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Senate Republican Majority Leader Stewart Iverson
and Democratic Minority Leader Mike Gronstal


(#3136)
April 30, 2004

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IOWA PRESS #3136>>

Borg: SPECULATION ABOUNDS OVER CERTAIN AND POSSIBLE EFFECTS FROM IOWA'S 2005 STATE BUDGET. PERSPECTIVE FROM IOWA SENATE'S REPUBLICAN MAJORITY LEADER STEWART IVERSON AND DEMOCRATIC MINORITY LEADER MIKE GRONSTAL 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; AND BY THE ASSOCIATED GENERAL CONTRACTORS OF IOWA... THE PUBLIC'S PARTNER IN BUILDING IOWA'S HIGHWAY, BRIDGE, AND MUNICIPAL UTILITY INFRASTRUCTURE.

ON STATEWIDE IOWA PUBLIC TELEVISION, THIS IS THE FRIDAY, APRIL 30 EDITION OF "IOWA PRESS." HERE IS DEAN BORG.

Borg: IOWA'S 80TH IOWA GENERAL ASSEMBLY CLOSED EARLIER THIS MONTH, BUT ADMINISTRATORS AND STATE GOVERNMENT NOW ARE SCRAMBLING TO MAKE DECISIONS FORCED BY THE DRUM-TIGHT STATE BUDGET THAT TAKES EFFECT JULY 1. IT'S A $5-BILLION STATE BUDGET, STILL NOT ENOUGH, THOUGH, TO AVOID CERTAIN LAYOFFS OF SOME STATE WORKERS. AND EARLIER THIS WEEK DEMOCRATIC GOVERNOR TOM VILSACK BLAMED THE REPUBLICAN-LED LEGISLATURE FOR WHAT HE CLAIMS WILL BE PROPERTY TAX INCREASES LEVIED BY COUNTIES, CITIES, AND SCHOOL DISTRICTS BECAUSE OF TIGHT STATE FUNDING. VILSACK ALSO SAID THE STATE'S BOND RATING IS IN JEOPARDY BECAUSE LEGISLATORS, HE CLAIMS, RAIDED RESERVE FUNDS TO BALANCE THE BUDGET. WELL, TODAY ON "IOWA PRESS," WE'LL QUESTION TWO STATE SENATE LEADERS. STEWART IVERSON LEADS THE SENATE'S MAJORITY REPUBLICANS, AND MIKE GRONSTAL DOES THE SAME FOR THE DEMOCRATIC MINORITY. WELCOME BACK TO "IOWA PRESS," GENTLEMEN.

Iverson: THANK YOU.

Gronstal: THANKS FOR HAVING US.

Borg: AND ACROSS THE TABLE: "LEE NEWSPAPERS" STATEHOUSE BUREAU CHIEF TODD DORMAN AND "RADIO IOWA" NEWS DIRECTOR KAY HENDERSON.

Henderson: GENTLEMEN, LET'S BEGIN WITH GOVERNOR VILSACK'S COMPLAINTS ISSUED ON MONDAY. SENATOR IVERSON, HE SAID THAT YOU HAVE ONLY PROVIDED ENOUGH MONEY FOR THE MEDICAID BUDGET TO LAST A FEW MONTHS, NOT TWELVE FULL MONTHS, AND THAT YOU'VE SET THE STATE UP FOR A TAX HIKE IN 2005. WHAT DO YOU RESPOND TO THAT CHARGE?

Iverson: WELL, FIRST OF ALL, MEDICAID, DO WE KNOW WE'RE AT THE LOW END OF THE MEDICARE RANGE, BECAUSE THERE'S ALWAYS A RANGE THAT MEDICARE COMES IN AND, YES, WE ARE AT THE LOW END. BUT WE THINK WITH THE ECONOMY GROWING THAT WE'LL HAVE FEWER PEOPLE ON MEDICAID, WHICH I THINK WILL HELP GROW OURSELVES OUT OF THIS. AND SO WE READILY ADMIT, YES, WE'RE ON THE LOW END OF THE MEDICAID DOLLARS.

Henderson: WHAT ABOUT THE PROPERTY TAX ALLEGATION? YOU HAVE FAILED TO TAKE YOUR RESPONSIBILITY, AND YOU'VE SHIFTED RESPONSIBILITY TO THE LOCAL GOVERNMENTS.

Iverson: WELL, YOU KNOW, THAT'S PRETTY GOOD RHETORIC WITHOUT MUCH SUBSTANCE. YOU TALKED ABOUT THE HOMESTEAD CREDIT. IT'S FUNDED AT THE SAME LEVEL IT WAS SOME YEARS AGO FOR THE PAST SEVERAL YEARS. SO THE GOVERNOR ACTUALLY DID A TAX INCREASE EVERYWHERE ELSE AND THEN FULLY FUNDED THE TAX CREDITS. SO WHEN YOU GET A $350-MILLION INCREASE, YOU CAN INCREASE YOUR REIMBURSEMENT BY $15- OR $20 MILLION. IT MAKES A LOT OF SENSE. BUT IT IS FUNDED AT THE SAME LEVEL. SO I THINK THAT'S A BOGUS CHARGE, AND I SAY IT'S A LOT OF RHETORIC WITHOUT A LOT OF SUBSTANCE.

Henderson: SENATOR GRONSTAL, ONE OF THE REASONS REPUBLICANS SAY THAT THEY DID NOT PROVIDE AS MUCH MONEY IN THAT MEDICAID BUDGET AS MIGHT BE NECESSARY IS BECAUSE LAST YEAR THE GOVERNOR WENT IN AND SCOOPED SOME OF THAT MONEY UP AND USED IT FOR SOME OTHER PURPOSE, FOR PROVIDING SALARIES FOR STATE WORKERS. WHY SHOULDN'T REPUBLICANS BE SKITTISH ABOUT GIVING THIS GOVERNOR THAT MUCH MONEY TO PLAY WITH WHEN THEY'RE NOT IN TOWN?

