| Home |  |
|
State Treasurer Michael Fitzgerald Borg: THE NATION STRUGGLES TO REVIVE THE LETHARGIC ECONOMY AND THE STATES SLASH EXPENSES TO MATCH PUNY TAX REVENUES. INSIGHT ON IOWA'S FINANCIAL BOOKS FROM STATE AUDITOR DAVID VAUDT AND TREASURER MICHAEL FITZGERALD ON THIS EDITION OF "IOWA PRESS." FUNDING FOR THIS PROGRAM WAS PROVIDED BY "FRIENDS," THE IOWA PUBLIC TELEVISION FOUNDATION... GENERATIONS OF FAMILIES AND FRIENDS WHO FEEL PASSIONATE ABOUT THE PROGRAMS THEY WATCH ON IOWA PUBLIC TELEVISION. AND BY THE IOWA BANKERS ASSOCIATION... FOR PERSONAL, BUSINESS, AND COMMERCIAL NEEDS, IOWA BANKS HELP IOWANS REACH THEIR FINANCIAL GOALS. ON STATEWIDE IOWA PUBLIC TELEVISION, THIS IS THE FRIDAY, OCTOBER 3 EDITION OF "IOWA PRESS." HERE IS DEAN BORG. THANK YOU. Fitzgerald: WELL, IT'S A DIFFICULT PROBLEM BUT WE ARE MILES AHEAD OF WHERE WE WERE TEN YEARS AGO WHEN WE HAD OUR FIRST CRISIS. WE HAD A $400 AND SOME MILLION DOLLAR GAP DEFICIT. WE DID NOT HAVE AN ACCEPTED METHOD OF KEEPING OUR BOOKS. WE DID NOT HAVE A BIPARTISAN WAY OF TRYING TO PROJECT OUR REVENUES. IT WAS JUST WHATEVER THE GOVERNOR SUGGESTED. SO WHEN WE GET TO THE END OF THE YEAR, AS DICK JOHNSON WOULD SAY: WE SEE THE SMOKE AND MIRRORS PUSHING REVENUES INTO THE PAST YEAR, PUTTING EXPENSES AHEAD OF THE NEXT YEAR. THOSE KINDS OF THINGS LED US TO THESE PROBLEMS. SO IOWA PUT FORTH A VERY STRONG STRUCTURE IN HOW WE WOULD BUDGET AND PREPARE OUR BUDGET AND OPERATE. WE FIRST ACCEPTED GAP ACCOUNTING, GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. THEN WE PUT TOGETHER A REVENUE ESTIMATING COMMITTEE THAT WAS BIPARTISAN. THE GOVERNOR HAS AN APPOINTEE, THE FISCAL DIRECTOR, AND THEN AN INDIVIDUAL SELECTED. AND THEN WE MUST OPERATE FROM THE REVENUES THAT THEY PROJECT, AND PLUS, WE MUST ONLY BUDGET 99 PERCENT OF THOSE REVENUES. Fitzgerald: WELL, WE HAVE GOTTEN IT RIGHT. WE HAVE REALLY DONE AN EXCELLENT JOB, BUT PREDICTING IOWA'S REVENUES, THAT'S A HARD THING TO DO. LET'S LOOK AT WHAT WE'VE WENT THROUGH. WE'VE BEEN TESTED BY FIRE. IN THE LAST THREE YEARS, WE'VE HAD A LONG, LINGERING RECESSION. WE'VE HAD 9/11. WE HAVE THIS WAR GOING ON IN IRAQ, AND WE'VE HAD THE FINANCIAL MANAGEMENT SCANDAL IN ALL THESE BIG CORPORATIONS IN THIS COUNTRY. REVENUES HAVE BEEN DOWN AND WE'VE MANAGED THROUGH IT. YES, THE $70-MILLION SHORTFALL AT THE END OF LAST YEAR AND THEN AGAIN THIS YEAR, THAT IS A SERIOUS PROBLEM, AND WE'VE GOT TO FIX IT. LAST YEAR THE GOVERNOR APPOINTED HOLMES FOSTER, A RESPECTED BANKER, TO BE ON THAT COMMITTEE. HE SHOOK UP HIS END OF IT, AND THEY MADE RECOMMENDATIONS. I WISH THE LEGISLATURE WOULD HAVE INCORPORATED THOSE, BECAUSE NOW WE SEE HOW IMPORTANT THAT IS. WE MUST DO THAT. Vaudt: BEING THE NEW PERSON ON THE BLOCK, I TAKE A LOOK AT IT AND THE