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2018 was a landmark year in Iowa politics. But 2019 beckons with even more intrigue at the Iowa Statehouse. And a presidential race is brewing in our own back yard. We gather Iowa political reporters to look back and ahead on this edition of Iowa Press.

Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. I'm a dad. I am a mom. I'm a kid. I'm a kid at heart. I'm a banker. I'm an Iowa banker. No matter who you are, there is an Iowa banker who is ready to help you get where you want to go. Iowa bankers, allowing you to discover the genuine difference of Iowa banks.

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For decades Iowa Press has brought you politicians and newsmakers from across Iowa and beyond. Now celebrating more than 40 years of broadcast excellence on statewide Iowa PBS, this is the Friday, December 28 edition of Iowa Press. Here is David Yepsen.

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Yepsen: 2018 was a political year for the record books in Iowa. Iowans elected the state's first female Governor and two U.S. House seats flipped from republican to democrat, electing our first women to Congress. But the strong year for Iowa democrats wasn't enough to flip the republican trifecta at the Statehouse and that's all before a wide open race in the democratic presidential caucuses begins. To talk about it all we've gathered Iowa journalists, James Lynch, Political Writer for the Gazette, Erin Murphy, Statehouse Bureau Chief for Lee Enterprises and Kay Henderson is News Director for Radio Iowa.

Yepsen: Well, gang, thanks all for being here to look ahead at the year in front of us. I want to just go around the table here and tell me what you think the big stories, some of the big stories might be in the year ahead. Kay?

Henderson: Well, the folks who watch the show after this, Market to Market, know that the state's ag economy is in a bit of a slump. Commodity prices are low. It was a really difficult harvest because of the weather. And there are a couple of things that affect the state's psyche, the success of our state university athletic teams and the ag economy, partly because it percolates along to Main Street and many of our communities, it percolates onto many of our manufacturers who make goods that are purchased by farmers. And so I think one of the unknowns as we head into 2019 is what the ag economy will be and whether we're going to start to see some of the farm foreclosures that were reminiscent of the 1980s.

Yepsen: Erin? What do you see as one of the big stories of the year?

Murphy: Well, all three of us sooner than later here are going to be regular visitors to the Iowa Capitol next month so I thought I'd talk about something you touched on there, the republican trifecta that stayed in place in Iowa's state government. Voters chose to keep republicans in complete control, Kim Reynolds won another four-year term, her first four-year term I should say and kept the republican majorities in the House and the Senate. So the question now is they got a lot done in the previous two years, ran down a big list of conservative policies with the opportunity that they had with democrats not being able to stop them. So the question now is what's left? Are there more in that mold? Do they go even farther on issues like abortion maybe? Or do they pump the brakes a little bit and is it a calmer two years? That remains to be seen and we'll get a sense of that starting in January when they convene. But I think that's what is interesting for me to observe will be how they tackle this two more years of this opportunity of having complete state lawmaking control.

Yepsen: James?

Lynch: I'm going to say disasters and I say that because whether you believe in climate change science or not, the disasters we've seen this year, wildfires in California, hurricanes in North Carolina, tornado in Marshalltown and Pella and areas around Central Iowa, either it validates your belief in climate change or it should sound some alarm bells to say, hey we're having more intense, more frequent weather, extreme weather and we need to be prepared for it. Just this week we saw FEMA denied the Governor’s request for aid for Marshalltown and some counties that experienced flooding so it's now really a state issue that they have to deal with. So I think this is going to be a bigger priority than it has been in the past.

Yepsen: And it always costs government more money when you get into these big disasters.

Lynch: Exactly. And it can be a drag on the economy similar to what is happening in the farm economy, as Kay mentioned.

Yepsen: Well, Kay, go back to the tax issue of, there's the old saying, I had a boss one time who said if farmers don't make it, we don't either. And so what I hear you saying is there maybe some difficulty with the economy. What is that going to do to tax revenues?