Gronstal: I CERTAINLY UNDERSTAND THE REPUBLICANS BEING SKITTISH ABOUT IT, BUT THEIR MEDICAID BUDGET -- FIRST OF ALL, THEY'RE ESSENTIALLY DOING THE SAME THING THE GOVERNOR DID -- THAT THEY'RE CRITICIZING THE GOVERNOR FOR.

Borg: EXCEPT THEY GOT TO IT FIRST.

Gronstal: THEY ARE UNDERFUNDING MEDICAID BY ROUND NUMBERS BY $100 MILLION. THIS ISN'T ON THE LOW SIDE OF REALITY. THIS IS OUTSIDE OF REALITY. IT'S ON A COMPLETELY DIFFERENT PLANET. THEY'RE ASSUMING NOBODY WILL BE SICK IN THE LAST HALF OF THIS FISCAL YEAR. IT'S COMPLETELY IRRESPONSIBLE. NOBODY BUYS IT. NONE OF THE PROVIDERS BUY IT. NONE OF THE ORGANIZATIONS THAT UNDERSTAND THESE THINGS BUY IT. IT'S A BOGUS MEDICAID BUDGET.

Dorman: SENATOR IVERSON, THERE HAVE BEEN SOME MEMBERS OF YOUR OWN CAUCUS -- REPUBLICAN CAUCUS WHO HAVE SAID THAT IN ORDER TO FILL THAT MEDICAID GAP NEXT YEAR, YOU'RE GOING TO HAVE TO RAISE THE CIGARETTE TAX AND THAT THIS YEAR YOU SIMPLY PUT IT OFF -- YOU'RE SIMPLY PUTTING OFF THE INEVITABLE. WHAT DO YOU THINK ABOUT THAT?

Iverson: WELL, I DON'T NECESSARILY AGREE WITH THAT. ONE THING ABOUT THE INEVITABLE, WE ALWAYS HAVE A GREATER DEMAND FOR DOLLARS THAN WE HAVE. IT DOESN'T MATTER HOW MANY DOLLARS THAT WERE OUT THERE. I THINK THAT OUR GOAL IS TO TRY AND GROW OUR WAY OUT OF THIS BUDGET. THE REVENUES HAVE BEEN COMING IN PRETTY GOOD. WE'RE LOOKING AT PROBABLY HAVING ABOUT A $100 MILLION OR MORE THAN THAT FOR AN ENDING BALANCE, SO I THINK WE'RE DOING PRETTY DECENT GROWING OUR WAY OUT OF IT, AUTOMATICALLY DOING THE TAX INCREASE. THE GOVERNOR PROPOSED THAT. HE DIDN'T REALLY FIND ANY SUPPORT AMONG MEMBERS OF HIS OWN PARTY. I'VE NOT HEARD SENATOR GRONSTAL RUNNING AROUND THE STATE SAYING WE'RE GOING TO HAVE TO RAISE TAXES. HE DIDN'T SAY IT THIS PAST YEAR, AND I DON'T HEAR HIM SAYING IT TODAY.

Gronstal: AS A MATTER OF FACT, THAT'S WHY WE OPPOSED THE REPUBLICAN BUDGET, BECAUSE IT DOES RAISE TAXES. IT RAISES PROPERTY TAXES. AND DON'T JUST LISTEN TO THE DEMOCRATIC LEADER OF THE SENATE; LISTEN TO THE IOWA FARM BUREAU. THEY SAY PROPERTY TAXES HAVE GONE UP $400 MILLION IN THE LAST THREE FISCAL YEARS, AND $240 MILLION OF THAT IS DIRECTLY ATTRIBUTABLE TO WHAT THE LEGISLATURE HAS DONE. SO EVEN THE IOWA FARM BUREAU RECOGNIZES THAT THERE'S BEEN PROPERTY TAX INCREASE. IT'S GREAT CAMPAIGN RHETORIC TO GO INTO THE ELECTION YEAR SAYING WE DIDN'T RAISE TAXES. WELL, I THINK THE IOWA FARM BUREAU HAS CALLED THE REPUBLICANS ON THAT CLAIM THAT THEY DIDN'T RAISE PROPERTY TAXES, BECAUSE THEY DID.

Iverson: AND WE ABSOLUTELY DID RAISE PROPERTY TAX BECAUSE EVERY TIME YOU RAISE THE SCHOOL AID, THE ALLOWABLE GROWTH, ABOUT 50 PERCENT OF IT IS TAX INCREASE ON PROPERTY TAXES. THE 100-PERCENT BUDGET GUARANTEE IS ALL PROPERTY TAXES. WE'RE VERY MUCH AWARE OF THAT. SO WE CAN HAVE THE RHETORIC ABOUT NOT RAISING TAXES OR NOT RAISING PROPERTY TAXES. THE REALITY IS THAT EVERY TIME WE INCREASE SCHOOL SPENDING, YOUR PROPERTY TAXES GO UP. YOU KNOW, BUT I DIDN'T SEE ANY WAY TO ELIMINATE THAT. SENATOR GRONSTAL CERTAINLY DIDN'T OFFER ANYTHING. I KNOW HIS PARTY OFFERED ABOUT $180 MILLION WORTH OF NEW SPENDING WITHOUT ANYPLACE TO GET IT FROM BUT, I MEAN, THAT WAY -- THAT'S THE ADVANTAGE OF THE MINORITY; THEY GET IT BOTH WAYS. THEY CAN TALK ABOUT IT AND OFFER THE AMENDMENTS TO OFFER MORE SPENDING BUT NOT OFFER THE WAYS TO GET TO THAT SPENDING.

Dorman: WELL, RATHER THAN GO ALONG WITH THE GOVERNOR'S PLANS FOR SOME INCREASED TAXES, YOU DECIDED TO DRAIN THE CASH RESERVES.