PROBLEM IS MUCH DEEPER THAN JUST THE R.E.C. ESTIMATES. Vaudt: CORRECT. EXCUSE ME. AND IF YOU TAKE A LOOK AT THE LAST EIGHT YEARS, THEIR ESTIMATES, THEY HAVE ALWAYS BEEN WITHIN A PLUS OR MINUS 2 PERCENT FOR THE LAST EIGHT FISCAL YEARS. SO IN OVERALL BASIS, THE REVENUE ESTIMATING IS COMING IN PRETTY GOOD WHEN YOU CAN SAY THAT YOU'RE COMING IN WITHIN 98 PERCENT OF WHAT YOU ESTIMATED. THE REAL ISSUE, I THINK, IS THAT WE ARE BUDGETING TOO CLOSE. WE'RE TRYING TO SPEND DOWN TO THE LAST DIME, AND YOU CAN'T DO THAT. WE'VE GOT A $2-MILLION BUDGET IN FISCAL -- OR CUSHION IN FISCAL YEAR '03 ON $4.5-BILLION BUDGET. THAT IS A .04-PERCENT CUSHION. AND I EQUATE THAT TO A FAMILY THAT HAS A $45,000 INCOME FOR AN ANNUAL BASIS. AND THEY BUDGET DOWN TO SPEND WITHIN $20. THAT WOULD BE THE EQUATION TO A FAMILY BUDGET, $20 CUSHION ON A $45,000 INCOME. YOU CAN'T DO IT. NO MATTER WHAT YOU DO IN THE REVENUE ESTIMATING, THERE ARE VARIABLES AND THERE ARE GOING TO BE VARIANCES, AND YOU'VE GOT TO PROVIDE A CUSHION TO DO THAT. AND WE HAVEN'T ALLOWED FOR THAT. Vaudt: WHAT'S REALLY HAPPENED AS I LOOK BACK OVER LAST THREE OR FOUR YEARS IS, WHEN YOU TAKE A LOOK AT THE NUMBERS, BACK AT THE END OF FISCAL YEAR 1999, WE ACTUALLY HAD A $400-MILLION CASH SURPLUS. THAT SURPLUS IS GONE. IN ADDITION, WE HAD RESERVES -- CASH RESERVES AND EVERYTHING BUILT UP, AND THOSE RESERVES AND STUFF ARE GONE. SO WE'VE ACTUALLY SPENT DOWN $4 MILLION WORTH OF CASH RESERVES, CASH SURPLUS. THEN WE'VE ACTUALLY TAKEN ANOTHER BILLION DOLLARS FROM OTHER FUNDS AND PROGRAMS AND SPENT THAT DOWN, AND $450 MILLION OF THAT IS REQUIRED TO BE REPAID BY LAW. Fitzgerald: FOR THE LAST THREE YEARS, IT CERTAINLY HAS AND IT'S CERTAINLY, I BELIEVE, A RESULT OF THE ECONOMY. WE'VE HAD A VERY SOFT ECONOMY, A STOCK MARKET THAT MOST PEOPLE FEEL HAS CRASHED. WE'VE HAD 9/11. VERY DIFFICULT PROBLEMS WITHIN OUR ECONOMY. REVENUES ARE NOT COMING IN. THE STATE HAS OPERATED WITH LESS REVENUE EACH YEAR FOR THE PAST THREE YEARS. WE'VE BEEN CUTTING SPENDING IN STATE GOVERNMENT. THE GOVERNOR AND THE LEGISLATURE, THEY'VE BOTH BEEN DOING THEIR JOB BECAUSE OUR STRUCTURE OF HOW WE BUDGET HAS BEEN WORKING. WE'VE BEEN TESTED UNDER FIRE. BUT IF REVENUES ARE NOT COMING IN, WE HAVE TO KEEP CUTTING, AND THEY'VE BEEN DOING THAT. Fitzgerald: ABSOLUTELY. Vaudt: MY REAL CONCERN IS THAT WE HAVE DIPPED INTO THE CASH SURPLUS, WE HAVE DIPPED INTO OTHER PROGRAMS AND FUNDS. SO WHEN YOU START LOOKING AT A FIVE-YEAR PERIOD WHERE YOU SPENT $1.4 BILLION OVER WHAT YOU ACTUALLY HAD FOR A REVENUE STREAM DURING THAT PERIOD, IT'S DIFFICULT. Vaudt: WHAT WE HAVE TO DO IS WE HAVE TO TAKE A LOOK AT WHAT WE WERE DEALING WITH. AND IN IOWA WE HAVE DIFFERENT CIRCUMSTANCES THAN WHAT THE NATION IS DEALING WITH. AND I THINK -- Vaudt: