DM Register attack v. Terry Branstad truth

I have this friend, we call him Grouch. And the name fits. Anyway, Grouch came up to me over the weekend, pointed to the Des Moines Register story about "Two-Book Branstad" and said, "See!! I told you so! Branstad can't be trusted!"

Having lived through the Branstad era as a statehouse reporter, I scratched my head and started to tell him it was all a mainstream media hype game. That they were amplifying former state auditor Richard Johnson's comments. But I told him that I'd respond-but I wanted to check out the facts first. So this is a compendium of the facts. Here's what I emailed Grouch:

• The story is based solely on Dick Johnson's attack on Branstad and on the fact that Branstad raised the sales tax twice in his tenure in office.
• There's never been any real research into what was going on other than the blathering of opinion columnists and bloggers (oops, guess that's me!).

The two players in this story:

• Dick Johnson began as state auditor in 1978, having been appointed to the post by Gov. Bob Ray after the death of Lloyd Smith. He served until 1993, when he left to run (unsuccessfully) for Congress.
• Terry Branstad took office in 1983 as governor, having served prior to that as Lt. Gov. to Ray and, before that, as a state representative.

Here's the REAL story...

Budgeting by state government in 1983 was a big guessing game. Lawmakers guessed how much money they'd receive and spent accordingly. There were no non-partisan revenue projections. And there was the eternal optimism among legislative Democrats that the state was going to continue to prosper and expand its tax base. That meant that many individual appropriations that lawmakers made fell short of the money needed to run the programs they created.

Starting in the Ray era, the State Comptroller (later the governor's budget director) would simply transfer overages from one appropriation to another item to make up a shortfall...kind of like in your personal budget if you didn't buy any socks and you budgeted $10 for socks and you needed to buy food and came up $10 short in the budget, you'd just spend the "sock money" on food.

Iowa was in a mess when Branstad took office. The farm crisis had wiped out many rural Iowans. Many banks were in trouble as well. Republican Branstad had a Democratic-controlled legislature which wanted to spend money profusely. Revenues were dropping.

To avoid raising other taxes, Branstad sheparded through the legislature a one-cent-on-the-dollar increase in the state sales tax, moving it from 3 percent to 4 percent. That was the first time in about ten years it had been raised.

Thanks to that tax boost and a number of vetoes and line-item vetoes of spending bills the Democratic legislature sent him that helped reduce long-term expenditures, Branstad proposed and finally signed into law two separate bills in the next two years of his term (1984-85) that DECREASED income taxes by a total of 10%. They were the largest tax reduction bills in Iowa history. Branstad was named by the Cato Institute in a report as one of the top "tax cutting governors" in the nation during the 80's and 90's. (This is the key fact that the Branstad attackers conveniently forget to say when talking about the sales tax increase.)

In the early 90's, state revenues started to decline again due to the state of economy and an explosion of federally-mandated spending for Medicaid and other social programs. It was clear that state revenues were coming up short of the spending the legislature authorized.
Remember our talk about accounting methods? Well, by 1992, they'd morphed into an accounting strategy where, to balance the budget on paper, the state counted money it hadn't received yet as assets, so assets and liabilities wouldn't be out of balance and show a deficit.

My check of historical records showed that Iowa wasn't alone in using transfers and counting "anticipated revenue" as real to avoid a deficit. Many states switched back-and-forth between "cash accounting" and "accrual accounting" methods. There also was no national accounting standard in place for state government. The Governmental Accounting Standards Board didn't issue its Standards document until 1994. There were no "Generally Accepted Accounting Principles" or GAAP at that time. Just a lot of different organizations with competing philosophies on how to put together state budgets.

In 1992, Dick Johnson first accused Branstad of juggling accounting methods to make the state's budget appear to be balanced, as required by the state constitution. It seemed strange when Johnson told a video interview this year by the Bob Vander Plaats campaign that Branstad had a deficit problem "from the beginning" of his tenure and yet Dick Johnson didn't complain about it until 1992. So for 9 years it was a problem but he ignored it?
So, Branstad inherited a jumbled accounting mess. And, to his detriment, he didn't seem cognizant of the problem or willing to change it until Dick Johnson made it public-and said the state budget was in a constitutionally-illegal deficit.