Iverson: JUST AS WE'VE DONE THE LAST THREE YEARS, WE'VE TAKEN SOME MONEY OUT OF THE CASH RESERVE, JUST LIKE EVERY FAMILY IN IOWA. BEFORE YOU GO OUT AND RAISE TAXES, I THINK IT'S IMPORTANT TO SPEND YOUR SAVINGS ACCOUNT. AND THAT'S WHAT WE'VE BEEN TALKING ABOUT, AND THAT'S WHAT WE'VE BEEN DOING FOR THE PAST FEW YEARS, BECAUSE WE STILL THINK THAT WE CAN GROW OUR WAY OUT OF IT. THE ECONOMY HAS TURNED AROUND.

Dorman: WELL, NOW THAT THAT MONEY HAS BEEN USED, SOME FOLKS, THE STATE AUDITOR -- THE REPUBLICAN STATE AUDITOR HAVE WARNED THAT YOU'RE GOING TO NEED VERY SUBSTANTIAL ECONOMIC GROWTH TO FUEL THE KIND OF TAX COLLECTIONS THAT YOU'RE GOING TO NEED TO COVER THOSE HOLES NEXT YEAR. WHAT ARE YOU GOING TO DO NEXT YEAR NOW THAT THESE RESERVES ARE DEPLETED?

Iverson: WELL, THAT'S ONE THING THAT WE'RE CERTAINLY GOING TO COME IN IN JANUARY AND TAKE A LOOK AT THE BUDGET. AND IS IT GOING TO BE AS FLUSH AS EVERYBODY WOULD LIKE IT TO BE? NO. BUT I THINK WE CAN STILL GET THERE TRYING TO GROW OUR WAY OUT OF IT INSTEAD OF JUST SAYING AUTOMATICALLY, WELL, WE'RE GOING TO HAVE TO INCREASE TAXES. THAT COMES AS A LAST RESORT. AND I THINK IT'S PRUDENT THAT WE TRY TO DO EVERYTHING WE CAN SO WE DON'T INCREASE TAXES, BECAUSE WHEN I FIRST CAME TO THE LEGISLATURE, IOWA WAS IN THE TOP TEN TAX BURDEN. NOW WE'RE ABOUT IN THE MIDDLE OF THE PACK, AND THAT'S ABOUT WHERE WE SHOULD BE. AS I SAY, WE CAN DO MORE GOVERNMENT SPENDING FROM HERE TO ETERNITY, BUT WE'RE GOING TO HAVE TO RAISE SOMEBODY'S TAXES TO DO MORE GOVERNMENT SPENDING BECAUSE WE DON'T HAVE A MONEY TREE THERE.

Henderson: SENATOR GRONSTAL, DEMOCRATIC GOVERNOR TOM VILSACK THIS WEEK DID CRITICIZE THE REPUBLICAN BUDGET PLAN THAT PASSED THE LEGISLATURE. YET HE SAID HE WAS GOING TO SIGN IT INTO LAW BECAUSE STEWART IVERSON HAS SAID YOU CAN CALL THE LEGISLATURE BACK FIFTY TIMES AND YOU'LL GET THE SAME RESULT. ARE YOU DISAPPOINTED THAT THIS IS THE FINAL WORK PRODUCT, THAT THE GOVERNOR IS NOT GOING TO VETO THIS AND CALL YOU BACK IN SPECIAL SESSION?

Gronstal: WE ARE DISAPPOINTED. WE THINK WE SHOULD COME BACK, I THINK IN PARTICULAR IN THE AREA OF K-12 EDUCATION. THERE ARE HUNDREDS AND HUNDREDS OF TEACHERS THAT HAVE BEEN LAID OFF. PEOPLE ARE GOING TO GO INTO THEIR SCHOOLS THIS FALL AND SEE MORE CROWDED CLASSROOMS AND FEWER TEACHERS. I THINK THAT'S A MISTAKE AND I THINK WE SHOULD DO SOMETHING ABOUT IT. SO THAT WILL BE KIND OF THE NUMBER ONE ISSUE I'D LIKE TO SEE US DEAL WITH. I ALSO THINK WE NEED TO DEAL WITH -- SENATOR IVERSON TALKS ABOUT GROWING OUR ECONOMY. WE HAVE THE GROW IOWA VALUES FUND THAT HAS CREATED AT THIS POINT IN TIME PROBABLY ABOUT 10,000 JOBS IN THE STATE OF IOWA. THE REPUBLICANS REFUSE TO FUND IT BEYOND NEXT YEAR. IT WAS ORIGINALLY SUPPOSED TO BE A SEVEN- OR AN EIGHT-YEAR PROGRAM. IT TURNS OUT IT'S ONLY GOING TO BE A TWO-YEAR PROGRAM. THAT TIES THE HANDS OF THE DEPARTMENT OF ECONOMIC DEVELOPMENT. I THINK THE GOVERNOR SHOULD CALL THE REPUBLICANS BACK, BUT I ALSO UNDERSTAND THAT THERE COMES A POINT IN TIME WHEN IF YOU CAN'T -- IF YOU CAN'T CHANGE THE MINDS OF THE PEOPLE THAT MAKE THE DECISIONS, MAYBE IT'S TIME TO HAVE AN ELECTION AND CHANGE THE PEOPLE THAT MAKE THOSE DECISIONS.

Borg: SENATOR IVERSON?

Iverson: THEN THE QUESTION IS CALL US BACK TO DO WHAT? TO RAISE TAXES? BECAUSE THAT'S ALL THERE IS LEFT. WE'VE SPENT THE SAVINGS ACCOUNT AND I'M NOT HEARING YOU SAYING, ALL RIGHT, GOVERNOR, CALL US BACK SO WE CAN RAISE TAXES.

Gronstal: WE COULD ACTUALLY -- WE COULD ACTUALLY BOND, SAVE SIGNIFICANT MONEY FOR -- WE COULD BOND FOR ECONOMIC DEVELOPMENT EFFORT AS HAS BEEN PROPOSED. REPUBLICANS WALKED AWAY FROM THAT OPPORTUNITY. THAT WOULD SAVE TIME. IF OUR ECONOMY IS GOING TO GROW -- AND THIS WOULD BE PART OF HELPING IT GROW -- THAT WOULD HELP SOLVE THE PROBLEM. WE ALSO HAVE $52 MILLION IN NEW REVENUES THAT IN MARCH WERE IDENTIFIED, $30 MILLION IN THIS YEAR, $52 MILLION IN NEXT YEAR. WE HAVE A NUMBER OF OPTIONS THAT DON'T INVOLVE RAISING TAXES.