Henderson: Well, this past month the revenue guesstimating conference met and decided that their prediction for state tax revenue in the next state fiscal year, which begins July 1st, will be 1.8% growth. That's really not a lot, especially when lawmakers have made some previous promises. You have institutions like the state universities asking for more money, you have K-12 schools expecting an increase in state support. So there will be a very interesting budget drama play out. The budget drama that we won't see this year, however, is midyear budget cuts which we've seen in each of the past two state fiscal years whereby revenue has not grown as much as expected and lawmakers had to make some difficult choices and cut budgets in the middle of a spending year.

Yepsen: An election year too.

Henderson: And in an election year.

Yepsen: What's the impact -- what do you guys think the impact of this fiscal situation is going to be?

Lynch: Well, as Kay said, 1.8% isn't much. I think it's like $144 million of new revenue. Some of that is already committed and then when you look at what the legislature has committed to or sort of committed to, mental health system, children's mental health, Future Ready Iowa, these are all programs that they have sort of laid the groundwork and said, we're going to come back and fund them. So that is the challenge this year. And they have to make that money go far enough to actually have a mental health system, to have a children's mental health system, to fund Future Ready Iowa, because workforce is the number one issue on pretty much everybody's agenda this year.

Murphy: And some of the things that Kay mentioned the previous years of budget cuts, some of the things that have been hurt by those, are hoping to get made whole again, the Regents, the judicial branches had troubles with its budget. It's going to be difficult to make those departments whole again. Like Kay said, I think we're going to hear a lot of hand wringing around budget time over some of these departments and agencies.

Yepsen: And yet, Erin, you still hear some republicans talking about tax cuts. They're talking about doing some changes to the corporate tax code. Is that for real?

Murphy: It is for real. That is still a goal as you talk to legislators and groups that are interested in such policies. There is very much an appetite, especially on the republican side, to do more work on cutting taxes in this session, despite those budget troubles. It goes back to the old belief that by reducing taxes that will ultimately raise more revenue and stimulate the economy.

Henderson: And you also have republicans who think government is still too bloated and another way that they may reduce the size of government is through the attrition and the forced way in which they have made state agencies absorb any staffing, salary increases. And you have seen that the state employee unions have been asking for pretty sizeable increases in salaries. If those are negotiated state agencies are going to be under an even greater pressure to pare their payroll.

Yepsen: James, isn't it smart politics though for republicans to say we want to look at cutting taxes? As Kay said, it's called crimping the fuel line, when they do that then the government will grow. But also there is a great deal of uncertainty about what tax revenues will be, not just because of the economy, because of the effect of the new federal tax code on Iowa's taxes. They're all tied. So you get the uncertainty of the economy plus the uncertainty of the federal tax code. Is it really smart for republicans to be cutting a little bit early on in the session and then have to come in later?

Lynch: It would seem to make sense, yeah. And what I hear some republican leaders saying is they want to do whatever they can to drive down tax rates to make Iowa more competitive in terms of attracting and retaining businesses. But at the same time when you listen to sort of their natural consistencies of chambers of commerce, business groups, they're asking for more funding for Regents universities, they're asking for more funding for Workforce Development, they want to make Iowa more welcoming in quality of life. They're supporting the Outdoor Recreation Fund. So they're getting pressure from both sides, sort of the Republican Party constituency that says government is too big, to expensive and then you have sort of the business community saying look, if we are going to grow, if we're going to grow our economy we need to invest in it.

Murphy: John Stineman with the Iowa Chamber Alliance, they had their legislative preview forum recently and he talked about that, he acknowledged we're asking for lower taxes while also asking for higher spending in some of these areas and he mentioned we understand we're trying to find the perfect mix for that cocktail. And I kind of thought, well if you do find that cocktail, hand me one because that's going to be pretty good.

Yepsen: Don't cut me, don't cut thee, cut the guy behind the tree.