FROM THE STANDPOINT THAT THEY'RE TRYING TO DEAL WITH THE NATIONAL ISSUES AND WE'RE DEALING MORE WITH THE LOCAL IOWA ISSUES AND WHAT WE'RE DOING HERE. AND I THINK THE REAL KEY IS TO SIT DOWN AND DECIDE WHAT OUR FINANCIAL GOALS ARE, AND THAT MEANS THE EXECUTIVE BRANCH AND THE LEGISLATIVE BRANCH SAYING WHERE DO WE REALLY WANT IOWA TO BE FROM A FINANCIAL CONDITION STANDPOINT. AND ONCE WE DO THAT, THEN WHAT WE HAVE TO DO IS TO SAY WHAT KIND OF TIME LINE IS IT GOING TO TAKE US TO BUILD THAT FINANCIAL STABILITY AND THEN IMPLEMENT IT. AND I THINK WHAT WILL DRIVE US IS THAT WE WILL FIND THAT THE 99-PERCENT SPENDING LIMITATION IS PROBABLY GOING TO HAVE TO BE ADDRESSED, BECAUSE IN ORDER TO MEET SOME OF THOSE FINANCIAL GOALS, WE MIGHT NEED TO LOOK AT 98-PERCENT OR 97-PERCENT SPENDING LIMITATION. Fitzgerald: WELL, FIRST OF ALL, I AGREE WITH AUDITOR VAUDT THAT TO PROJECT OUR REVENUES -- WE'VE DONE A PRETTY GOOD JOB. IF YOU'RE WITHIN 2 PERCENT, YOU HAVE DONE A GOOD JOB. BUT WHERE WE'VE GOTTEN IN TROUBLE IS AT THE END OF THE YEAR, NOT BEING ABLE TO ACCURATELY PREDICT THOSE LAST THREE MONTH'S ACCRUALS. WE NEED TO ADDRESS THAT PROBLEM. BUT LET'S ALSO REMEMBER WE DO HAVE A BALANCED BUDGET AND WE DO HAVE $200 MILLION IN RESERVES. AND IT'S BEEN COMING DOWN AND THAT'S BEEN A DIRECT RESULT OF THREE VERY, VERY DIFFICULT YEARS. OUR SYSTEM IS WORKING. IT'S BEING TESTED UNDER FIRE, AND IT'S NOT JUST MIKE FITZGERALD SAYING THAT. THE RATING AGENCIES, STANDARD AND POOR'S AND MOODY'S, HAVE SAID: IOWA, WE APPRECIATE WHAT YOU'RE DOING; YOU HAVE FINANCIAL INTEGRITY IN THAT STATE; YOU HAVE A STRUCTURE THAT YOU'VE LIVED WITH THROUGH HARD TIMES. AND THAT'S WHY THEY'VE BOTH GIVEN US AA+ AND AA1 RATINGS. AND WHEN YOU LOOK AROUND THE COUNTRY AND HOW WE STACK UP AGAINST OTHER STATES, IF IT WAS A RANKING LIKE FOOTBALL RANKINGS, WE'RE NUMBER 11 IN THE COUNTRY. AND WE ALL SEE WHAT'S HAPPENING IN CALIFORNIA, WISCONSIN, MISSOURI, ILLINOIS. WE ARE -- THROUGH THESE BAD TIMES, WE'RE LOOKING PRETTY GOOD. Fitzgerald: WELL, I WOULD BE A LITTLE MORE CONSERVATIVE. THAT'S MY NATURE AND I WOULD AGREE WITH HIM THERE. WE SHOULD -- WE SHOULD NOT TRY TO BUDGET RIGHT DOWN TO THE $2 MILLION. Vaudt: I THINK WHAT WE HAVE TO DO IN IOWA IS TAKE A LOOK AT OUR TAX STRUCTURE, AND WE HAVE TO DECIDE WHAT'S GOING TO BE CONDUCIVE TO THE BUSINESS ENVIRONMENT THAT WE WANT TO CREATE AND TO GROW IOWA. BUT AT THE SAME TIME, I THINK EXPENDITURES HAVE TO BE IN LINE WITH REVENUES, NOT REVENUES IN LINE WITH EXPENDITURES. Vaudt: IN THE TAX STRUCTURE, WE NEED TO STEP BACK AND SAY FROM A SALES TAX, FROM A PROPERTY TAX, ALL THE TAX, PERSONAL INCOME TAXES, WE NEED TO STEP BACK AND SAY WHAT KIND OF STRUCTURE DO WE THINK WOULD BE THE BEST AND FAIREST STRUCTURE FOR IOWANS. Vaudt: