND A WAY TO SIGN THE APPROPRIATION BILL IN A WAY THAT PRESERVES, FOR HIM, ENOUGH RESOURCES TO OPERATE AN EFFECTIVE DEPARTMENT OF ECONOMIC DEVELOPMENT. HE IS LOOKING AT THAT AND HE'S ALSO LOOKING AT ITEM VETOING THE POLICY BILL. AND I THINK IT'S KIND OF HARD TO PREDICT AT THIS MOMENT WHAT HE'S GOING TO DO, BUT I'M CERTAIN THERE WILL BE SOME VETOES.

Yepsen: THE CONSTITUTION DOES NOT APPEAR TO ALLOW A GOVERNOR THE RIGHT -- THE ABILITY TO VETO A POLICY BILL. WHAT DO YOU SEE THERE THAT INDICATES TO YOU THAT HE CAN DO THAT?

Gronstal: WELL, I'VE REVIEWED A NUMBER OF THE COURT CASES FROM THE PAST -- FROM THE PAST COUPLE OF DECADES, RELATED TO ITEM VETOES. AND I DON'T THINK THE CONSTITUTION CLEARLY SAYS HE CAN'T DO THAT. AS A MATTER OF FACT, SEVERAL OF THE CASES WOULD INDICATE THAT MECHANISMS THAT SIGNIFICANTLY AFFECT THE GOVERNOR'S ABILITY TO BUDGET ARE ITEM VETOABLE. SO WHEN YOU CREATE A SURCHARGE TO FUND WORK FORCE DEVELOPMENT OFFICES AND DEDICATE REVENUES TO THAT REVENUE STREAM, THAT IS IN FACT AN APPROPRIATION. SO I THINK THAT'S ARGUABLE. AND IN THE END, WE'LL BE ABLE TO FIND ATTORNEYS THAT WILL SAY BOTH THINGS. ONE SET OF ATTORNEYS WILL SAY IT IS ITEM VETOABLE AND ONE WON'T, AND THE COURT WILL MAKE THAT DECISION IN THE END. BUT THAT BILL, IN MY VIEW, IS UNACCEPTABLE. IT'S GOING TO LEAD TO -- AT A TIME WHEN WE'RE FORCING CITIES AND COUNTIES TO CUT POLICE AND FIRE ACROSS THE STATE OF IOWA, WE'RE GOING TO ENACT A $310-, $320-MILLION TAX CUT FOR THE WEALTHIEST IOWANS AT THE EXPENSE OF WORKING FAMILIES IN THIS STATE? I THINK THAT'S A MISTAKE.

Yepsen: IF HE DOES VETO THE WHOLE THING, WHICH IT SEEMS TO ME IS THE ONLY COURSE HE HAS THAT ISN'T GOING TO WIND UP IN COURT, JUST TAKE IT ALL DOWN --

Gronstal: WELL, IT IS KIND OF INTERESTING. THE REPUBLICANS -- PART OF THAT BILL IS TO RESTRICT PEOPLE'S ACCESS TO THE COURTS, BUT THAT'S THEIR FIRST REACTION: LET'S NOT WORK WITH THE GOVERNOR AND COME UP WITH A DEAL; LET'S GO TO COURT.

Yepsen: IF HE DOES VETO ALL OF THIS, MY QUESTION IS WHAT KIND OF FUTURE SESSIONS WILL YOU HAVE WITH THE REPUBLICAN MAJORITY.

Gronstal: DAVID, HOW COULD THEY BE WORSE? THEY WENT INTO A PRIVATE ROOM -- THE SENATE REPUBLICANS WENT INTO A PRIVATE ROOM, PUT TOGETHER A PACKAGE, A PACKAGE THAT WAS UNACCEPTABLE TO THE GOVERNOR, THAT THE GOVERNOR HAD TO INDICATE -- HOW COULD IT GET ANY WORSE? THESE GUYS CAN'T EVEN WORK WITH THEIR OWN REPUBLICAN COUNTERPARTS IN THE HOUSE. YOU KNOW, WE TALKED AT THE START OF THE SESSION ABOUT BIPARTISAN COOPERATION. THEY CAN'T EVEN GET UNIPARTISAN COOPERATION BETWEEN THE HOUSE REPUBLICANS AND THE SENATE REPUBLICANS. I DON'T THINK THE RELATIONSHIP COULD GET MUCH WORSE.