Lynch: Another issue, David, that we might see is immigration. Business chamber groups, the economic developers acknowledge that that's more of a federal issue. But they say nothing is happening on the federal level and Iowa needs to grow its workforce and we're not making enough babies ourselves I guess so they're looking for attracting people and that is where making Iowa a welcoming place and acknowledging that we are going to depend on immigrants to do the jobs, a lot of the jobs that need to be done. So there may be action, there's not a lot the state can do on immigration policy, but it's more about making immigrants welcome here and want to come to Iowa.

Yepsen: Well, and the politics of tax cuts is smart to cut in the first year of the biennium. If there's money left there's always a place to spend it. You take the hit now so that conceivably in 2020 when they come into session they've got a little extra money in the till and they can have a nice, smooth session heading into election year.

Henderson: Well, another thing you do in the off year in which you're not up for re-election or election is to raise taxes and there is a real live round being discussed now whereby they would raise the sales tax by a penny. Three-eighths of that would be funneled into an already existing account for natural resources and water quality initiatives called the Iowa Water and Land Legacy Fund. And then the rest could possibly be used for the aforementioned mental health system which is currently funded by county taxpayers who foot the bill when mental health care is provided to an indigent Iowan and especially as they move to try to address the lack of services available for children who are in need of mental health services.

Yepsen: A lot of environmentalists think that three-eighths of a penny should be net new money. But what you're suggesting is, well maybe they could shove some current natural resources spending onto those dollars freeing them up other tax dollars for mental health or something else?

Henderson: No, actually raise the penny and dedicate three-eighths of that new money to the fund and then use the rest of the penny that they have raised on these other initiatives. And mixed into all this is a local option sales tax for school infrastructure that is scheduled to end in a while. They debated extending that in the last legislative session, that may be part of this mix. So it's really going to be interesting to see how republicans who are in control consider raising taxes.

Yepsen: I remember old Jack Nystrom, a state Senator from Boone, always would say, you've got to have two cents worth of needs to get the votes to pass a one cent increase.

Murphy: I'm just old enough to remember the fight over the gas tax increase a couple of years ago and how that went and I still remember one republican legislator yelling as he walked off the floor after that vote, I didn't come here to raise taxes. So we'll see how that goes.

Yepsen: But those kind of legislators are often the first ones out to cut the new ribbons, cut the ribbons for the new highway. James, the judicial nomination commission, there's talk of changing that. What is that all about?

Lynch: Well, there are some conservatives who believe their voices aren't being heard. Iowa has this process where the Bar Association puts up half the members of the nominating commission, the Governor appoints others, and the Bar, members of the Bar who are on that commission aren't as conservative as the conservatives in the Republican Party. So there's some talk about either not, that the bar wouldn't nominate people for that commission, or doing away with the commission entirely and leaving those appointments up to the Governor. There are a lot of, I would say there's peril in both approaches and politically while it would certainly be great for conservatives to score a victory on this, it may come with more harm than good politically for, I would think for the Governor if all of this was put in her lap. It's sort of a McConnell/Grassley approach on the state level to getting the court that you want and it would have long lasting impact.

Yepsen: Kay, redistricting. We have a non-partisan system of redistricting and this is another thing we think is pretty good reform in Iowa, just like merit selection of judges. Will they tinker with the redistricting system in Iowa?

Henderson: Linda Upmeyer, who is the republican House Speaker, has said she's not interested in doing that. We haven't had a definitive answer from some of the leaders, the republican leaders in the Iowa Senate. But it seems as if she's not interested in doing anything and if she's not interested then it might not happen.

Yepsen: Yeah, and frankly a republican could look at this and say if it ain't broke we're not going to fix it. Why would we change the rules of a game we just won?

Henderson: Right.

Yepsen: IPERS. Erin, next question, the state's pension plan. Always talk about that, it was a big issue in the campaign.