Borg: SENATOR IVERSON, AREN'T YOU -- HE MAKES A POINT THERE. AREN'T YOU MISSING A GOLDEN OPPORTUNITY WITH INTEREST RATES ON THEIR WAY UP? IS THERE GOOD NEWS, BAD NEWS? YOU HOPE THE ECONOMY WILL GROW YOUR WAY OUT OF AN ECONOMIC PROBLEM IN IOWA, BUT YET YOU HAVE AN OPPORTUNITY AT LOW INTEREST RATES NOW TO BORROW TO INVEST IN IOWA'S FUTURE.

Iverson: AND THERE'S NOTHING WRONG WITH BORROWING, AND WE HAVE DONE SOME OF THAT. BUT WHEN YOU BORROW, YOU HAVE TO HAVE A REPAYMENT STREAM, AND RIGHT NOW THERE IS NO REPAYMENT STREAM TO REPAY THOSE BONDS. THAT'S THE PROBLEM. AND IF YOU'RE GOING TO GO OUT AND BORROW MONEY, YOU BETTER HAVE A WAY TO PAY IT BACK, WHICH MEANS YOU'RE GOING TO RAISE TAXES TO DO THAT. AND IF THAT'S WHAT YOU WANT TO DO, AT LEAST BE UP FRONT WITH PEOPLE AND TELL THEM, WELL, WE'RE GOING TO BORROW TODAY BUT WE'RE GOING TO RAISE YOUR TAXES BECAUSE WE DON'T HAVE A WAY TO REPAY IT. THE GROW IOWA VALUES FUND, WHICH DID HAVE TWO YEARS OF FUNDING, WE KNOW THAT -- AND WE WILL DEAL WITH THAT, YOU KNOW. COME NEXT YEAR WE KNOW WE'RE GOING TO HAVE TO DO IT. WE ORIGINALLY SET OUT THE STREAMLINE SALES TAX WAS SUPPOSED TO COVER THAT. WELL, WE FOUND OUT NOW THAT IS NOT GOING TO COME CLOSE TO RECOVERING THAT. AND THE OTHER THING IS WHEN YOU WERE TALKING ABOUT LITERALLY GIVING DOLLARS AWAY -- GOVERNMENT CAN GIVE MONEY AWAY AND PEOPLE WILL STAND IN LINE TO GET IT. THE THINGS THAT I HEAR ABOUT FROM BUSINESSES NOT ONLY TALK ABOUT HOW MANY DOLLARS I CAN GET FOR GOVERNMENT, WHAT'S YOUR REGULATORY CLIMATE LIKE. PART OF THE BILL THAT WE PASSED A YEAR AGO HAD REGULATORY IN IT AND HAD TAX ISSUES IN IT. THE GOVERNOR LINE-ITEM VETOED. THAT IS STILL INTO THE COURT SYSTEM. AND WHY ON EARTH WOULD WE ALL OF A SUDDEN GO OUT AND GET A BIG POT OF MONEY THAT YOU CAN SPEND TODAY AND THEN THREE YEARS FROM NOW IT'S GONE AND YOU HAVE NOTHING LEFT? SO IT'S A STEP BY STEP -- IF WE WOULD HAVE PUT $500 MILLION IN THAT POT LAST YEAR, I WOULD GUARANTEE THAT TODAY PROBABLY 400 OF IT WOULD BE OBLIGATED. SO YOU NEED TO SPREAD THIS OUT A LITTLE BIT INSTEAD OF JUST DUMPING A WHOLE BUNCH OF MONEY IN WITH NO REPAYMENT STREAM AND THEN WONDER WHAT HAPPENED.

Dorman: SENATOR IVERSON, SPEAKING OF THE LAWSUIT, ORAL ARGUMENTS ARE SCHEDULED IN MAY FOR THE LAWSUIT. AT STAKE I GUESS IS A $300-MILLION TAX CUT OVER SEVERAL YEARS WITH ABOUT $30-SOME MILLION IN THE CURRENT BUDGET YEAR. IF YOU WIN THAT LAWSUIT AND THOSE TAX CUTS ARE ENACTED, DO YOU HAVE TO COME BACK INTO SPECIAL SESSION AND FIX YOUR BUDGET?

Iverson: WELL, WE ACTUALLY -- IN THE SENATE SIDE, WE ACTUALLY PASSED A BILL TO DELAY THAT BECAUSE WE DON'T KNOW THE OUTCOME OF THE LAWSUIT. AND I THINK THAT MADE SENSE. THE HOUSE CHOSE NOT TO DO THAT, AND WE MAY HAVE TO DEAL WITH THAT IF WE WOULD WIN THE LAWSUIT. BUT HOW LONG THIS WILL TAKE TO GO THROUGH THE COURT SYSTEM, I DON'T KNOW. I MEAN THE ORAL ARGUMENTS ARE COMING UP IN MAY, BUT IT MAY BE SEVERAL MONTHS BEFORE WE HEAR. SO WE MAY HAVE TO DEAL WITH THIS AT SOME POINT IN TIME.

Dorman: THE HOUSE SAID THAT THE ENDING BALANCE WOULD BE SUFFICIENT TO COVER THOSE TAX CUTS, BUT NOW THE GOVERNOR IS TALKING ABOUT PERHAPS USING SOME OF THAT TO GO BACK AND RETROACTIVELY REDUCE AN ACROSS-THE-BOARD CUT IN EDUCATION HE MADE LAST FALL. DOES THAT COMPLICATE --

Iverson: THAT DOES COMPLICATE IT BECAUSE, FIRST OF ALL, THE GOVERNOR CAN'T JUST RETROACTIVELY PUT SOME MONEY BACK INTO EDUCATION. THE GOVERNOR HAS THE AUTHORITY TO DO ACROSS-THE-BOARD CUTS, WHICH HE DID LAST FALL. IF HE GOES IN, HE WOULD HAVE TO RESCIND THAT EXECUTIVE ORDER, ISSUE ANOTHER ONE, AND LOWER IT FOR EVERYBODY, SO SCHOOLS WOULD GET SOME MONEY. BUT THEN HE JUST EXACERBATES THE PROBLEM FOR NEXT YEAR. SO IT'S KIND OF SOMETHING THAT SOUNDS GOOD ON THE SURFACE, BUT THE GOVERNOR CAN'T GO IN AND SELECTIVELY DO ACROSS-THE-BOARDS. IT'S ALL OR NONE.