Henderson: IN THE END, THOUGH, SENATE REPUBLICANS DID INCLUDE IN THAT PACKAGE SOMETHING THAT HOUSE REPUBLICANS HAD INSISTED UPON ALL ALONG -- REPUBLICANS IN THE SENATE RELUCTANTLY WENT ALONG -- PROVIDING SCHOOL FINANCING FOR CONSTRUCTION OF BUILDINGS AND RENOVATION OF EXISTING BUILDINGS. WILL THAT RESOLVE THE PROBLEM -- THE EQUITY PROBLEM THAT IOWA CREATED?

Gronstal: ABSOLUTELY NOT. IT'S NOT A BIG ENOUGH EFFORT TO DO THAT. IT'S $10 MILLION A YEAR. THE ORIGINAL VERSION THAT THE HOUSE HAD -- ORIGINALLY THEY TALKED ABOUT AS MUCH AS $400 MILLION. IN THE END THEY CAME UP WITH ABOUT $250 MILLION IN THE HOUSE PLAN. THAT'S KIND OF PROBABLY THE MINIMUM NUMBER YOU NEED TO RESOLVE THE COURT CHALLENGE TO OUR EXISTING MECHANISM FOR BUILDING SCHOOL BUILDINGS.

Yepsen: SENATOR, ANOTHER PIECE OF THE BILL IS SOMETHING CALLED REGULATORY REFORM. THE BUSINESS COMMUNITY SAID THEY NEEDED TO PUT SOME RESTRICTIONS ON LAWSUITS. DEMOCRATS DID NOT LIKE THAT. WHAT'S WRONG WITH THAT PROVISION?

Gronstal: WELL, THERE ARE SEVERAL PROVISIONS. IT'S MORE THAN ONE PROVISION AS IT RELATES TO THE REGULATORY REFORM. ONE OF THOSE IS WHEN A WORKER IS INJURED AND WHAT THE REPUBLICANS INDICATED, EVEN IN THEIR OWN PRINTED MATERIAL, WAS THEY WANTED LANGUAGE THAT WOULD REVERSE THE VENEGAS DECISION. THE BILL THEY PASSED, IN FACT, GOES MUCH FURTHER THAN THAT, AND MOST WORKERS ON A SECOND INJURY WILL ESSENTIALLY COLLECT NO BENEFITS UNDER THE VERSION THAT THE REPUBLICANS HAVE PASSED. SO IF YOU'RE INJURED THROUGH NO FAULT OF YOUR OWN ON A JOB, THEN YOU'LL GET NO BENEFITS WHATSOEVER ON A SECOND INJURY. I THINK THAT GOES TOO FAR. I THINK THE ACTUAL MALICE -- REQUIRING AN ACTUAL MALICE TO GET PUNITIVE DAMAGES MEANS YOU HAVE NO TOBACCO LAWSUIT, YOU HAVE NO -- YOU HAVE NO LAWSUIT WHEN A CAR COMPANY MAKES CARS WITH EXPLODING GAS TANKS AND KNEW THEY WERE EXPLODING GAS TANKS. UNLESS YOU CAN PROVE THAT THEY DID IT TO DELIBERATELY GET YOU IN COURT, THERE ARE NO PUNITIVE DAMAGES. THAT'S ONE OF THE MECHANISMS FOR HOLDING CORPORATIONS ACCOUNTABLE IN THIS COUNTRY, AND I THINK THAT GOES WAY, WAY TOO FAR.

Yepsen: YOU'VE HEARD THIS COMPLAINT FROM THE BUSINESS COMMUNITY, THAT THEY'RE WORRIED ABOUT LAWSUITS. IS THERE ANYTHING --

Gronstal: DAVID, THE U.S. CHAMBER OF COMMERCE SAYS -- I THINK THAT'S A FAIRLY REPUBLICAN GROUP -- SAYS IOWA HAS THE THIRD BEST TORT CLIMATE IN THE COUNTRY FROM A BUSINESS PERSPECTIVE. SO WHAT'S THE PROBLEM WE'RE SOLVING WITH THIS LEGISLATION?

Yepsen: WELL, THAT WAS GOING TO BE MY QUESTION. THE IOWA ASSOCIATION OF BUSINESS AND INDUSTRY, A GROUP OF IOWANS, SAYS IOWA HAS A PROBLEM. IS THERE ANY SOLUTION THAT YOU CAN THINK OF THAT IS GOING TO SATISFY THE IOWA ASSOCIATION OF BUSINESS AND INDUSTRY AND YOUR FRIENDS IN THE TRIAL LAWYER COMMUNITY?