AND THAT'S ONE OF THE THINGS THAT'S GOING TO TAKE SOME ANALYSIS. AND OBVIOUSLY, THE LEGISLATURE IS TRYING TO DEAL WITH THAT. AND THE ONE THING THAT I LOOK AT IS IT'S DEFINITELY -- THE LEGISLATURE AND THE GOVERNOR WERE ELECTED TO SET POLICY AND SPENDING AND APPROPRIATION DECISIONS. AND I'M HERE TO HELP PROVIDE SOME FINANCIAL ADVICE AS THEY TRY AND MAKE THOSE DECISIONS. Fitzgerald: WELL, EVERYBODY HAS DIFFERENCES IN WHAT THE FAIR TAX STRUCTURE SHOULD BE. BUT LET'S ALSO REMEMBER -- Fitzgerald: RIGHT, THAT'S CORRECT. THAT'S CORRECT. IN THE LAST THREE YEARS IN THIS VERY DIFFICULT ECONOMY, THE STATE OF IOWA HAS NOT RAISED TAXES. AS A MATTER OF FACT, WE'VE CUT TAXES. AND SO WHAT WE NEED TO DO IN THIS STATE IS WE NEED TO GET OUR ECONOMY GOING. WE'VE DONE A COUPLE OF THINGS THAT HAVE BEEN VERY SUCCESSFUL. FIRST OF ALL, WE DID -- WE PASSED VISION IOWA, AND THAT WAS A PROGRAM THAT BOTH REPUBLICANS AND DEMOCRATS CONTRIBUTED TO. THE GOVERNOR WAS FOR IT. I KNOW SENATOR LAMBERTI WAS VERY INSTRUMENTAL IN THAT. BUT IT WAS TURNED OVER TO A COMMISSION WHERE MIKE GARTNER PUT SIXTY HOURS A WEEK INTO THIS PROGRAM. BUT WE ALSO HAVE MR. BERENSTEIN, A REPUBLICAN FROM SIOUX CITY THAT'S ON IT; GREGG CONNELL, FROM SOUTHWEST IOWA; MARY ELLEN CHAMBERLAIN IS FROM DAVENPORT; SHARON JUON FROM WATERLOO; BIPARTISAN FOLKS WITH THE INTEREST OF HOW DO WE TAKE $200 MILLION, SPREAD IT AROUND THE STATE, BRING LOCAL COMMUNITIES TOGETHER TO DEVELOP ATTRACTIONS AND TOURISM ALL OVER THE STATE, AND IT'S WORKED. $200 MILLION HAS BEEN LEVERAGED INTO $2 BILLION. Fitzgerald: OKAY. NO, IT'S NOT. AND IT'S WORKING. IT TAKES TIME FOR THESE THINGS. THEY JUST DON'T HAPPEN OVERNIGHT. DES MOINES PROJECT, BUILDING THE EVENT CENTER, THAT'S STILL BEING BUILT. Fitzgerald: WE NEED TO KEEP DOING IT. VISION IOWA IS GOING TO -- IS WORKING. AND NOW WITH THE ECONOMIC DEVELOPMENT FUND, IT'S GETTING OFF THE GROUND. AND IT SHOULD HAVE BEEN MORE AGGRESSIVE THAN WHAT IT WAS. WE'RE TRYING -- WE'VE SEEN THREE EXCELLENT PROJECTS STARTED, BUT I WORRY IF THEY'RE GOING TO BE ABLE TO MAINTAIN. BUT WE HAVE TO DO THAT KIND OF THING TO BRING IN JOBS, KEEP YOUNG PEOPLE IN OUR STATE. IF WE DON'T DO IT, WE'RE GOING TO END UP LOOKING LIKE NORTH DAKOTA. Vaudt: I THINK THEY'RE DEFINITELY OPTIONS THAT NEED TO BE EVALUATED. IT'S A PLACE THAT WE CAN GO TO, TO BRING IN THAT ADDITIONAL REVENUE. BUT TO KIND OF FOLLOW UP WITH WHAT MIKE WAS TALKING TO, MY REAL CONCERN IS WE DO HAVE TO CONTROL SPENDING BECAUSE IF WE REALLY STEP BACK AND SAY WHAT HAS HAPPENED OVER THE LAST FEW YEARS, WE HAVE INCURRED A $450-MILLION DEBT TO FUND GENERAL FUND EXPENDITURES. WE'VE GOT $450 MILLION THAT WE HAVE TO REPAY. WE HAVE NOT SET WHAT THE REPAYMENT TERMS ARE GOING TO BE AS FAR AS TIME LINE AND STUFF, BUT