Branstad bargaining in bad faith, Iowa Democrats say

Gov. Terry Branstad has jeopardized some of his 2011 priorities with a short-sighted decision to slash tax breaks for Iowa's working poor and small businesses from compromise legislation that passed both the House and Senate without opposition, legislative Democrats said Monday.

“It's bad-faith bargaining on the governor's part,” said Senate Majority Leader Mike Gronstal, D-Council Bluffs.

If the GOP governor still expects the split-control Legislature to take up his proposals to revamp the state's economic development effort into a public-private partnership or consider changes to the state's commercial property tax or corporate income tax systems, “I don't believe that this was a way to get there,” Gronstal added.

Earlier Monday, Branstad defended his decisions to use his item-veto power to slash provisions of Senate File 209 that sought to raise the earned income tax credit from 7 percent to 10 percent for 240,000 Iowans making less than $45,000 annually and to provide bonus depreciation to reduce taxes for businesses that make equipment and machinery upgrades.

“We're disappointed that the governor didn't take the bonus depreciation,” said Senate GOP Leader Paul McKinley of Chariton. “We thought that was a good shot of adrenalin, particularly for rural communities, small businesses and farmers. But the governor has vowed to try and make that part of his overall tax package and I take him at his word.”

Branstad did sign other provisions that provided $46.7 million supplemental funding for indigent defense, corrections, human services and other priority budget areas through June 30, created a special taxpayers' trust fund to capture up to $60 million annually in surplus state money for tax relief, and earmarked $20 million to begin reforming mental-health programs facing waiting lists and other challenges.

“There was no deal. We were not part of the discussions on the taxes at all,” Branstad told reporters in explaining his action. “We've been very consistent throughout. We gave them no indications that these tax changes that they had in this bill were acceptable.”

The five-term governor said he was willing to discuss tax changes as part of a comprehensive effort to remove impediments to job creation for Iowa businesses, but he did concede he worked separately with House Republicans to meet their demand for the new tax relief account that they say will bring taxpayers to the table in yearly budget discussions.

Senators from both parties said they felt Branstad broke faith by striking down parts of a package that would cleared both chambers without dissent. They doubted there would be an effort to override the governor's action with a two-thirds majority vote in both chambers, although Democrats said that option had not been ruled out.

Sen. Joe Bolkcom, D-Iowa City, co-chairman of the House-Senate conference committee that hammered out the combination spending and tax policy package, said the governor was being “disingenuous” if he says he and his aides were not involved in brokering the compromise. He said the trust level was very low heading into critical budget talks needed to adjourn the 2011 session.

“We thought we were all in this together. We thought it was one package and it's created some problems here. We can't take him at his word,” Bolkcom said.

“It just sets us up I think for difficult Senate negotiations ahead when we think he's in the game and apparently he's not,” he added. “I think it's time to get the budgets done and once we get that done figure out if there's any goodwill to finish any of this other work.”

Rep. Scott Raecker, R-Urbandale, said the governor's action in vetoing provisions of S.F. 209 set back the process of finishing this year's legislative work with Friday marking the 110th session day when daily expense money paid to lawmakers is set to expire.

“There's no question the line-item veto on Senate File 209 is a step backward for us as far as process,” he said. “We'll get there. I'm optimistic. It's just been a step backwards.”

Debi Durham, director of the state Department of Economic Development, said she was encouraged but conceded there are a few sticking points standing in the way of the governor's proposed Partnership for Economic Progress – a multi-component public-private approach to revamping the current DED structure. She conceded that the issue could get mired in session-ending partisan wrangling and used “as a leveraging point,” but she was hopeful the split-control Legislature would agree to the Branstad's proposed organization change.

“Yes, and I'd like to be 6'5” and 210, also,” said Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee. “There are consequences for everyone's actions around here. So far (the governor) has gotten his way all the time. I don't think it works that way.”