Gronstal: I THINK REASONABLE MINDS CAN GET TOGETHER AND NEGOTIATE, BUT AN ABSOLUTE PROHIBITION ON PUNITIVE DAMAGES EVER BEING GRANTED IN THE STATE OF IOWA -- AND THAT'S EFFECTIVELY WHAT THIS IS -- UNLESS THEY CAN PROVE THAT THE EXPLODING GAS TANK CAR WAS TARGETED TO ME INDIVIDUALLY AND THEY WERE TRYING TO KILL ME WITH THAT CAR, YOU CAN'T PROVE ACTUAL MALICE. YOU CAN'T GET DRUNK DRIVERS AND HOLD THEM ACCOUNTABLE FOR -- UNLESS YOU CAN SHOW THEY DELIBERATELY DROVE DRUNK TO GET ME.

Yepsen: YOU'RE A COMPROMISER. WHAT WOULD BE A FAIR MIDDLE-GROUND COMPROMISE ON THIS ISSUE?

Gronstal: I THINK YOU -- I THINK YOU CAN RAISE SOME OF THE STANDARDS AND SOME OF THE BURDEN OF PROOF. THOSE ARE THE KINDS OF THINGS THAT REASONABLE MINDS SHOULD SIT DOWN AND WORK OUT, NOT HAVE ONE SIDE GO INTO THE BACK ROOM, WRITE SOMETHING, AND COME OUT AND SAY THIS IS WHAT WE'RE GOING TO PASS.

Henderson: YOU EARLIER CRITICIZED THE INCOME TAX PORTION OF THIS PACKAGE, WHICH WOULD SHRINK RATES TO THREE RATE CLASSES AND WOULD ALSO CUT IOWANS' INCOME TAXES BY ABOUT $310 MILLION. WHAT'S WRONG WITH MAKING THE TAX SYSTEM SIMPLER IN THIS STATE?

Gronstal: THERE'S NOTHING WRONG WITH THAT, AND WE COULD HAVE DONE THAT. AS A MATTER OF FACT, I OFFERED A PLAN TO THE REPUBLICANS THAT WOULD HAVE, IN FACT, DONE THAT. IN THE END THEY CAME UP WITH A PLAN THAT TAKES FROM THE POOR AND GIVES TO THE RICH. IT ACTUALLY RAISES TAXES ON THE BOTTOM 40 PERCENT OF IOWANS. FORTY PERCENT OF ALL IOWA TAXPAYERS GET THEIR TAXES RAISED --

Henderson: HOW SO?

Gronstal: WHEN YOU TAKE AWAY THE UTILITY -- THE SALES TAX ON RESIDENTAL UTILITIES, THAT EFFECTIVELY RAISES THOSE FOLKS' TAXES. THERE'S A STUDY OUT TODAY THAT WILL SHOW 40 PERCENT OF IOWANS WILL ESSENTIALLY SEE THEIR TAXES GO UP OR NO INCREASE WHATSOEVER. AND THE TOP -- THE TOP ONE PERCENT OF IOWANS WILL SEE THEIR TAXES EFFECTIVELY CUT EIGHT TIMES AS MUCH AS THE LOWEST.

Yepsen: EXCUSE ME, SENATOR, I DON'T UNDERSTAND SOMETHING IN YOUR ANSWER. THE STATE HAS HAD A POLICY OF PHASING OUT THE SALES TAX ON UTILITY BILLS. THIS LEGISLATION CALLS TO JUST HALT THAT PHASEOUT. HOW IS THAT AN INCREASE?

Gronstal: IT'S IN THE LAW RIGHT NOW THAT THEY'RE GOING TO GET THAT TAX CUT.

Yepsen: RIGHT --

Gronstal: IT'S IN THE LAW RIGHT NOW.

Yepsen: TO JUST HOLD IT WHERE YOU ARE, HOW IS THAT AN INCREASE IN TAXES?

Gronstal: BECAUSE JANUARY 1 IT WOULD GO DOWN ANOTHER PERCENT, BUT THE REPUBLICANS CHANGED THAT AND POSTPONED THAT UNTIL 2008.

Yepsen: SO MAINTAINING A FREEZE IS SOMEHOW A TAX INCREASE?

Gronstal: THE LAW SAYS YOUR TAXES GO DOWN JANUARY 1. TO CHANGE THAT I THINK IS A TAX INCREASE.

Henderson: YOU MENTIONED THAT YOU OFFERED A TAX PLAN THAT YOU SAY COULD HAVE WORKED. REPUBLICANS COUNTERED THAT YOU OFFERED IT AT THE LAST POSSIBLE MOMENT AND THEY DIDN'T HAVE ANY TIME TO REVIEW IT DURING THE REGULAR SESSION.

Gronstal: SO. THEY HAD FOUR WEEKS AFTER THE REGULAR SESSION BEFORE THE SPECIAL SESSION TO REVIEW IT. THEY COULD HAVE REVIEWED IT THEN.

