Branstad says employee compensation will be topic of budget cuts

Former Gov. Terry Branstad said Monday that wages and benefits being paid to state employees are outpacing the private sector and changes will have to be considered as part of a government downsizing effort to ensure compensation costs are sustainable for the future.

During a meeting with The Gazette Editorial Board, the former governor also said he believes Iowa is “very close to saturation” on gambling opportunities and he would not favor opening the state to sports betting if Congress gave states that authority or expanding further into online, electronic or international gaming.

Branstad, who served as Iowa governor from 1983 to 1999, said he has set a goal of reducing state spending by 15 percent over the next five years – an effort that likely will require a public discussion about the appropriate level of wages and benefits for state employees that are subject to collective bargaining.

“We're not going to look at raising taxes. We're going to look at instead reducing the size and cost of government and one of biggest costs of government is personnel costs – it's both wages and benefits. I think it has to be looked at but it also needs to be done in a very even handed and equitable way,” he said. “I'm not advocating a specific plan. I'm saying we've got to analyze and review the whole cost structure that's gotten state government, and in some cases local government as well in an uncompetitive situation and we've got to find out an equitable way to deal with that and that means, I think reviewing everything.”

Branstad noted that state employees on a single plan do not have to pay a share of health-insurance premiums and that workers subject to step increases received at least a 4 percent raise even when the base wage rate was frozen – factors that led to an increased cost to the state of nearly $100 million even though negotiators agreed that no across-the-board pay hike would be made at a time when Iowa's jobless ranks were swelling and some state workers were taking voluntary furloughs.

“When I talk to contractors and business people around the state, they say we keep losing people to the government because the wages are higher and the benefits are much higher,” he said. “Government right now at the federal level and the state level is not sustainable.”

Branstad did not offer specifics concerning what changes he believed should be pursued, although he said he has talked with private employers who have unionized workforces who switched from a defined benefit system to a defined contribution system and made other changes that might be appropriate for the state to pursue. He said the first thing he would do in pursuing any changes in employee compensation would be to launch a public education plan to explain the current situation and potential options.

“You've got to let the people know why we're in an uncompetitive situation and then give some reasonable alternatives that are fair to employees and are also fair to the taxpayers that are paying the bill and how we can correct it,” he said. “I recognize this is subject to collective bargaining and it has to be worked out in a way with the unions and the groups that represent the employees.”

Branstad's comments came on a day when New Jersey Gov. Chris Christie drew a big crowd at a Branstad fundraiser in West Des Moines. Branstad often refers to Christie as an example of someone working to reform that state's pension system, but Democrats noted the proposed changes included benefit cuts, increased contribution rates, higher retirement ages and eliminating cost of living increases.

Lt. Gov. Patty Judge said Branstad previously targeted state employee pensions fund, tried to tax Social Security benefits, and was locked in an unsuccessful court battle over wage increases that unionized state workers won via arbitration which led to employee layoffs and low morale.

“It seems to me he has not changed his stripes,” Judge told reporters via a teleconference Monday.

“It doesn't take a rocket scientist to figure out that if Branstad wants to make additional cuts at that level, the only places left to cut are jobs, and raiding the pension fund,” Judge added. “Gov. Culver and I do not believe in balancing the budget on the backs of retirees, as Gov. Christie has done in New Jersey and as Branstad might do here. We need to live up to the promises that we made to people when they began their employment with us.”

Turning to gambling, Branstad said he believes Iowa has enough riverboat and racetrack casinos although he understood why the state Racing and Gaming Commission approved a casino in Lyon County that mostly would be drawing clients from South Dakota.

“I certainly disagree with Gov. Culver's insistence that we should have added four more casinos,” he said.

“I don't think we should be adding more,” he told the newspaper's editorial board. “I think we're very close to saturation and I think we have to be careful about not expanding gambling further.”

Branstad said he also intended to talk with legislative leaders, if elected, to see if there was bipartisan support to restrict further gambling expansions into things like online gaming or video lottery options.

The former governor also said he would explore ways to provide more funding for transportation needs but he did not favor raising the state gas tax. “I think this is not the time to raise any tax because we're in a recession and we've got to get our financial house in order first,” he said.