Murphy: Yeah, really heated up at the end of the campaign there when democrats warned that electing republicans would put IPERS in position for big changes. Governor Reynolds insisted during the campaign that she had no intention to make any plans. In the past she had sort of indicated she would be open to looking at possible tweaks to make sure that it's sustainable for the long-term. She seemed, again when that heated up in the campaign she seemed to scale that back a little bit and say there's no plans to change the formula. Senate republicans have indicated a willingness to look at it, they have had legislation so they may revisit that, so again it may be a thing where the Senate republicans introduce something and then we find out how Linda Upmeyer and Kim Reynolds ultimately feel about it.

Yepsen: James, what do you think will happen? A lot of democrats are really suspicious of this. They were told, well we're just going to tweak collective bargaining. And giving new meaning to the word tweak republicans went in and gutted much of the law. Is the same thing going to happen here, could happen with IPERS? Or has it become the third rail, no republican wants to touch it?

Lynch: I don't think there's going to be big changes. In the past Governor Branstad talked about how private sector is going to these defined contribution plans rather than defined benefit plans. When states have done that or public bodies have done that the track record isn't very good. So I think it's going to be hard to make an argument for moving away from a defined benefit plan, which IPERS is, and moving to a defined contribution. Now, there could be some sort of a bifurcated system where people coming into the system are making defined contributions like a 401K as opposed to what IPERS is today. But again, the track record isn't real good on those sorts of --

Yepsen: Well yeah, if you do that then who is putting new money into --

Henderson: And as Erin referenced, that will be difficult for the Governor to sign because at the end of the campaign she said that there would be not changes for current, future or younger. She was unequivocal at the end of the campaign in saying she doesn't support changes in IPERS.

Yepsen: Iowa's pension system is among the top ten in the country.

Murphy: I was just going to say, it bears noting here that it's about, it's in the 80 roughly percent funded and that is in the top tier among states across the country.

Yepsen: One of the things that never gets discussed much in this IPERS debate is that the state having a good pension system makes it an attractive place for people to want to come and work and state government is like any business these days, everybody is competing for talent. Kay, do you hear any talk like that? I don't ever hear anybody say, we ought to mess with it because this is a good fringe benefit that we can offer prospective employees?

Henderson: That is not discussed because as we all heard Terry Branstad often discuss and other republicans they don't like the fact that public employees have better benefits than maybe perhaps their private sector counterparts. They often cite research which shows that state employees in Iowa have better benefits than those who work in the private sector.

Lynch: But lawmakers are part of IPERS too. So they have a vested interest.

Yepsen: James, what about abortion issues? Always controversial, we talk about the trifecta and what they'll do and not do. What do you think?

Lynch: Earlier this year the legislature passed the fetal heartbeat law which basically says abortion is banned after a fetal heartbeat is detected, which is about six weeks. There are some people who would like to go further, they want to pass a personhood bill. The Governor has said she's not interested. So I think it's going to be very hard, even if it gets through the legislature which I think would be a major challenge because there are a number of lawmakers who say, look, the fetal heartbeat bill is in court, let's wait and see what happens there before we take the next step. So I think there will be probably at least a bill or two introduced. There may be some debate on it. But I don't think there's going to be action.

Yepsen: Wait to see what the court says.

Henderson: Well, if there is action and a lobbying push from people who really make this their number one issue it's going to come after a district court decision. And so we don't know when that will come in. It looks as if, if we look at all the other rulings, it would come late in the session. So this is certainly not something that is going to be on their agenda in January or February or even March.

Yepsen: And I wonder if republicans will want to back off for political reasons. They didn't do too well among women voters, particularly younger women in the last election. Is there a political sense that let's not go there for political reasons?

Murphy: Maybe in the House, but again in the Senate they grew the number of republicans there so they may feel embolden to not just keep the pedal to the metal, try and push it through the floor.

Yepsen: And that they've got to support the people who helped them get re-elected.

Henderson: Right.