Henderson: BUT THEY SUGGEST THAT, YOU KNOW, YOUR TARDINESS IN PRESENTING THAT AND THE INABILITY OF DEMOCRATS -- ANY OF THE DEMOCRATS IN THE SENATE TO VOTE FOR A TAX CUT PLAN WAS AN EXHIBIT THAT YOU GUYS DIDN'T REALLY WANT TO CUT INCOME TAXES AND WANTED TO SORT OF SCUTTLE THAT PART OF THE PACKAGE.

Gronstal: WE WERE -- FIRST OF ALL, WE WERE NEVER WILLING TO PLAY ROBINHOOD IN REVERSE, AND THAT'S WHAT THEY DID. THEY RAISED TAXES ON LOW AND MODERATE INCOME PEOPLE SO THEY COULD CUT THEM FOR UPPER INCOME IOWANS. SO WE WEREN'T GOING TO SUPPORT A BILL THAT WAS ROBINHOOD IN REVERSE, AND WE WEREN'T GOING TO SUPPORT A BILL THAT WASN'T ESSENTIALLY REVENUE NEUTRAL. HOW CAN YOU JUSTIFY WHEN YOU'RE FORCING CITIES AND COUNTIES TO LAY OFF POLICE AND FIREFIGHTERS AND NEXT YEAR TO RAISE PROPERTY TAXES? THAT'S EFFECTIVELY WHAT THIS LEGISLATURE HAS DONE IS PASS THE BIGGEST PROPERTY TAX INCREASE IN THE HISTORY OF THE STATE, $100-MILLION INCREASE IN PEOPLE'S PROPERTY TAXES NEXT YEAR AS A DIRECT RESULT OF THEIR ACTIONS. WE THOUGHT THAT KIND OF STUFF WAS UNACCEPTABLE. WE WOULD HAVE SUPPORTED AN INCOME TAX BILL THAT WAS REVENUE NEUTRAL AND THAT SIMPLIFIED, GOT THREE RATES. WE COULD HAVE DONE THAT AND WE COULD HAVE REPLACED THE LOST REVENUE WITH SOME OTHER MECHANISMS. REPUBLICANS WERE UNWILLING TO CONSIDER THAT.

Yepsen: SENATOR, ONE OF THE ISSUES THAT IS GOING TO CONFRONT THE NEXT LEGISLATURE WILL BE A QUESTION OF A CONSTITUTIONAL AMENDMENT. IF THIS LAW IS SIGNED, THE TAX PART DOESN'T GO INTO EFFECT UNTIL -- OR WON'T CONTINUE IN EFFECT UNLESS THE VOTERS PASS SORT OF RESTRICTION ON THE ABILITY TO RAISE TAXES. HOW DO DEMOCRATS FEEL ABOUT THE WHOLE QUESTION OF CONSTITUTIONAL RESTRICTIONS ON TAX INCREASES? DO YOU FAVOR OR OPPOSE REQUIRING A SUPERMAJORITY OF THE LEGISLATURE? DO YOU FAVOR OR OPPOSE A VOTE OF THE PEOPLE. GOVERNOR VILSACK, IN THE '98 CAMPAIGN, SUGGESTED A VOTE OF THE PEOPLE. HOW DO LEGISLATIVE DEMOCRATS -- HOW TO SENATE DEMOCRATS FEEL ABOUT THIS ISSUE?

Gronstal: I THINK I'D REVERSE IT. YOU TALKED ABOUT A SUPERMAJORITY. IN FACT, WHAT IT DOES IS IT GIVES THE POWER TO A MINORITY IN THE LEGISLATURE TO STOP THE LEGISLATURE FROM DOING SOMETHING. I DON'T THINK THAT'S GOOD POLICY. I THINK MAJORITY RULES. I THINK SOMETIMES THERE ARE DIFFICULT, TOUGH ISSUES. AND YOU SHOULDN'T PASS LAWS THAT TIE THE HANDS OF YOUR LEGISLATURE.

Yepsen: HOW ABOUT A VOTE OF THE PEOPLE?

Gronstal: WELL, YOU KNOW, IT WOULD BE NICE IF MY OPPONENT IN THE NEXT ELECTION HAD TO GET 60 PERCENT TO BEAT ME, BUT I DON'T THINK WE'RE GOING TO CHANGE THAT LAW.

Yepsen: WELL, BUT THE DISCUSSION THAT I UNDERSTOOD -- EXCUSE ME, SENATOR -- IS THAT IT WOULD BE A SIMPLE MAJORITY VOTE OF THE PEOPLE.