Henderson: SO, SENATOR GRONSTAL, DO YOU AGREE THAT THE GOVERNOR WOULD BE MAKING A MISTAKE TO SORT OF RESCIND HIS ACROSS-THE-BOARD CUT TO TRY TO PLUG MORE MONEY INTO EDUCATION?

Gronstal: NO, I DON'T THINK THAT'S A MISTAKE. I THINK ANY EFFORT TO DEAL WITH THE FACT THAT HUNDREDS AND HUNDREDS OF TEACHERS ARE BEING LAID OFF AND CLASSROOMS ARE GOING TO BE MORE CROWDED THIS FALL -- I DON'T THINK THE REPUBLICANS LISTENED THROUGHOUT THIS SESSION TO PARENTS, TO TEACHERS, TO SCHOOL BOARD MEMBERS, TO SCHOOL ADMINISTRATORS. I DON'T THINK THEY LISTENED TO THE PROBLEMS THAT ARE OCCURRING OUT THERE IN IOWA. THEY'VE MADE SOME PROMISE THAT NEXT YEAR -- IN THE NEXT FISCAL YEAR, THEY'LL DO 4-PERCENT ALLOWABLE GROWTH. THEY'VE MADE NO COMMITMENT TO MAINTAIN TEACHER QUALITY OR CLASS-SIZE REDUCTION PROGRAMS. SO IN ESSENCE THEY'RE SAYING, OH, WE'LL CATCH YOU LATER, BUT THAT'S IF NOBODY GETS SICK AND WE'VE GOT ENOUGH MONEY LEFT OVER FROM MEDICAID. AND IT'S IF THEY'RE GOING TO CONTINUE TO DO THINGS THAT RAISE PEOPLE'S PROPERTY TAXES.

Iverson: FIRST OF ALL, THAT'S ABSOLUTELY UNTRUE AND YOU KNOW IT, MIKE! ONE, WE RESTORED THE GOVERNOR'S ACROSS-THE-BOARD CUT THAT THE GOVERNOR MADE THAT DECISION LAST FALL TO DO. WE RESTORED THAT. THE 2-PERCENT ALLOWABLE GROWTH IS $40-SOME MILLION. THE $50-MILLION ACROSS-THE-BOARD CUT IS RESTORED FOR THIS YEAR. WE EXTENDED THE CLASS-SIZE REDUCTION FOR ANOTHER $30 MILLION THIS YEAR. AND, YOU KNOW, I WAS ON THE SCHOOL BOARD WHEN WE HAD ACROSS-THE-BOARD CUTS. I KNOW WHAT IMPACT THAT HAS. WE TAKE A LOOK AT THE DES MOINES SYSTEM; THEY HAVE FEWER STUDENTS TODAY AND YET THEY HAVE MORE TEACHERS THAN THEY DID FIVE YEARS AGO. LET'S BE REALISTIC ABOUT WHAT EDUCATION CONSISTS OF. OVER 50 PERCENT OF A CHILD'S ABILITY TO LEARN COMES FROM THE PARENT; 40 PERCENT IS TEACHER; CLASS SIZE, YOUR BUILDING, YOUR TEXTBOOKS AMOUNT TO LESS THAN 5 PERCENT OF A CHILD'S ABILITY TO LEARN. THE FIRST THING WE HAVE TO DO IS HAVE CHILDREN THAT ARE READY TO GO TO SCHOOL. THAT'S THE PARENTS' RESPONSIBILITY. AND THE PARENTS CAN'T JUST SHIP THEM OFF TO SCHOOL AND EXPECT THE TEACHER TO DO EVERYTHING FOR THEM. THE AMOUNT OF DOLLARS -- AND I LOOKED AT ALL 50 STATES, AND THE AMOUNT DOLLARS SPENT ON EDUCATION HAS ABSOLUTELY NO CORRELATION WITH THE TEST RESULTS OR THE CHILD'S ABILITY TO LEARN. I MEAN I THOUGHT WE OFFERED A PRETTY COMMON-SENSE THING THAT WE THINK READING, WHICH WE HAVE PUMPED $150 MILLION INTO IN THE LAST FIVE YEARS -- AND, YOU KNOW, AT THE END OF THIRD GRADE, IF A CHILD CAN'T READ, YOU KNOW, GOSH, MAYBE THEY SHOULD NOT MOVE ON. NOW, THE SCHOOL BOARD ACTUALLY MAKES THE FINAL DECISION ON THAT. BUT THAT'S REALLY DETERMINED IN THE FIRST GRADE, SECOND GRADE. AND ALL WE SAID IS THAT AT THE END OF THIRD GRADE, THE CHILD OUGHT TO BE ABLE TO LEARN AT THE END OF THE SECOND GRADE LEVEL. I DON'T THINK THAT'S ASKING TOO MUCH.

Gronstal: AND I THINK YOU MAKE MY POINT, SENATOR IVERSON: REPUBLICANS AREN'T LISTENING TO PARENTS, TO TEACHERS, TO SCHOOL BOARD MEMBERS. THEY SAY THEY'VE GOT ENOUGH MONEY. THEY SAY THERE'S NO PROBLEM. THAT BELIES THE FACT THAT HUNDREDS OF LAYOFF NOTICES WENT OUT A COUPLE WEEKS AGO, HUNDREDS OF LAYOFF NOTICES ACROSS THE STATE OF IOWA. YOU DON'T HEAR OR SEE THOSE PROBLEMS THAT EXIST OUT THERE, AND THAT'S WHY YOU'VE GOT NO RESPONSE TO THIS FALL'S PROBLEMS IN IOWA SCHOOLS.