Branstad then implemented across-the-board cuts and furloughed state employees to cut the deficit and started pressuring the legislature for a balanced budget plan. That should have pleased Dick Johnson, right? Nope. He complained that the budget cuts were too harsh. He said too many state workers were let go-so much so that there were lightbulbs in his office that were burned out that weren't getting replaced.

However, Johnson did give the state a favorable report in 1993 after the budget reforms were in place and the $408.8 million dollar deficit was reduced to $20 million by the end of the 1993-94 fiscal year.

Dick Johnson, who now complains that Branstad transferred money between accounts, was pressuring Branstad back in 1992 to transfer money between accounts to avoid laying off workers. He also complained that there were so few workers at the statehouse that there were burned out light bulbs in his office that weren't getting replaced.

Johnson also didn't want his own budget cut. He complained that his office having to endure the same budget cuts as other departments was a repraisal for Johnson's deficit attack. Branstad's budget included measures to allow governments to use outside accounting firms instead of the state auditor to do their annual reports, something Johnson didn't like.

State Auditor Johnson found himself being accused of gouging the State Board of Regents for hiking the cost of his office auditing the Regents' institutions. Johnson hiked the cost for his office to audit the regents by 87 percent in from 1987 to 1994. He said payroll costs were the reason for the hike. (87%??)

With this battle between Johnson and Branstad, people starting choosing sides. There were those people in 1992 threatening to run a GOP primary opponent against Dick Johnson in retaliation for not only his attacks on Branstad, but his testimony for state labor unions that sued Branstad to force the state to pay for pay raises that the governor vetoed-an interesting situation because in 1992 Johnson recommended Branstad delay the pay raise for state workers because of the budget shortfall. (The unions won.) Several times the two had fiery exchanges at the state executive council meetings.

Then in 1993 Dick Johnson fired his last shot. He announced that he was endorsing Fred Grandy for governor in the primary battle against Branstad. The conservative Johnson gave his full support to the moderate Grandy. The race was bitter but Branstad emerged the victor and won re-election. Johnson then mounted an ill-fated campaign for Congress.

So after looking at a ton of newspaper articles from the 80's and 90's, I can't help feel that an objective review would find that Branstad did have a deficit in 1992 as Johnson stated, and Johnson was the loud voice that prompted public outcry for a change. But to Branstad's credit, he did not rubber stamp the Democratic legislature's plan to just raise the state sales tax one percent and go on as normal.

Branstad convened a commission on spending reform headed by businessman David Fisher and demanded that the legislature approve its recommendations. Democrats approved a plan that set up a Revenue Estimating Conference of "experts" to predict what state revenues would be for the year, and only allowed the legislature to spend 99 percent of that amount-the rest going into a "rainy day fund." It was then-state Sen. Tom Vilsack that outlined the plan before reporters outside the press room in the basement of the state capitol rotunda after emerging with a meeting between Democratic leaders and Branstad.

That plan is still in effect today. And is one of the barriers to out of control spending. However, lawmakers can use the words "nothwithstanding" to ignore the law-and current auditor David Vaudt says the Democrats in the legislature and the governor's office are doing that.

So kudos to both Branstad and Johnson for their roles in straightening out Iowa's financial picture. They both deserve credit. But Johnson's clearly not gotten over the politics of the whole mess, and the Register seems willing to exploit that in its reporting without any investigation.

So I told Grouch that...

• Branstad had a deficit-but it was a product of both a bad accounting method used before he was in office and overspending (largely for Medicaid and welfare)
• Dick Johnson pressured the legislature to fix it
• Branstad cut taxes more than any governor in recent history.
• Branstad's been no more or less trustable than Johnson when it comes to the budget-they both did a good job of fixing things even though at the time the were at loggerheads.
• Dick Johnson got political back in the 90's and that tainted his statements, and the same is true in the primary election. His attempt to paint Branstad as fiscally irresponsible is just not true. Branstad vetoed hundreds of spending bills given him by the legislature to avoid costly programs and new spending. He proved his fiscal conservatism.
• It was odd to see a Dick Johnson who campaigned for social moderate Fred Grandy for governor team up with Bob Vander Plaats' campaign. The only explanation I can come up with is political payback by Johnson again, as it was in the endorsement of Grandy. Payback for the perceived injustices that Johnson believes he suffered at the hands of Branstad. It's a very petty course that tarnishes the great work Johnson did as state auditor.

There...email to Grouch sent. Let's see what he comes up with now!