June 23, 2005

"We're going to stay focused on education, because it is our duty to prepare, in a world class fashion, the next generation of Utahns." - Gov. Huntsman

Reporters (in order of appearance):

DAN BAMMES, KUER
RICHARD PIATT, KSL-TV
TOM JORDAN, METRO NETWORKS
LISA RILEY ROCHE, DESERET MORNING NEWS
LEE AUSTIN, UTAH PUBLIC RADIO
JENNIFER NAPIER PEARCE, INSIDE UTAH.COM
JULIE ROSE, KCPW

Transcript:

DAM BAMMES, KUER: Governor, thank you for joining us today. You were just recently at the Western Governors Conference. One of the big issues that they're trying to deal with is the skyrocketing cost of Medicaid for the states. The state of Utah right now is looking at a preferred drug list, a cost cutting measure that is either in use or under consideration in 44 other states. But there seems to be some resistance to that in the Utah legislature. What's your feeling in using a preferred drug list to help save costs in Medicaid?

GOVERNOR HUNTSMAN: Well I think there are a couple of approaches that we ought to be considering. Probably unorthodox as seen by some, particularly the pharmaceutical companies, but if it saves purchasers money, then I think we ought to probably look into them, one of which is the PDL. And that is you have a preferred buying list that you must purchase your pharmaceuticals from. But therein you're guaranteed a discount of sorts. Two is some sort of purchasing co-op that perhaps we could enter into. We're looking at it currently along with the governor of New Hampshire, I believe it is, through David Sundwall, our health director. And that would be based on volume purchasing, wherein you would get a discount.

The third is something that I noticed Nevada did just a couple of days ago, at least as reported in the New York Times, whereby they are importing from Canada, something that I've long talk talked about and I know, again, it isn't a popular issue with a lot of folks who are in the pharmaceutical manufacturing business. But last time I looked we had a trade agreement with Canada that allowed the free flow of goods across border. There are perhaps some questions on safety. They have a different set of safety standards in Canada, probably as rigorous as the FDA, I would think, but there should be some way of certifying safety of those pharmaceuticals. And I believe that Canada, although the article wasn't extensive in this regard, that Governor Guinn is doing something to ensure the safety and efficacy of drugs that would be brought in from Canada. Again, purchased at a discount. And I think that that's another area that we ought to be looking at as well. In fact we are looking at it. There's a group of seven or eight governors that is hoping to open a dialogue with the Canadian government about doing more of this kind of thing.

DAN BAMMES, KUER: A number of people, including Michael Diley, who directs the Medicaid program for Utah, has described the growing cost of that program as unsustainable. Do you see it that way, and besides these strategies, do you worry about the future of Medicaid?

GOVERNOR HUNTSMAN: I do. I think it is economically and financially unsustainable unless we come up with alternatives. When you look at where the federal government is and where they intend to go, billions of dollars will be placed on the states in terms of additional burdens to carry. We're going to have to figure out how to pay for some of these increasing costs. The last national governor's association meeting, I think almost to a person the governors in attendance there told the president and told the White House that this was probably going to be unacceptable over the next ten years, putting I think it's 50 or 60 billion dollars that are foisted upon the state in terms of Medicaid costs. I think there will likely be something brokered in the way of what the federal government is willing to continue to carry versus what the states carry.

But in the meantime we really do need to look at pharmaceutical, purchases for example, and also look at our primary care network, which is in existence, it's unique, really, to Utah. It has allowed doctors and hospitals to basically volunteer some of the services and costs to those cases that are most extreme, the so-called catastrophic cases, and that does help us as a state in terms of the overall costs that we would otherwise be picking up, and I think it's probably unique somewhat to our volunteer spirit as a state. But there certainly are some things that we're going to have to do in order to first anticipate and then deal with additional Medicaid costs going forward.

RICHARD PIATT, KSL-TV: Governor, here we are in the middle of June, the clock is ticking, you've got high popularity rankings right now. I'm wondering how you feel about your six months, over six months in office, and what you say to critics who feel that you haven't truly been tested in office?