Gronstal: A VOTE OF THE PEOPLE, I THINK THERE ARE A LOT OF FOLKS THAT HAVE -- I CAN'T TELL YOU THAT THERE'S A SOLID FEELING ONE WAY OR THE OTHER INSIDE THE DEMOCRATIC CAUCUS. NO ONE HAS SUGGESTED THAT.

Yepsen: AND THE LAST PIECE OF THIS VALUES FUND PACKAGE IS THE PROPERTY TAX PORTION THAT STARTS A STUDY. HOW DO YOU FEEL ABOUT THAT PROPERTY TAX PIECE OF THE LEGISLATURE?

Gronstal: WELL, I THINK IT'S HIGHLY PROBLEMATICAL. MOST OF WHAT THEY DID IN THAT BILL WAS HANDED OFF THE DECISIONS -- ALL OF THE TOUGH DECISIONS TO SOME COMMISSION. I'M A LITTLE LESS CONCERNED NOW THAT IT'S A PILOT PROJECT ONLY IN THREE COUNTIES. BUT I THINK IT'S DRAMATICALLY BAD IN TERMS OF DEVELOPING COMMUNITIES. IF YOU'VE GOT A COMMUNITY THAT'S GOT ANY GROWTH GOING ON, I THINK IT'S GOING TO STIFLE THAT KIND OF DEVELOPMENT. AND I THINK YOU END UP WITH SOME REAL EQUITY ISSUES. BECAUSE YOU'VE LIVED IN A HOME FOR TWENTY YEARS AND KAY DECIDES TO BUY ONE NEXT DOOR TO IT THAT'S EXACTLY THE SAME VALUE, HER TAXES MAY BE TWICE AS MUCH AS YOURS. THERE'S SOME REAL EQUITY CONCERNS ABOUT HOW THAT WORKS.

Borg: IS THERE SOME AREA WHERE YOU THINK SOME BUDGET CUTS OUGHT TO BE RESTORED, THAT IN THE REVENUE AUSTERITY THAT WE HAVE, THAT CUTS HAVE GONE TOO DEEP? TWICE NOW IN OUR CONVERSATION HERE, YOU'VE MENTIONED MUNICIPALITIES LAYING OFF POLICE AND FIRE. AND I'M REMINDED THAT THIS WEEK, DUBUQUE FIREMEN WENT DOOR TO DOOR IN THAT CITY, TRYING TO RAISE PUBLIC SUPPORT FOR THEIR JOB, FEARING THAT THEY WERE GOING TO BE ON THE CHOPPING BLOCK. THE BASIC QUESTION IS, HAS IN SOME AREA, NOT NECESSARILY MUNICIPALITIES, THE EXCAVATING BEEN TOO DEEP AND THERE'S BACKFILLING TO BE DONE?

Gronstal: WELL, I'D SAY THIS: THE DIFFICULTY WAS -- I THINK WE SHOULD RESTORE THAT MONEY FOR AT LEAST ONE YEAR. WE CUT 70 MILLION AND IN THE END ABOUT 60 MILLION FROM CITIES AND COUNTIES. AND WE DID IT AFTER THEY HAD ALREADY SET THEIR BUDGETS, AFTER THEY'D ALREADY SET THEIR NEW LEVIES. THEY ESSENTIALLY HAVE THE REST OF THIS MONTH TO FIGURE OUT HOW TO BALANCE THOSE CUTS, IN MY COMMUNITY ABOUT $800,000. I THINK THAT'S PRETTY UNFAIR FOR US TO DO THAT TO THEM, AND I THINK WE SHOULD HAVE PROVIDED SOME ASSISTANCE TO THEM FOR THIS YEAR. GIVE THEM A YEAR OF TRANSITION AND TELL THEM NEXT YEAR THERE WILL NO LONGER BE COUNTY AND MUNICIPAL ASSISTANCE AND THAT MONEY WILL BE GONE. BUT WE COULD HAVE BOUGHT THEM A YEAR TO DEAL WITH THAT, AND WE TRIED TO DO THAT IN THE SPECIAL SESSION. WE TRIED TO RESTORE THAT MONEY TO CITIES AND COUNTIES.

Henderson: CONGRESSMAN STEVE KING, WHO IS A REPUBLICAN FORMER MEMBER OF THE STATE SENATE, COMPLAINED ABOUT THE USE OF THE FEDERAL ECONOMIC STIMULUS MONEY THAT'S COMING IOWA'S WAY TO BANKROLL THIS IOWA VALUES ECONOMIC DEVELOPMENT FUND. DO YOU SHARE HIS CONCERNS THAT THE STATE IS MISUSING THAT MONEY?

