Economy, unemployment, housing issues differ this time for Branstad

When Terry Branstad took the oath of office as Iowa's governor in January 1983, the state's unemployment rate was 8.6 percent, the national jobless rate was 9.6 percent and the housing sector was in a slump.

As Branstad starts his fifth term as governor, Iowa's jobless rate is 6.7 percent, the national unemployment rate is 9.4 percent and the housing sector is mired in a slump.

That's where the similarities end.

High mortgage rates - 13.75 percent for a 30-year loan in January 1983 - caused home construction and purchases to stall. Today, falling home prices, tighter mortgage lending standards and concerns about job security have created a stagnant housing market in Iowa and across the country.

“You can't really compare this period to much of anything in the past,” said Michael Blouin, president of the Greater Dubuque Development Corp., former Cedar Rapids Area Chamber of Commerce president, and Iowa Department of Economic Development director in former Gov. Tom Vilsack's administration.

“If I'm reading the tea leaves of the professionals correctly, this is not going to be an easy fix,” Blouin said. “I don't really think you can fix the economy and the job situation at the state or the federal level. This is a global problem that's going to take a lot of painful time to solve.”

Systemic changes since Branstad left office, including the Internet's impact and an increase in overseas outsourcing, have slashed U.S. manufacturing employment by 2.5 million jobs since 2000. And jobs being created typically require workers with skills that did not exist in the 1980s.

Branstad campaigned on a platform of cutting commercial property taxes, removing barriers to business growth and creating 200,000 private sector jobs over the next five years. Speaking last month to local residents at the Marion Public Library, Branstad said 80 percent of the new jobs will be created by small businesses.

“We need to eliminate burdensome regulations that stand in the way of business growth and reduce commercial property taxes, which are a significant hindrance,” Branstad said. “At the same time, we need to be cost effective when it comes to offering incentives for job creation.”

Debi Durham, Branstad's Iowa Department of Economic Development director, said the governor will oppose ending research and development tax credits, believing the state needs to attract more facilities such as the recently announced $25 million Genencor BioIsoprene research pilot plant in Cedar Rapids.

“We need to grow more of those research jobs here,” she said. “Research and development jobs are typically high-paying positions that will help us retain our college graduates.

“We also know that when research is done in a place, what often follows is the production or manufacturing.”

Branstad favors reduced use of tax increment financing and 100 percent property tax abatement, contending that local governments need to retain as much as 40 percent of property tax income to offset a reduction in commercial property taxes. He also wants to use tax waivers and tuition tax credits to encourage new small business start-ups.

Blouin, who applauds Branstad's appointment of Durham as “a class act who will restore IDED's credibility with the legislature,” sharply disagrees with the governor on reducing tax increment financing or property tax abatement.

“No matter how successful the state has been at putting up incentives, the biggest incentive in almost every case has been tax increment financing,” Blouin said. “We're in a bidding war with other states and it's the biggest pile of money that we've been able to offer companies.”

Estimated TIF tax revenue in Linn County was $12.8 million for fiscal 2010-11 levies. In Johnson County, TIF tax revenue totaled $22.8 million for the same levies.

Branstad wants to restructure the Iowa Department of Economic Development to be more of a public-private entity. Durham said the governor wants the private sector to have a greater opportunity to interact with the IDED.

“We have been very successful in the past involving company executives and local economic development organizations on recruiting visits,” said Durham, former president of the Siouxland Chamber of Commerce in Sioux City. “There's nothing like having an Iowa CEO sitting across the table from the CEO of a company we're trying to attract to the state. They both know what it's like to make a payroll.”

Blouin agrees with Durham, but says it should go a step further.

“Even better is having the governor sitting across the table from a CEO and selling him on the state,” Blouin said. “Gov. Branstad was willing to do that when he was in office the first time. If he is willing to do that again, it could really help attract jobs and industry.”

Where Blouin parts company with Branstad is a proposal voiced in the gubernatorial campaign to have the lieutenant governor chair the IDED board of directors. “The IDED board has worked very well as a private entity of business leaders and people from various walks of life,” Blouin said. “The minute you put a public sector elected official as the head of the board, it's no longer operating in a private sector mindset.”