GOVERNOR HUNTSMAN: Well, I think floods test you. We had once-per-hundred-year floods. I think a legislative session certainly is going to test any newcomer, as it did us. Who knows what lies in store beyond? The chances are we're going to have some wildfires that will exceed what we've seen in recent years, where we're going to have to pull together as a government. We're embarking upon tax reform, which is a once per, probably two generation exercise, significant undertaking. There are lots of issues that I would say are fairly hefty in terms of the governor's involvement, in the way in which the governor's office must work with the legislature and other special interest groups. Listen, we've been at it for six months, and you're going to have those who like what we've done and those who will criticize, but that's the American way. And that's the only way that I'd want it. You don't want everybody who's going to pile on and just say that you're doing a good job, because you lose your focus that way. You do want those who are going to keep you sharp by saying that perhaps this could have been done a little bit better, or differently.

That said, we've got our plate full of a lot of very important issues, and I think they go right to the heart and soul of what is right for the state. And we're going to continue to stay focused on the economy, so that we can weather the traditional national economic cycles. That's the whole purpose for focusing on economic development. We need to bring out our indigenous strengths, as we talked about in our economic summit yesterday, so that we have a straight line performance, regardless of what the national or, indeed, the international economies, throw our way. We're going to stay focused on education, because it is our duty to prepare, in a world class fashion, the next generation of Utahns. And that's going to cost. And we've got transportation. These are all critically important issues of our time, and whether me or whether anyone else I think, anyone in this position would be dealing with these issues today.

RICHARD PIATT, KSL-TV: Is there anything about dealing with government that you, in all candor, are willing to say that's thrown you for a loop, or that you feel your learning curve was a little bit longer than you expected to get used to the way things are operating in the state?

GOVERNOR HUNTSMAN: Not so far. And maybe that is having been involved in government service before, albeit at a federal level. I think the only cautionary note for me, and I'm probably more critical of myself than anyone on the outside, is that we not get too many things on the plate so that you begin to lose focus of that which is really important, and therefore become less effective in getting the two or three critically important things done at the end of the day. Sometimes you can overload your wish list to the point where you get pulled in too many different directions. And I don't want that to happen. And either so many things out there you'd like to see done or you'd like to help with, and by doing so sometimes you lose your focus. That's a cautionary note to me personally.

TOM JORDAN, METRO NETWORKS: What's your take on, of the many issues you just brought up, on a flat tax? Most of us sitting here will be adversely affected by that. You're in a slightly different tax bracket from most of us.

GOVERNOR HUNTSMAN: I used to be.

TOM JORDAN, METRO NETWORKS: Hardly an advantage to you. But what's your feeling about it? Is this a smart way to be going?

GOVERNOR HUNTSMAN: Well, first of all, I don't think we should render any final judgment on a tax package that is considered a work in progress. We don't have the final elements in place on which to render a final judgment. We are working toward a flatter tax. I wouldn't call it a flat tax. I would call it a flatter, simpler tax, which is the direction I think we ought to go. Now whether that ends up being 4.1 or 4.2 versus 4.8 or 4.9, anything that would get us into this area, with some provision that would allow those in the lowest of income categories not to be adversely affected, as they would be by a straight flat tax. So I call it a flatter tax, in the sense that there are different ways to phase in tax policy such that you don't leave those at the lowest end paying more than they should be paying. And again, at the lowest end you've got those who are not paying taxes today who, under a flat tax scenario, would be paying something.

And I want to make sure that whatever we do is fair, and by being fair I mean not putting a burden on those who are the lowest end of the income category. So it's a flatter tax, it isn't a flat tax, it's a flatter tax that we're working toward. And even I'm not going to render a judgment on this until we figure out what we have at the end of the day on the table, since it is an iterative kind of undertaking, coupled with what we have on the sales tax side, which I think, for a lot of people, will be a very meaningful thing if we can somehow deal with lowering the sales tax overall. Maybe by a percentage point, I don't know.

LISA RILEY ROCHE, DESERET MORNING NEWS: Governor, what about the issue of deductions with flat tax, specifically deductions for charitable contributions made? The LDS Church has made their position clear on this. I know you've had a meeting with them where this issue came up. Is that pretty much a done deal? Were are we going to see that deduction in whatever kind of flat or flatter tax we end up with?