Gronstal: YES. I DON'T OFTEN AGREE WITH SENATOR KING, BUT IN THIS CASE, I THINK HE WAS RIGHT. I THINK WE SHOULD HAVE TAKEN SOME OF THAT FEDERAL STIMULUS MONEY, ABOUT A THIRD OF IT COULD HAVE REPLACED THESE CUTS TO CITIES AND COUNTIES AND GIVEN THEM A YEAR TO TRANSITION TO WHETHER THEY'RE GOING TO HAVE TO LAY OFF FIREFIGHTERS OR COME UP WITH SOME OTHER MECHANISMS TO DEAL WITH THAT.

Yepsen: SENATOR, I WANT TO GO BACK TO DEAN'S QUESTION ON BACKFILLING. AS YOU LOOK -- AS YOU LOOK AHEAD TO THE NEXT LEGISLATIVE SESSION, ARE THERE SPECIFIC AREAS THAT YOU KNOW THE LEGISLATURE SHOULD COME IN AND BACKFILL OR PROVIDE SOME ADDITIONAL MONEY? FOR EXAMPLE, THIS YEAR YOU WENT INTO THE BUDGET YOU APPROVED A YEAR AGO AND YOU GAVE SOME MORE MONEY FOR CORRECTIONS BECAUSE YOU DIDN'T WANT TO LAY OFF PRISON GUARDS. EVERY AGENCY THAT GETS MONEY FROM STATE GOVERNMENT IS COMPLAINING ABOUT BUDGET CUTS. DO YOU RIGHT NOW KNOW OF ANYPLACE WHERE, IN JANUARY, THE LEGISLATURE SHOULD COME IN AND APPROPRIATE MORE MONEY IMMEDIATELY?

Gronstal: I THINK WE WILL BE STUCK JUST AS WE WERE THIS YEAR BECAUSE THE REPUBLICANS HAVE SIGNIFICANTLY UNDERFUNDED THE SALARY BILL, SO I THINK WE WILL BE STUCK LOOKING AT SOME OF THOSE SAME KINDS OF DECISIONS. WHAT DO YOU DO AT THE DEPARTMENT OF CORRECTIONS? YOU CAN'T FURLOUGH THE GUARDS ON FRIDAY AFTERNOONS AND NOT HAVE GUARDS AROUND THE PRISONS. WE'VE ALREADY HAD SOME PROBLEMS WITH INADEQUATE STAFFING OF PRISONS, SO I THINK YOU'RE GOING TO SEE SOME OF THAT. I'M PRETTY CONCERNED IN THE WHOLE CHILD WELFARE AREA. FOSTER CARE IN THIS STATE FOR SOME OF IOWA'S MOST TROUBLED KIDS, THERE'S A $10-MILLION CUT LOOMING THERE. I DON'T THINK WE'RE GOING TO BE ABLE TO COME UP WITH THE SAVINGS THAT WILL COVER THAT. I THINK FOR SOME OF OUR MOST VULNERABLE KIDS, WE SHOULD CERTAINLY TAKE A LOOK AT THAT. BUT IN THE BIG PICTURE, I'D SAY WE'VE NEGLECTED COMMUNITY COLLEGES. THEY'RE EFFECTIVELY, PROBABLY THIS YEAR, WHEN IT'S ALL SAID AND DONE, WHEN YOU CALCULATE THE REVENUE THEY GET FROM LOCAL PROPERTY TAXES THAT'S FROZEN UNDER OUR LAW, THEY'RE GOING TO EFFECTIVELY HAVE ABOUT A 5-PERCENT CUT. AND THEY'RE GOING TO BE THE ENGINES OF ECONOMIC DEVELOPMENT, THE TRAINING MECHANISM FOR THE JOBS OF THE FUTURE, AND WE HAVE BADLY NEGLECTED THEM, FRANKLY, FOR TWENTY YEARS, BUT THE LAST THREE YEARS HAVE BEEN PARTICULARLY BAD.

Yepsen: WILL THOSE BUDGET CONSIDERATIONS BE THE PRIMARY CONSIDERATION OF THE LEGISLATURE NEXT YEAR? STEWART IVERSON, LAST WEEK WHEN HE WAS OUT HERE, SAID ALL THEY WANTED TO DO WAS THE BUDGET NEXT YEAR. DO YOU SEE IT THE SAME WAY, OR ARE THERE OTHER THINGS --

Gronstal: I THINK IT'S GOOD IF --

Yepsen: -- IN POLICY ISSUES THAT DEMOCRATS WANT TO DO NEXT YEAR?