Iverson: I KNOW EXACTLY WHAT THEY'RE TALKING ABOUT BECAUSE I'VE BEEN THERE. AND WHEN WE LOOK AT REALITY, IN THE LAST FIVE YEARS WE'VE PUT $300 MILLION MORE INTO K-12 AND WE HAVE 18,000 FEWER STUDENTS.

Gronstal: SO YOU'RE SAYING THEY'VE GOT ENOUGH.

Iverson: NO, I'M SAYING WE ALL HAVE TO WORK WITH WHAT WE HAVE. IS THERE A BOTTOMLESS PIT OUT THERE? NO. AND I THINK THAT THE ISSUE IS HOW DO YOU DO THE BALANCING ACT BECAUSE, AS I SAID EARLIER, YOU OFFERED $180 MILLION IN EXTRA SPENDING, BUT YOU DIDN'T OFFER ANY TAX INCREASE TO PAY FOR IT. YOU DIDN'T OFFER ANY WAY TO PAY FOR THAT. YOU JUST SAID WE'RE GOING TO GIVE YOU MORE MONEY. WELL, I THINK WE HAVE TO BE REALISTIC WITH THE PEOPLE OF IOWA. IF YOU WANT TO GIVE THEM MORE MONEY, THEN YOU'VE GOT TO GET IT FROM SOMEWHERE.

Gronstal: SOME OF THOSE $180-MILLION AMENDMENTS WERE TO RESTORE YOUR INCREASES IN PROPERTY TAXES. SOME OF THOSE WERE DIRECTLY RELATED. YOU GUYS HAVE RAISED PROPERTY TAXES. WE WERE TRYING TO FILL THOSE HOLES, AND YOU CAN'T CALL IT SPENDING AND --

Borg: KAY?

Henderson: ONE OF THE OTHER SUBJECTS THAT TOOK A LOT OF YOUR ATTENTION THIS YEAR WAS GAMBLING. YOU CAME UP WITH A GAMBLING RESOLUTION, WHICH DIDN'T REALLY PROVIDE THE DIRECTION THAT MEMBERS OF THE RACING AND GAMING COMMISSION MIGHT HAVE BEEN SEEKING. SENATOR GRONSTAL, IF THE MEMBERS OF THE RACING AND GAMING COMMISSION WERE HERE, WHAT WOULD YOU SAY TO THEM AS THEY TRY TO INTERPRET THAT LEGISLATION WHICH LANDED ON THE GOVERNOR'S DESK?

Gronstal: WELL, I THINK IT'S PRETTY CLEAR THAT THE IOWA HOUSE PASSED A VERSION THAT HAD A HARD FREEZE IN IT. THE IOWA SENATE STRUCK THAT HARD FREEZE AND SAID WE'RE OPEN TO EXPANDED GAMING OPPORTUNITIES IN COMMUNITIES IN IOWA. THE HOUSE, WHEN THEY REVISITED THAT, AGREED THAT THEY'RE OPEN TO EXPANDED GAMING. SO I THINK THE MESSAGE IS REALLY PRETTY CLEAR TO THE RACING AND GAMING COMMISSION. THE LEGISLATURE HAS SPOKEN. WE DON'T WANT TO -- WE DON'T WANT TO MAKE CALCULATED JUDGMENTS ABOUT HOW MANY LICENSES THERE SHOULD BE. WE THINK THAT'S PART OF THEIR REGULATORY JOB IS TO TAKE A LOOK AT THE MARKETPLACE AND SEE WHAT MAKES SENSE OUT THERE. SO WE WEREN'T GOING TO, KIND OF, PREJUDGE. WE WEREN'T GOING TO SAY THESE SIX COMMUNITIES WILL GET IT, BUT WE WANTED THAT PROCESS TO BE OPEN. AND I THINK THE MESSAGE FROM THE LEGISLATURE IS PRETTY SOLID, THAT COLLECTIVELY OUR JUDGMENT IS THERE SHOULD BE SOME EXPANSION.

Henderson: SENATOR IVERSON, LAST YEAR WHEN LEGISLATORS CAME TO DES MOINES, YOU STARTED MEETING PRIVATELY WITH THE GOVERNOR, HAVING CONSULTANTS COME IN. AND THE OUTCOME OF THAT WAS SUPPOSED TO BE THIS REALLY STUNNING REDO OF IOWA'S INCOME TAX SYSTEM, AND THEN YOU TALKED ABOUT REDOING THE PROPERTY TAX SYSTEM. A BILL WAS PASSED. IT'S TURNED OUT TO KIND OF BE A BUST. WHEN YOU GO OUT TO VOTERS, HOW ARE YOU GOING TO EXPLAIN RAISING EXPECTATIONS ABOUT MAYBE EVEN FILLING YOUR INCOME TAX OUT ON A POSTCARD AND NOT DELIVERING?

Iverson: OKAY. WELL, FIRST OF ALL, WE DIDN'T HIRE ANY CONSULTANTS. THE GOVERNOR DID. WE DIDN'T EVEN KNOW ABOUT IT UNTIL TWO OR THREE OR FOUR MONTHS AFTER IT WAS DONE. THERE WERE SOME FOLKS THAT CAME UP WITH THE IDEA OF GOING TO A SQUARE FOOTAGE, WHICH WE THOUGHT WE OUGHT TO EXPLORE THAT, SO THAT ACTUALLY --

Henderson: IN REGARDS TO CALCULATING YOUR PROPERTY TAXES ON YOUR HOME.