THOSE ARE GOING TO COME OUT OF OUR GENERAL FUND RESOURCES OF THE FUTURE, SO WE'VE COMMITTED THOSE FUTURE RESOURCES SOMEHOW. Vaudt: NINE MONTHS. Vaudt: YOU KNOW, I THINK THE ISSUES THERE ARE WE HAVE TO SAY WHAT ARE IOWA'S PRIORITIES. AND JUST LIKE EVERY FAMILY HAS TO SIT DOWN AND SAY I'D LIKE TO DO THIS AND I NEED TO DO THIS BUT I CAN ONLY DO CERTAIN THINGS, WE'RE GOING TO HAVE TO FOCUS ON WHAT OUR PRIORITIES ARE, AND THOSE PRIORITIES ARE GOING TO BE SET BY THE LEGISLATURE AND THE GOVERNOR. AND ONCE WE SET THOSE, THEN WE'VE GOT TO LEVEL OUR SPENDING -- Fitzgerald: WELL, WE HAVE BEEN CUTTING. WE SPENT LAST -- EACH THE LAST THREE YEARS, WE'VE SPENT LESS THAN THE YEAR BEFORE. TWO YEARS AGO, IN 2002, IOWA CUT OVER 5 PERCENT OF ITS BUDGET. WE WERE THE LEADING STATE IN THE COUNTRY IN CUTTING OUR BUDGET. THAT'S WHY DURING THE GOVERNOR'S RACE, IT WAS WHERE DID THE MONEY GO, WHAT ARE ALL THESE PROBLEMS. OUR SYSTEM BROUGHT THIS PROBLEM OUT EARLY, AND WE HAD TO DEAL WITH IT AND WE DEALT WITH IT. SO THE SYSTEM IS WORKING AND WE'VE BEEN CUTTING. NOW WE NEED REVENUE. WE NEED TO DEVELOP THE ECONOMY IN THIS STATE, AND WE NEED TO GET OUR YOUNG PEOPLE BACK. WE'VE GOT TO CREATE JOBS. Fitzgerald: OH, THE INTERNET TAX? CERTAINLY. I THINK WE NEED TO COLLECT OUR FAIR SHARE OF INTERNET SALES BECAUSE WE'RE PUTTING OUR MAIN STREET BUSINESS PEOPLE AT A DISADVANTAGE. ALSO, THE CIGARETTE TAX -- MY FATHER DIED OF EMPHYSEMA. IF THEY CAN TAX CIGARETTES, GREAT. I WOULD LIKE THEM TO SEE -- TO SEE THAT HAPPEN. Fitzgerald: CORRECT, CORRECT. BUT THAT ISN'T GOING TO ANSWER ALL OF IOWA'S PROBLEMS EITHER. WE HAVE GOT TO GROW THE ECONOMY. AND RIGHT NOW WITH THIS BUDGET SO TIGHT IN THIS RECESSION, THE GOVERNOR AND THE LEGISLATURE REALLY DO HAVE A DIFFICULT PROBLEM. WE CAN'T CONTINUE TO SLASH EDUCATION. LOOK AT HOW MUCH TUITION HAS RISEN IN THE LAST FEW YEARS. IT'S GONE UP SO MUCH THAT A LOT OF CHILDREN ARE BEING HELD OUT OF SCHOOL. FAMILIES JUST CAN'T SEND THEM. WE CAN'T ALLOW THAT TO HAPPEN IN THE STATE OF IOWA. Vaudt: I WOULD COME BACK TO SAYING THAT I THINK THE REVENUE ESTIMATING PROCESS IS WORKING QUITE WELL, WHEN YOU CAN GET WITHIN 98 PERCENT OF WHAT YOU THINK YOU ARE. AND BUSINESSES WOULD BE VERY HAPPY WITH THAT TYPE OF SUCCESS RATE TOO, BECAUSE IF YOU LOOK AT THAT TOTAL, THAT'S VERY GOOD. IT'S JUST THAT WE'VE GOT TO CONTROL OUR SPENDING SO THAT WE DON'T TRY AND SPEND EVERYTHING, BECAUSE THERE'S SO MANY VARIABLES THAT WILL IMPACT THAT. Vaudt: I LOOK AT IT AND SAY FISCAL RESPONSIBILITY TAKES TOUGH DISCIPLINE, AND HOPEFULLY PEOPLE CAN USE SELF-DISCIPLINE TO GET THERE. BUT IF WE CAN'T GET THERE THROUGH SELF-DISCIPLINE, YES, I THINK WE NEED TO LOOK AT THOSE OPTIONS AND SAY HOW CAN WE GET THERE. THE OTHER THING IS, IF YOU REALLY