Gronstal: I THINK THERE'S A LOT OF THINGS DEMOCRATS WOULD LIKE TO DO. I DON'T THINK THE CURRENT MAJORITY HAS MUCH BELIEF THAT GOVERNMENT CAN DO ANYTHING GOOD. I THINK IT'S A GOOD THING IF ALL THEY DO IS THE BUDGET NEXT YEAR AND GET OUT OF THERE AND LET'S HAVE AN ELECTION AND TRY AND FIND SOME FOLKS THAT ARE GOING TO BE WILLING TO WORK IN A BIPARTISAN WAY. BUT THAT'S WHAT WE NEED TO DO NEXT YEAR.

Henderson: GOVERNOR VILSACK CRITICIZED THE SENTENCING REFORM BILL THAT CLEARED THE LEGISLATURE THIS YEAR, WHICH HE SIGNED, FOR NOT GOING FAR ENOUGH AND EASING THE PRISON OVERCROWDING PROBLEM, AND HE SUGGESTED THAT THE STATE HAS PUT ITSELF IN A POSITION OF BEING FORCED TO BUILD A NEW PRISON. DO YOU SHARE THAT CONCERN THAT YOU'RE GOING TO HAVE TO PUT OUT BIG BUCKS TO BUILD A NEW PRISON?

Gronstal: WE'LL HAVE TO SPEND $40 OR $50 MILLION TO BUILD ANOTHER PRISON, AND THEN WE'LL HAVE TO SPEND ANNUAL OPERATING COSTS OF PROBABLY $15 MILLION TO RUN THAT NEW PRISON.

Henderson: IS THERE ANY WAY TO AVOID THAT?

Gronstal: WELL, THERE IS IF WE DO SOME REAL SENTENCING REFORM. I DON'T THINK IOWA HAS BEEN SMART ON CRIME. AND PEOPLE LIKE TO TALK ABOUT TOUGH ON CRIME. WELL, I THINK SMART ON CRIME IS TAKING OFFENDERS THAT ARE NONVIOLENT, NONPERSON OFFENSES, AND PUTTING THEM IN COMMUNITY-BASED CORRECTIONS, MAKING THEM EARN MONEY, GET A JOB, PAY RESTITUTION, THAT'S BEING SMART ON CRIME. AND IT'S TOUGHER THAN LOCKING THEM UP TWENTY-FOUR HOURS A DAY AND GIVING THEM THREE MEALS AND ALL THE TV THEY CAN WATCH.

Yepsen: WILL THE LEGISLATURE NEXT YEAR RAISE THE GAS TAX? SOME URBAN COMMUNITIES ARE COMPLAINING THEY DON'T HAVE ENOUGH MONEY TO FIX THEIR ROADS?

Gronstal: I THINK AT SOME POINT THE STATE WILL HAVE TO LOOK AT THE REVENUES THAT GO TO THE ROAD USE TAX FUND, BUT AT THIS POINT IN TIME, I THINK THE DEPARTMENT HAS ACTUALLY DONE A PRETTY GOOD JOB OF REORGANIZING, FINDING A WAY TO SAVE. I THINK THEY'VE SAVED ABOUT -- ON ANNUAL OPERATING EXPENSES, ABOUT $15 MILLION A YEAR. WE WENT THROUGH A PROCESS THIS YEAR WHERE WE'RE MOVING SOME ROADS BACK TO -- BACK TO COUNTIES AND CITIES, ROADS THAT ARE NO LONGER REALLY PART OF THE STATE SYSTEM, THEY'RE TRULY LOCAL ROADS. THERE'S SOME OF THAT GOING ON, SO I THINK WE NEED TO CONTINUE TO WORK ON THOSE PIECES OF REORGANIZING THE SYSTEM IN A WAY THAT MAKES MORE SENSE AND THEN FIGURE OUT WHAT WE NEED IN TERMS OF REVENUES.

Henderson: EARLIER YOU MENTIONED SOME CONCERNS WITH THE RECONFIGURATION OF THE DEPARTMENT OF HUMAN SERVICES. IN WHAT WAY DO YOU THINK THEY'RE GOING DOWN THE WRONG PATH?

Gronstal: THE MISTAKE I THINK THEY'RE MAKING IS TO ASSUME THAT WITHIN SIX MONTHS WE'LL BE ABLE TO COME UP WITH MORE EFFICIENT WAYS TO PROVIDE FOSTER CARE TO IOWA'S MOST TROUBLED KIDS, TO FIND $10 MILLION IN SAVINGS IN THAT, ON A PROGRAM THAT'S ABOUT $100 MILLION OVER -- IT'S ABOUT $200 MILLION OVERALL, GROUP AND PRIVATE FOSTER CARE. TO TRY AND FIND TEN MILLION IN SAVINGS IN THAT IN THE NEXT SIX MONTHS, I THINK, IS GOING TO BE DIFFICULT. THE IDEA IS -- I DON'T THINK ANY OF US HAVE OPPOSED THE RESTRUCTURING EFFORT, AND MAYBE THERE ARE LONG-TERM SAVINGS THERE, BUT WE SHOULD IDENTIFY THOSE SAVINGS BEFORE WE CUT THOSE PROGRAMS.