GOVERNOR HUNTSMAN: Right now it is out. All deductions are out as of right now. This will be kind of a review process later on whereby everyone who's involved in this task force will look at possible deductions, whether they should be in or out. Now I think it's noteworthy that, you know, somebody with the renown and expertise of Marty Feldstein, who has been at University of Chicago and will likely be the next chairman of the Federal Reserve Bank board, has said that despite the twists and turns of the national tax code, charitable giving basically has remained the same. I'm not sure that that will have much of an impact on charitable giving all by itself. Particularly the small amount that is tied to the state taxes versus that what is deductible on federal taxes, which, of course, would remain the same. So as of right now the assumption is we don't have any deductions as part of overall tax planning, but that will be reviewed over time.

And I suspect, whether it's the LDS Church or Catholic Relief Services, or others who feel strongly about this--and we have a large charitable community in the state. I suspect that they would all be together in wanting to keep that deduction in. Now, that's when elected officials have to kind of remember their duty and obligation as being elected by all the people in determining what survives and what doesn't at the end of the day in tax policy.

DAN BAMMES, KUER: Governor, we have a question from Lee Austin of Utah Public Radio from our microwave site in Logan.

GOVERNOR HUNTSMAN: Hi, Lee.

LEE AUSTIN, UTAH PUBLIC RADIO: Hello, thank you. Continuing with the question of tax reform, you say you are seeking a flatter tax, not rendering any judgment on what's being discussed right now. But is it a concern to you if people, critics put up charts that show the vast majority of the benefits go to the high income, yes, we protected the lowest earners, but the benefits for the middle class are not there, or they wind up paying more taxes?

GOVERNOR HUNTSMAN: Well I think that would be a premature judgment today. We need to look at the totality of the tax package, that would be individual income tax, plus the sales tax refinements, at the end of the exercise as we approach September, and then see who it affects and how it affects them. The objective being that taxpayers would have more in their hip pocket to put back into the economy. That is the objective, and thereby stimulating economic growth. Now we don't know what the assumptions are until we have a final package to roll out. But yes, having a tax plan that would adversely affect those at the lowest end of the income scale would not be acceptable to me, and that's why I'm calling it a flatter tax as opposed to a flat tax.

REBECCA WALSH, SALT LAKE TRIBUNE: Governor, you are working with New Mexico Governor Bill Richardson, talking about a western primary, and the previous governor, Leavitt, attempted that and it was a dismal failure. Why go down that road again?

GOVERNOR HUNTSMAN: Well, I think there are two things that we're taking into consideration. One, it is not being done unilaterally as it was done before. It is being done bilaterally, multilaterally, I should say, a Republican and a Democrat. Second of all, the timing of the primary makes all the difference in the world. And as I recall under the last scenario it was a post super Tuesday arrangement, as opposed to a pre super Tuesday arrangement. I think this is worth pursuing if, in fact, we can get a pre super Tuesday date, which is to say you've got Iowa, New Hampshire, South Carolina, and then you move into super Tuesday. And if we can get something early in the schedule which would be, say, in early to mid February, and now, again, my days may be off a little bit, whereby you could get four to five states banding together to really highlight and promote western issues--like nuclear waste for example--and have candidates come through and listen to us and pay attention, as they today do not, and moreover are a lot of the campaign spending, of the advertising and the campaigning and the whatnot that goes into supporting these efforts, in talking to Bill Richardson, for New Mexico, at least in their limited experience, it has been an economic boon to them. And they have not done anything other than, I think, a preferential primary kind of arrangement.

So my objective, although we haven't rolled it out formally, Bill Richardson did--thank you very much, Bill--we hope in the next couple of weeks that we will have something that we can formally roll out that would represent how many states are interested in participating. When, from a scheduling standpoint, that might happen, and what the costs would be associated with that. So there are some features that are a little bit different this go-around that might make it more doable. And I've had a few conversations with regional governors to that end, and I sense that there is an interest. They, too, I think, would like our states better represented in terms of candidates from both parties coming through and hearing out our uniquely western issues.

REBECCA WALSH, SALT LAKE TRIBUNE: Which states are you talking to?