LOOK AT OUR 99-PERCENT SPENDING LIMITATION, IT APPLIES WHEN WE'RE ADOPTING OUR BUDGET. BUT WHEN WE GO INTO SPECIAL SESSION AND WE GO INTO SUPPLEMENTAL APPROPRIATIONS, IT DOESN'T APPLY. SO WE'RE REALLY -- WE DON'T HAVE A REAL SPENDING LIMITATION RIGHT NOW. Vaudt: THAT'S RIGHT. THAT'S RIGHT. Fitzgerald: NO, I COULD NOT. AND I THINK WE DO HAVE DISCIPLINE IN OUR STATE GOVERNMENT. AGAIN, LOOK AT THE TIMES WE'VE BEEN THROUGH AND WE STILL HAVE $200 MILLION OF RESERVE FUNDS WITH A BALANCED BUDGET. AND IT'S -- AGAIN, IT'S NOT MIKE FITZGERALD SAYING IT; THE RATING AGENCIES ARE SAYING: YOU SURVIVED THIS FIRESTORM; YOU'VE PROVED YOURSELF UNDER DIFFICULT TIMES. I BELIEVE WE'VE GOT TO HAVE RESPONSIBLE LEADERSHIP IN STATE GOVERNMENT, SO I DON'T THINK WE SHOULD SHACKLE OURSELVES WITH CONSTITUTIONAL RESTRICTIONS ON WHETHER WE SHOULD RAISE REVENUES. Fitzgerald: NO, I WOULD NOT SUPPORT THAT AS WELL. Fitzgerald: HE'S A GOOD DEMOCRAT BUT WE DON'T AGREE ON ALL THINGS. THAT'S ONE I DON'T AGREE WITH HIM ON. THERE'S BEEN A LOT OF THINGS WE HAVEN'T AGREED ON AND THAT I'VE ASKED FOR THAT HE JUST COULDN'T ALLOW. I RESPECT HIS DIFFERENCES BUT HE'S GOT A BIG RESPONSIBILITY THERE TOO. Vaudt: IT WOULD HELP A GREAT DEAL BECAUSE IT WOULD GIVE US THAT ABILITY TO ACCUMULATE THOSE RESERVES AND DO THAT. Vaudt: I THINK WE REALLY HAVE TO LOOK AND SAY, NUMBER ONE, WE HAVE NEVER REALLY ADDRESSED THE 450 MILLION THAT WE HAVE TO REPAY. WE HAVE TO TAKE A LOOK AT THAT AND SAY WHAT'S THE IMPACT, WHAT KIND OF REVENUE STREAM DO WE NEED TO ACCUMULATE, IN OTHER WORDS, THAT WE CAN'T SPEND CURRENTLY BECAUSE WE'VE GOT THIS OTHER DEBT TO RETIRE ALONG WITH IT. Fitzgerald: WELL, DAVID, YOU KNOW, AS I AGREED, GET TO THE END OF THE YEAR, THIS 70-MILLION SHORTFALL, WE CAN'T HAVE THOSE KIND OF SURPRISES. THE AUDITOR SAID THAT $2-MILLION CUSHION, WELL, THAT'S NOT ENOUGH. BUT TO GO FROM 99 TO 98 MILLION, IT MEANS LET'S CUT OFF ANOTHER $50 MILLION OF NEXT YEAR'S BUDGET. AND RIGHT NOW IN THESE HARD TIMES, I THINK IT'S MORE RESPONSIBLE TO SAY LET'S FIX THE REVENUE PROJECTIONS, LET'S USE HOLMES FOSTER'S RECOMMENDATIONS OF HOW WE HONE IN ON THAT AND MAKE THE $99 MILLION WORK -- OR THE 99 PERCENT WORK. IF IT DOESN'T, IF WE CONTINUE TO HAVE THESE ERUPTIONS AT THE END OF THE YEAR, THEN WE'RE GOING TO HAVE TO GO TO IT. BUT RIGHT NOW I THINK IT'S MORE PRUDENT THIS YEAR TO CARRY ON ANOTHER YEAR THAT IMPLEMENT SOME OF THESE SUGGESTIONS. Vaudt: I THINK WHEN YOU LOOK BACK AT THE EIGHT-YEAR PERIOD THAT I LOOKED AT AND SAID WE WERE WITHIN A PLUS OR MINUS 2 PERCENT IN ALL THOSE EIGHT YEARS, IT KIND OF GIVES YOU THE INDICATION THAT 2 PERCENT IS PROBABLY A GOOD PLACE TO PEG IT. Fitzgerald: I THINK THE 99-PERCENT NUMBER WORKS WELL AND THAT I THINK WE SHOULD TRY TO WORK WITH