Yepsen: SENATOR, WE'VE GOT JUST A COUPLE MINUTES LEFT. LOCAL SCHOOLS... BUDGET GUARANTEE. THE REDUCTION OF SCHOOL -- STATE AID TO LOCAL SCHOOLS WHO ARE LOSING ENROLLMENTS REALLY STARTS TO KICK IN AND IS BITING A LOT OF RURAL SCHOOLS. DO YOU ANTICIPATE THE NEXT SESSION OF THE LEGISLATURE CHANGING THE BUDGET GUARANTEE?

Gronstal: I THINK THAT WILL BE AN ISSUE WITH A LOT OF TENSION ABOUT IT. THERE WILL BE CERTAINLY MEMBERS OF MY CAUCUS, CERTAINLY MEMBERS OF THE REPUBLICAN CAUCUS THAT WILL PUSH TO DO SOMETHING ABOUT THE BUDGET GUARANTEE TO LIMIT THE AMOUNT OF RATCHETING DOWN THAT HAPPENS IN THAT. AND I THINK IT'S KIND OF HARD AT THIS POINT TO PREDICT WHAT WILL HAPPEN ON THAT. I DON'T THINK PEOPLE HAVE CAST-IN-STONE POSITIONS ON IT.

Henderson: THE LEGISLATURE, A COUPLE OF YEARS AGO, TIED PAY TO PERFORMANCE FOR SCHOOL TEACHERS THROUGHOUT THE STATE, BUT THEY'VE NEVER REALLY PUT A LOT OF MONEY BEHIND THE PAY PART.

Gronstal: THEN WE NEVER PAY FOR THE PERFORMANCE.

Henderson: EXACTLY. WILL THE STATE EVER BE IN A POSITION, GIVEN THE FINANCIAL CONSTRAINTS, TO EVER PUT ADDITIONAL MONEY FOR TEACHER SALARIES?

Gronstal: WE CERTAINLY WON'T IF WE PASS A $320-MILLION INCOME TAX CUT. THAT JUST TAKES IT ANOTHER FIVE YEARS OUT BEFORE YOU SEE THE KINDS OF REVENUES THAT WILL BE ABLE TO DEAL WITH THAT. SO THAT'S -- THAT'S PRIMARILY -- IT'S NOT SO MUCH A TAX CUT AS A SERVICE CUT.

Borg: WITH THE DEMOCRATIC PRESIDENTIAL CANDIDATES ROAMING IOWA NOW, HAVE YOU PICKED A FAVORITE?

Gronstal: NO. I THINK THEY'RE -- I THINK THEY'RE ALL DOING A GOOD JOB OF LAYING OUT AN AGENDA FOR DEMOCRATS IN THE NEXT CAMPAIGN. I'M ENCOURAGED BY THE ACTIVITY IN THE DEMOCRATIC PRESIDENTIAL RACE. WE'VE GOT A BUNCH OF GREAT CANDIDATES OUT THERE, AND I ENCOURAGE THEM ALL TO COME TO IOWA. WE WELCOME THEM HERE AND LOOK FORWARD TO THEIR SUCCESS.

Borg: THANKS. THANKS FOR SHARING YOUR VIEWS WITH US TODAY.

Gronstal: SURE.

Borg: ON OUR NEXT EDITION OF "IOWA PRESS," WE FOCUS ON IOWA'S ECONOMIC PROSPECTS. THE NEW DIRECTOR OF ECONOMIC DEVELOPMENT, MICHAEL BLOUIN, WILL BE WITH US. AND BY THAT TIME, THE GOVERNOR MAY HAVE DECIDED WHAT TO DO ABOUT THE DEVELOPMENT LEGISLATION THAT WE DISCUSSED HERE, AND WE'LL GET DIRECTOR BLOUIN'S BLUEPRINTS FOR ENERGIZING THE STATE'S ECONOMY. I HOPE YOU'LL WATCH NEXT WEEKEND: 6:30 FRIDAY, SUNDAY AT NOON. AND THAT'S IT FOR THIS WEEK'S EDITION OF "IOWA PRESS." I'M DEAN BORG. THANKS FOR JOINING US TODAY.