GOVERNOR HUNTSMAN: Well, New Mexico, I've talked to Wyoming, and I've talked to Montana, Brian Schweitzer. I will be talking to Dirk Kempthorne tomorrow about this, and Kenny Guinn in Nevada, as well, in the next day or two. So that would be the universe of participating states. Colorado has a possibility as well, but that would be the universe of states that would have an interest in looking at something like this.

JENNIFER NAPIER PEARCE, INSIDE UTAH.COM: Governor, you mentioned the economic summit that you held yesterday, and you heard feedback from business leaders, some of them complaining that there is not enough qualified, a qualified labor force, and not enough start-up capital. What can you, as governor, do about that?

GOVERNOR HUNTSMAN: Work hard, and maintain a focus on the areas that are relevant for those who are taking a risk and building businesses here in the state, whether those businesses are big or small. And when we hear that there isn't enough in the way of startup capital--it's called early-stage development capital--that is a concern. We do have venture capital, $1.4 billion worth now in the state, well up recently, but it is for later-stage development. It is for so-called mezzanine financing, as opposed to the riskier early-stage development, which is what we need. We have a state of entrepreneurs who need that early-stage development money, and we don't have enough of it. And it means that as governor, I would have to door knock a little bit more aggressively to those funds that specialize in that kind of investment, maybe sit down with the venture capital community here in the state to see if they wouldn't be willing to show more, provide more of a focus on the early-stage development.

And as it relates to work force development, I think we've got a great set of institutions in the U-CAT institutions that do a lot of the technical skills training. And again, we're hearing from, you know, diesel mechanics, the truck companies that need more in the way of mechanics, and need more in the way of technical skills. I would like to see more in the way of alliances between these companies that require a flow of skilled technicians. More in the way of alliances between what they're doing and a vision for their future with some of our U-CAT institutions. We see that sporadically in the state, but probably not enough. I mean I've been up to Davis, I've been up to Bridgerland in Logan, and I see the alliances that have been struck with regional manufacturing companies, where there is custom-fit training in these institutions that is most extraordinary. They get them right out of high school, they provide them with a two-year technical degree, very specific training, and then they go right into the work force. We can do more with that, with our U-CAT institutions around the state. We probably need to look at those that are working well, and maybe build upon those models to try to figure out how we can better serve our growing business community with those particular needs.

JULIE ROSE, KCPW: Entrepreneurs at the summit yesterday touched on a sensitive issue of education in public schools. They said very clearly that it's difficult for them to recruit high-level executives to Utah, one of the reasons being that these well-educated folks want their children to be well educated, and they don't look highly on Utah's education system. Utah also is embroiled in some debate regarding No Child Left Behind and achievement gaps. What can Utah do in the near future to improve its public school system so that these companies can recruit high-level executives?

GOVERNOR HUNTSMAN: Well, I hear what they're saying. I also heard recently in silicon valley when I made a visit a couple of months ago to knock on doors of the venture capital community, that the public schools in California, at least in this region, in northern California, don't provide funding for extracurricular activities. In some cases that would be music and athletics, and even, I think, chemistry classes. That was a huge downer for people that I was talking- - I mean high-level executives in the community. So anywhere you go, I think you can find areas in public education that need refinement, in shoring up, and help. I don't think it's unique only to Utah.

Yes, we need more in the way of funding, and yes, we need more in the way of higher salaries for our teachers. But we produce a pretty good result at the end of the day. I think we can do a much better job as it relates to this so-called achievement gap, student performance. And I think this is relatively new as people now are understanding the numbers, and as we become, as we evolve into a more heterogeneous state, which the demographers would have told you 20 years ago was only inevitable, and here we are, and it will continue to evolve over the next 20 years. So I think we need to focus on pockets of vulnerable students, and do something to help shore them up. And that's the whole reason that we've got our working group on student achievement up and running, and I suspect we're going to have some pretty good findings come September from this effort. We have very good representation from certain ethnic communities that are interested in participating from the school board, and from other interested members. And I think this may do as much as anything else over the short term to make sure that we close whatever gap may be emerging in terms of performance. And I'm very excited about what we might have toward the end of the year. Of course it will be a fight. Not a fight, but a negotiation with the legislature to get something done.