Yepsen: Kay, you mentioned Governor Branstad. Are we starting to see Governor Reynolds differentiate herself from Terry Branstad?

Henderson: Absolutely. On the day that she pardoned the turkey she also mentioned an effort to essentially pardon people, if you will, who have completed their prison sentences, they have done their parole, and give them the right to vote. In Iowa and Kentucky, those two states have a process whereby those who have completed their probation and parole have to apply to the Governor and the Governor reviews each case. We saw in Florida that Florida voters decided that felons, convicted felons should have their voting rights restored. The Governor had a very moving conversation with someone who had gone through the process of applying to her to have his voting rights restored and he talked to her about how it made him feel to, again, be part of the community. And so I think she was very moved by that conversation. I think this is something that legislators are going to struggle with because there are a lot of crime and punishment republicans who do not want to give voting rights to felons.

Yepsen: But, Erin, yet at the federal level you're seeing republicans endorsing sentencing reform. Chuck Grassley is one of the leaders in this. Does that give these law and order republicans in the legislature either some cover or pause about --

Murphy: I absolutely think it does. And you had some voters, Florida voters, through voter for a constitutional amendment to make this happen. So I absolutely do think there is enough movement out there including among republicans that there is cover for this kind of thing. It's funny, James earlier mentioned a kind of McConnell/Grassley similarity, you kind of have that here too with McConnell was against the criminal justice reform originally at the federal level and Grassley was for it and similar to Branstad was very much against changing this system and now you have Kim Reynolds showing willingness to.

Henderson: The other thing that Governor Reynolds has started to do and I believe we'll see sort of happen throughout the next several months is assemble her own team. When she became Governor in late May of 2017 she inherited Terry Branstad's administration. She has begun to see people exit because they worked for eight years for Terry Branstad and now her in their respective roles within her administration and so she is bringing in her own people. She has already brought in her own person to be Chief of Staff. That's important.

Yepsen: What about the policy questions, though? Medicaid?

Henderson: That's something that she has struggled with during the campaign, it was a major issue. She has made clear that the new contracts which were signed with the two private companies that are managing Medicaid require them to meet standards of paying the bills on time, which has been a real headache for republicans in the legislature because they hear from hospitals, they hear from doctors, they hear from clinics, they hear from social service agencies that serve disabled Iowans giving them a ride to work that they aren't being paid on time and that they have had to lay people off because of this bill paying fiasco.

Yepsen: James, we've got less than a minute.

Lynch: And we heard Doug Gross on this program talk about how she really was kind of hamstrung on Medicaid because it was Governor Branstad's policy. Now she has been elected, she can be her own Governor, she can pursue sort of a new policy on that if she wants, if she wants.

Yepsen: Erin, we've only got 30 seconds, but I want to ask you. We’ve got a new state auditor, Rob Sand, a democrat. What are republicans in the legislature going to do? They worry about him don't they?

Murphy: That's going to be interesting. Well, and it will be interesting to see how aggressive he is in the way he audits other entities, including within state government. And then the reaction of pushback. We've already seen in the past two years republicans push back against democratic statewide office holders using their images or likeness in advertising campaigns. So we may see some similar backlash if they don't like what Rob Sand is doing.

Yepsen: All this means we've got a lot to talk about in future Iowa Press shows. Thanks everybody for coming out here to do this. And thank you for joining us. We'll be back with another edition of Iowa Press next week. You can catch Iowa Press at 7:30 Friday night on our main Iowa PBS channel and again Sunday at Noon with another broadcast Saturday morning at 8:30 on our .3 World channel. So for all of us here at Iowa PBS, I'm David Yepsen. Thanks for joining us today.

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Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. I'm a dad. I am a mom. I'm a kid. I'm a kid at heart. I'm a banker. I'm an Iowa banker. No matter who you are, there is an Iowa banker who is ready to help you get where you want to go. Iowa bankers, allowing you to discover the genuine difference of Iowa banks.

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Associated General Contractors of Iowa