Iverson: YES. AND WHAT THEY'VE DONE AFTER STUDYING THIS NOW -- IT WAS ACTUALLY PASSED A YEAR AGO -- IS SAID, WELL, IT'S NOT REALLY GOING TO BE WORKABLE THAT WAY, SO IT'S KIND OF BACK TO THE DRAWING BOARD. I THINK IT ONLY MAKES SENSE THAT WHEN YOU'RE TRYING TO REDO THE ENTIRE TAX SYSTEM, YOU'RE GOING TO PROBABLY TRY SOME THINGS THAT DON'T WORK. BUT, YOU KNOW, IF YOU DON'T TRY, YOU DON'T GET ANYWHERE. AND THE PROPERTY TAX COMMITTEE IS GOING TO CONTINUE TO MEET THIS YEAR. THE INCOME TAX IS A LITTLE BIT MORE COMPLICATED. COULDN'T WE GET IT TO A POSTCARD? YES, BUT THEN PROBABLY WHAT YOU'RE GOING TO DO IS GO TO PART OF YOUR ADJUSTED GROSS INCOME, WHICH IS FROM YOUR FEDERAL INCOME TAX, WHICH SOME STATES DO. BUT THEN WHAT YOU'VE DONE IS LET THE FEDERAL GOVERNMENT WRITE YOUR TAX CODE IN YOUR STATE. THAT'S THE DANGER OF IT BECAUSE IF THEY MAKE A CHANGE THERE IN YOUR PERCENTAGE OF THEIR CALCULATION, THEN YOUR ENTIRE TAX CODE IS DEPENDENT UPON WHAT THE FEDERAL GOVERNMENT DOES. SO THAT'S WHERE I THINK WE HAVE SOME DIFFERENCES, AND WE STILL HAVE NOT WORKED THROUGH ALL OF THOSE ISSUES.

Borg: TODD?

Dorman: SENATOR GRONSTAL, ON TAX REFORM, WHAT DO DEMOCRATS EITHER LEND OR NOT LEND TO THIS DEBATE? WHAT DID YOU WANT TO TRY FOR TAX REFORM THAT DIDN'T GET DONE?

Gronstal: CLEARLY, IF YOU COME UP WITH A MECHANISM THAT GETS RID OF FEDERAL DEDUCTABILITY AND PLOWS ALL OF THE MONEY FROM THAT BACK INTO THE RATES -- DEMOCRATS WERE READY TO AGREE WITH REPUBLICANS THAT WE WOULD NOT COME UP WITH A "SOAK THE RICH TAX SCHEME," IF THAT WAS THEIR CONCERN. BUT WE'D GET RID OF FEDERAL DEDUCTABILITY, ROLL THE BENEFITS OF THAT BACK INTO THE RATE STRUCTURE IN SUCH A WAY THAT NO CLASS PAID MORE OR PAID A GREATER SHARE. WE WERE WILLING TO LOOK AT THAT. WE WANTED THE REPUBLICANS TO AGREE TO MAKE IT REVENUE NEUTRAL OVERALL SO THAT NOT ONLY WOULD THERE BE NO TAX SHIFTS BUT THERE WOULD BE NO LOSS IN REVENUE TO A STATE THAT'S LAYING OFF TEACHERS AND RAISING PROPERTY TAXES. WE THOUGHT THAT MADE SENSE TO KEEP THE STATE INCOME TAX REVENUE NEUTRAL. THE PLAN THE REPUBLICANS PASSED, THE ONE THAT'S BEFORE THE SUPREME COURT RIGHT NOW, FOR ONE HALF OF ALL IOWANS, WAS NO CUT OR A TAX INCREASE, AND FOR THE OTHER HALF, THE UPPER INCOME HALF, GOT SIGNIFICANT TAX CUTS. SO IT WAS ROBINHOOD IN REVERSE. DEMOCRATS OPPOSED THAT EFFORT BUT WE DID SIT DOWN AND SAY WE'RE CERTAINLY WILLING TO LOOK AT A TAX CODE THAT ISN'T ABOUT SHIFTING THE BURDEN TO OTHER INCOME CLASSES BUT IS ABOUT SIMPLIFYING THE TAX CODE. WITHOUT DEALING WITH FEDERAL DEDUCTABILITY, YOU PROBABLY CAN'T GET THERE.

Dorman: ONE BURDEN ON IOWANS RIGHT NOW ARE HIGHER GAS PRICES. IS THERE ANYTHING THE STATE CAN DO AT THIS POINT TO --

Iverson: REALLY THERE IS VERY LITTLE THAT THE STATE CAN DO, OTHER THAN WE AS CITIZENS CAN BUY GAS WITH MORE ETHANOL OR DIESEL IF IT'S AVAILABLE. THE SOYBEAN HELPS SOME. BUT AS FAR AS THE PRICES, YEAH, THERE'S VERY, VERY LITTLE THAT WE CAN DO. WE DO HAVE A NUMBER OF ETHENOL PLANTS COMING ONLINE. IS THAT GOING TO ACTUALLY BRING DOWN THE COST OF GAS? PROBABLY NOT BECAUSE WE'VE FOUND ETHANOL PRETTY MUCH FOLLOWS THE PRICE OF OIL.

Borg: SENATOR GRONSTAL, I WANT TO GO BACK TO YOUR COMMENTS ON RACING AND GAMING. IF NEBRASKA DECIDES TO INSTITUTE GAMBLING THERE, ARE YOU COMPETITIVELY -- IN THE COUNCIL BLUFFS AREA WHERE YOU LIVE, ARE YOU COMPETITIVELY DISADVANTAGED THE WAY IOWA IS CURRENTLY REGULATING GAMING?

Gronstal: IT REALLY DEPENDS ON IN WHAT FORM NEBRASKA PASSES THAT. THAT'S CERTAINLY AN ISSUE WE'LL HAVE TO TAKE A LOOK AT ONCE THEY GET TO FINAL PASSAGE. AND ONCE THEY GET THE VOTERS TO APPROVE IT IN NEBRASKA, WE'LL CERTAINLY HAVE TO TAKE A LOOK AT THAT. WE'VE EXPECTED FOR MANY YEARS THAT EVENTUALLY, YOU KNOW, MAYBE NOT THIS YEAR, MAYBE NOT NEXT YEAR, BUT THAT EVENTUALLY NEBRASKA WOULD APPROVE SOME FORM OF GAMING, PARTLY OUT OF THEIR COMPETITION WITH IOWA. THEY SEE US GETTING SOME OF THE BENEFITS OF THAT. AND THEY'LL EVENTUALLY GET THERE; THAT'S MY BELIEF. AND WE'LL HAVE TO DEAL WITH THAT WHEN THE TIME COMES.