THE FRAMEWORK WE HAVE NOW. Fitzgerald: DAVID, YOU MAKE A GOOD POINT. BUT AGAIN, LAST YEAR WHEN THIS HAPPENED, THE REVENUE ESTIMATING COMMITTEE WITH HOLMES FOSTER AND DENNIS PROUTY CAME FORWARD WITH THESE RECOMMENDATIONS, AND I THINK IT'S -- FIRST, LET'S GIVE THAT A SHOT TO SEE IF WE CAN BRING IT IN TO MAKE IT WORK. IT IT CAN'T, THEN I WOULD GO ALONG WITH THE 2 PERCENT, 98 PERCENT. BUT I THINK WE CAN MAKE IT WORK. Vaudt: NO. BUT I THINK WE NEED TO STEP BACK AGAIN AND SAY WE'VE BEEN WITHIN 2 PERCENT OVER LAST EIGHT YEARS. WE'RE NEVER GOING TO BE ABLE TO GET IT DOWN TO 100 PERCENT ACCURACY, BECAUSE THERE'S VARIANCES AND THERE ARE VARIABLES, AND WE HAVE TO TAKE THOSE INTO CONSIDERATION. SO I DON'T WANT US TO SPEND TO MUCH RESOURCES TO TRY AND REFINE IT TO A PLACE WE'RE NOT GOING TO GET. Vaudt: WELL, I THINK IF WE SIT DOWN AND WE LOOKED AT PRIORITIES AND IF WE TALK ABOUT EDUCATION AND SOME OF THE THINGS THAT WE THINK WILL MAKE A DIFFERENCE IN IOWA, IN HOW WE GROW AND HOW WE BRING UP OUR YOUTH AND HOW WE GET THEM TO STAY HERE IN IOWA, THOSE ARE SOME OF THE THINGS THAT WE NEED TO FOCUS ON. AND THEN WE HAVE TO SAY WE CAN'T HAVE 500 PRIORITIES BECAUSE WE JUST CAN'T DO IT, AND THEN WE HAVE TO TAKE A VERY HARD LOOK AT SOME OF THE PROGRAMS THAT ARE OUT THERE AND SAY WHICH ONES CAN WE CUT BY EVALUATING WHAT'S THE IMPACT OF THOSE. Vaudt: WELL, I ALWAYS LOOK AT -- JUST SAY WE NEED TO LOOK AT WHERE IS IOWA AT. I'M NOT AS CONCERNED ABOUT WHERE MINNESOTA STANDS OR WHERE ANY OTHER STATE STANDS, BUT WHERE ARE WE AT FINANCIALLY AND HOW SOUND ARE WE AND WHAT KIND OF RESERVES DID WE HAVE AND WHAT'S OUR ABILITY TO MAKE SURE THAT WE HAVE A WELL-PLANNED FUTURE. I'M MORE CONCERNED ABOUT THAT. Fitzgerald: WELL, THE STATE IPERS RETIREMENT SYSTEM IS NOW UNDERFUNDED. IT'S ABOUT 90-PERCENT FUNDED, AND THAT IS A PROBLEM. AND IT'S A GROWING PROBLEM. AND THE LEGISLATURE AND THE GOVERNOR HAVE TO ADDRESS IT NOW OR THIS $1.2-BILLION PROBLEM IS GOING TO GROW AND IT'S GOING TO BECOME UNMANAGEABLE. THE EMPLOYEES HAVE COME FORWARD WITH ONE OPTION. BUT I BELIEVE THAT, ONE, FIX THE IPERS SITUATION AS QUICK AS YOU CAN RIGHT NOW, BUT WE NEED TO HAVE A THOROUGH STUDY OF HOW GOVERNMENT AT ALL LEVELS IN IOWA IS GOING TO PROVIDE RETIREMENT BENEFITS FOR ITS EMPLOYEES. THIS IS -- THE PRIVATE SECTOR IS DOING THAT TODAY. WE NEED TO LOOK AT THAT AS WELL AND THAT GOING FORWARD, THIS IS GOING TO CONTINUE TO BE A HUGE, HUGE ISSUE. YOU KNOW, BACK IN THE '90S, IPERS WAS WAY OVERFUNDED. SO WHAT HAPPENED? THE GOVERNOR AND LEGISLATURE WERE CONVINCED THAT THEY COULD REALLY EXPAND IPERS BENEFITS DRAMATICALLY. THEY SAID THAT IT WOULD TAKE CARE OF ITSELF. WELL, IT HASN'T. WE'RE IN A PROBLEM, BUT THAT'S ALWAYS GOING TO BE THE CASE. WE NEED TO GO BACK AND LOOK