RICHARD PIATT, KSL-TV: Excuse me. With regards to your economic development efforts, the main focus of your campaign, how would you grade your performance so far, on your administration's performance, and what's the biggest challenge toward getting done what you want to get done, would you say?

GOVERNOR HUNTSMAN: Not enough hours in the day. But I think I would probably take a chapter from Governor Calvin Rampton's book, I believe, in which he said that 20 years later perhaps you could begin to measure the results of what you were doing. Giving it a 6-month increment is kind of akin to looking at the quarterly returns of publicly-traded companies and trying to figure whether their trajectory is good or bad. We're not going to know for 10 or 20 years if what we're doing is truly benefiting the state. That's just the way economic cycles work. We're looking at some long-term fixes, here, that won't have necessarily immediate--immediate in the sense of whether the economic analysis can be done immediately. Certainly there's going to be an upsurge in confidence, in business confidence, but in terms of the real economic analysis- -

You look at tax reform. That's going to be a long-term indicator that we're not going to know the results of for some time, if we do get real tax reform through. We're looking at the millions of dollars that we have for tourism promotion. And again, at our summit yesterday, image came up more than a few times, and we're dealing with that as it relates to tourism promotion. And listen, this is the first time our state's ever done anything like this. And I'm very excited about the prospects, but it's going to be some time before we actually are able to measure the results of that.

Venture capital, we continue to accumulate more and more, hopefully on a targeted basis for those who really do need it. Now, businesses have to develop, they have to mature, they have to hire, they have to generate a profit. That's a long-term prospect to see if what we did in these particular areas was good for the state or not. I think all of what we're doing over time will be considered better for the state. Whether we can stand up after six months and say that we have a definitive result is the question.

And what did Mao say to the journalist Edgar Snow when Edgar Snow asked him, you know, what impact the French revolution may have had on the Chinese revolution, you know, 200 years before? Mao told him, "Well it's too early to tell." I don't know, it's going to take some time to find out.

RICHARD PIATT, KSL-TV: You must be sensing some opportunity out there. Taxes are high in California, some companies may be looking for new locations in the next ten years or so. Are you sensing opportunity?

GOVERNOR HUNTSMAN: Yes, I am. I don't want to be a one-man cheerleader. You all can go out and find whether you see it or not, but I do sense, and I hear from the business community that there is an upsurge in optimism about the direction in which we are headed, and the opportunities that we have to build some meaningful economic clusters that will serve us, I think, very positively longer term in this state.

DAN BAMMES, KUER: Governor, we have just a couple of minutes left, here. Finally the state is ending this fiscal year with a surplus of about $160 million, that's the estimate. It sounds like a lot of money, but it's 1.8 percent of the state's overall spending. What can you do with the money? There is some clamor for tax cuts. What do you do with the good news?

GOVERNOR HUNTSMAN: Well, most of it's spoken for. Two-thirds will go to education right off the top, 50 percent of the remaining portion will go to the rainy day fund. And then you've got a small fraction left, and that will be debated over. Guaranteed. The good news is that we have a little bit more to support a growing, thriving state that is in need of good education and transportation. So I don't think we'll ever run out of important and meaningful priorities that we need to support for this state, particularly growing as rapidly as we are. But when you look at the 160, 162 million dollars- - And first of all, we don't have a final accounting on that money. This is a guesstimate. We think that as the fiscal year ends we'll get a solid reading on it. But you've got to remember most of it's already spoken for based upon legislation that is currently in place.

DAN BAMMES, KUER: Not enough even to think about a tax cut.

GOVERNOR HUNTSMAN: I don't know that we ought to be thinking about a tax cut right now. I think that first we look at tax reform, and see where tax reform gets us, and that may make us sharper and more competitive longer term, as a state. And perhaps even balance out our traditional sources of revenue such that we don't go in peaks and valleys, feast and famine as we have in recent years.

DAN BAMMES, KUER: Thank you very much, Governor. We're about out of time. We would like to remind you that both transcripts and video streaming of the Governor's Monthly News Conference are available at the Utah Education Network. The web site is www.uen.org. It's been a pleasure to have you with us. We will not be holding a monthly news conference in July, we're going to take a month off, but we'll be doing this again come August. Thank you very much for joining us.

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