Henderson: SENATOR IVERSON, OTHER STATES ARE STRUGGLING WITH LAWSUITS WHICH ARE CHALLENGING THE WAY IN WHICH STATES HAND OUT FUNDING TO SCHOOLS IN THEIR AREAS. HAS IOWA SET ITSELF UP FOR ONE OF THOSE LAWSUITS THAT WOULD CHALLENGE THE CONSTITUTIONALITY, THAT PEOPLE WOULD BE ABLE TO ARGUE THERE'S UNEQUAL PER-PUPIL SPENDING IN IOWA, PARTICULARLY SINCE YOU SET UP THIS LOCAL OPTION SALES TAX SYSTEM TO RESOLVE THE ISSUE OF BUILDING SCHOOL BUILDINGS?

Iverson: WELL, THERE'S TWO SEPARATE ISSUES. IOWA IS ONE OF ONLY FOUR STATES THAT HAS NOT BEEN TAKEN TO COURT OVER THEIR FUNDING FORMULA, BECAUSE WE HAVE THE UNIFORM 540 RATE AND IT'S ALL BASED ON THE NUMBER OF STUDENTS.

Borg: THAT'S, THAT'S -- WHAT YOU'RE TALKING ABOUT THERE IS WHAT WE CALL A FOUNDATION PLAN, WHICH GIVES, I THINK, A LITTLE OVER $4,000 PER STUDENT TO EACH SCHOOL.

Iverson: YES. AND THAT'S WHY IOWA HAS NOT BEEN TAKEN TO COURT, BECAUSE WE DO HAVE UNIFORM -- PRETTY MUCH UNIFORM FUNDING. NOW, THERE ARE VARIOUS THINGS THAT SCHOOL BOARDS CAN DO IF THEY WANT TO ENHANCE. NOW, THE BUILDING SIDE OF IT IS A WHOLE DIFFERENT ISSUE. ONE, UP UNTIL A FEW YEARS AGO, THE ENTIRE BURDEN ON THE SCHOOL BUILDINGS WERE ON PROPERTY TAXES. WE PASSED A LOCAL OPTION SALES TAX THAT THE COUNTIES WERE ABLE -- IF THEY PASSED IT, THEN THEY WENT TO THE OPTIONAL ONE-CENT SALES TAX. SO WHAT YOU HAVE IN COUNTIES THAT HAVE A HIGH RETAIL BASE ACTUALLY GETTING A LOT MORE IN SALES TAX, SO TO DECREASE THE PROPERTY TAX BURDEN ON THE INFRASTRUCTURE SIDE OF IT. I DON'T THINK THAT A COURT -- AND THERE MAY BE A LAWSUIT, BUT I DON'T THINK A COURT IS GOING TO FIND THAT BECAUSE YOU HAVE THE ABILITY TO DO SOME ON SALES TAX OR PROPERTY TAX THAT THAT'S INEQUITABLE. IT GOES BACK TO THE INSTRUCTIONAL SUPPORT FOR THE STUDENT IS VERY EQUITABLE. SO I SEE THAT AS AN ENTIRELY SEPARATE ISSUE.

Henderson: SENATOR IVERSON --

Gronstal: KAY, YOU CAN MAKE A CASE THAT THE LOCAL OPTION SALES TAX FOR SCHOOLS ACTUALLY MADE THE SYSTEM MORE EQUITABLE THAN THE OLD SYSTEM THAT WAS FULLY DEPENDENT ON PROPERTY TAXES.

Borg: HOW DO YOU SAY THAT?

Gronstal: BECAUSE YOU GET INTO A HIGH-COST -- A HIGH-COST DISTRICT LIKE COUNCIL BLUFFS WITH LOW VALUES PER STUDENT, SO LOW PROPERTY VALUES PER STUDENT, AND THEN YOU GET INTO A RICH AREA WITH A WHOLE BUNCH OF VALUE BEHIND EACH STUDENT BUT NOT MUCH RETAIL SALES TAX BASE. THERE WAS AN INEQUITY IN THE OLD SYSTEM AS WELL, AND YOU CAN MAKE A CASE THAT THIS IS MORE EQUITABLE BUT STILL NOT COMPLETELY.

Borg: FINAL QUESTION.

Henderson: GENTLEMEN, I FEEL LIKE WE'VE SEEN AN ELECTION PREVIEW HERE. IN ONE SENTENCE, SORT OF "IT'S THE ECONOMY, STUPID," WHAT IS YOUR PROPOSAL TO VOTERS FOR REELECTING REPUBLICANS? ONE SENTENCE.

Iverson: ONE SENTENCE. I THINK THAT YOU NEED TO LOOK AT PEOPLE WHO HAVE BEEN FISCALLY RESPONSIBLE AND STILL MOVE THE BALL FORWARD AND GET ACCOMPLISHED WHAT WE NEED TO DO.

Henderson: SENATOR GRONSTAL, ONE SENTENCE FOR DEMOCRATS.

Gronstal: WELL, WE THINK REPUBLICANS HAVE NEGLECTED EDUCATION, RAISED YOUR PROPERTY TAXES, AND AREN'T SOLVING THE REAL PROBLEMS FACING THE STATE OF IOWA.

Borg: KAY RANG THE BELL. WE ARE OUT OF TIME. THANK YOU VERY MUCH FOR BEING WITH US. AND THAT'S IT FOR THIS WEEKEND'S EDITION OF "IOWA PRESS." I HOPE YOU'LL WATCH NEXT WEEKEND. REGULAR AIRTIMES: 7:30 FRIDAY; SUNDAY AT NOON. I'M DEAN BORG. THANKS FOR JOINING US TODAY.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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