AT HOW WE STRUCTURED -- Fitzgerald: WELL, YOU KNOW, LEGALLY, IF YOU LOOK AT THIS $1.2 OBLIGATION WE HAVE IS AN OBLIGATION OF THE TAXPAYERS. IF YOU WOULD TAKE IT TO COURT OR WHATEVER, THE STATE HAS TO GUARANTEE -- OR THE STATE AND, YOU KNOW, THE SCHOOL DISTRICTS, THE COUNTIES, THE CITIES. WE'RE ON THE HOOK FOR $1.2 BILLION, BUT THE EMPLOYEES ARE COMING FORWARD TO PAY PART OF IT. I THINK THE STATE, IT WAS IN THEIR BEST INTEREST TO WORK WITH THEM TO GET THIS BACK ON SOLID GROUND. Fitzgerald: YES, I AGREE. AND THAT'S THE RECOMMENDATION THAT'S BEING BROUGHT FORWARD, AND I AGREE WITH IT. Vaudt: YEAH, I THINK DEFINITELY WHEN YOU START LOOKING AT A DEFINED EMPLOYEE BENEFIT PLAN LIKE WE HAVE IN IOWA, THE COSTS OF THOSE ARE BECOMING VERY, VERY HIGH. AND YOU'LL SEE THAT IN THE PRIVATE INDUSTRIES, A LOT OF COMPANIES ARE GOING AWAY FROM THAT TYPE OF BENEFIT PLAN BECAUSE IT IS SO COSTLY. BUT IF WE'RE GOING TO HAVE THAT TYPE OF PLAN, WE HAVE TO LOOK VERY CAREFULLY AT WHAT KIND OF BENEFITS WE CAN AFFORD TO PROVIDE AND THEN WE HAVE TO LOOK AT THE CONTRIBUTION RATES. Fitzgerald: COMPARED TO OTHER STATES, WE'RE IN GOOD SHAPE. YOU KNOW, IT'S 90-PERCENT FUNDED AND IT'S WELL MANAGED. YOU KNOW, THE MANAGEMENT AT IPERS, THEY TAKE IT VERY SERIOUSLY AND THEY DO AN EXCELLENT JOB. BUT -- Fitzgerald: NO, THE RETIREES CAN SIT PRETTY COMFORTABLE FOR WHERE WE'RE AT FOR THE NEXT TWENTY YEARS. IT'S THE GUYS THAT ARE STILL WORKING IN STATE GOVERNMENT, LIKE AUDITOR VAUDT AND MYSELF, THAT MAY FIND THE SHORT END OF THE STICK IF THIS SITUATION IS NOT CORRECTED. Fitzgerald: WE -- WE ARE PAYING OUR BILLS ON TIME. AND WE WILL CONTINUE TO PAY OUR BILLS ON TIME. WE MAY DO SHORT-TERM BORROWING. YOU KNOW, IN THE PAST THE STATE WAS ABLE TO BORROW MONEY AT TAX EXEMPT RATE, LESS THAN THE MARKET RATE. SO IF WE DON'T NEED ALL THAT MONEY, WE TAKE IT OUT AND REINVEST IT, AND MOST YEARS WE MAKE A PROFIT. AND THERE'S BEEN SOME YEARS WE'VE MADE $8-, $9-MILLION PROFIT. SO IF WE CAN DO IT -- MEANING IF WE MEET THE IRS'S CRITERIA, I RECOMMEND WE ALWAYS DO IT BECAUSE IT'S A WAY TO MAKE SOME MONEY FOR THE STATE OF IOWA. BUT AGAIN, IF WE DO IT THIS YEAR, WE'RE NOT GOING TO HAVE TO GO TO ANY JAPANESE BANK BECAUSE THE IOWA RATINGS ARE AA+. THE MARKET ACCEPTS US. AND WE JUST BORROWED MONEY FOR THE D.O.T. WE MADE .99-PERCENT INTEREST RATE. CALIFORNIA WENT LAST WEEK; THEY PAID 1.5 INTEREST ON THEIR SHORT-TERM MONEY. FUNDING FOR THIS PROGRAM WAS PROVIDED BY "FRIENDS," THE IOWA PUBLIC TELEVISION FOUNDATION... GENERATIONS OF FAMILIES AND FRIENDS WHO FEEL PASSIONATE ABOUT THE PROGRAMS THEY WATCH ON IOWA PUBLIC TELEVISION. AND BY THE IOWA BANKERS ASSOCIATION...
FOR PERSONAL, BUSINESS, AND COMMERCIAL NEEDS, IOWA BANKS HELP IOWANS REACH
THEIR FINANCIAL GOALS. |
|
