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GARY EICHTEN: Minnesota Governor Arne Carlson is our guest this afternoon for the first in what we hope is going to be a regular series of visits by the governor here on Minnesota Public Radio, a chance to visit with the governor about some of the issues, and a chance for you to talk with the governor and ask your questions as well. Governor, thanks for coming in.

ARNE CARLSON: Delighted. Thank you.

GARY EICHTEN: Let's start with the fun question, that budget that the state is facing, a budget problem the state is facing. How bad is it?

ARNE CARLSON: Well, it's very, very serious. What has happened is this. And we've got to understand it in the context of time. During the 1980s, state and local governments in Minnesota were spending at a rate that was roughly 57% higher than the growth of inflation. I mean, that was dangerously high. Matter of fact, the second highest in the United States.

And it was inevitable that at some point your revenues are going to be less than your expenses. And that happened one week after the election. And that's when I demanded a recount. But in any event, what Minnesota has to do has got to make a very fundamental decision, and that is, is it willing to limit its spending to its revenues? And I take a posture where the answer is a very firm yes.

For the next two years coming up, starting in July of 1993, it's expected that Minnesota's revenues will increase about 11%. So that's fairly good. Most of us would love to have revenue increases and our family lives of 11%. And that's a two-year figure. However, promises or expectations of the spending systems are going to be closer to 14%. So that's what causes the gap. So I would argue that what has to be done then is to bring that 14% down to match revenues.

GARY EICHTEN: How come we've heard so little really about this at the legislative campaigns? We've heard of-- not a lot, but we've heard at least a fair amount about the fact that the federal government is facing big problems financially, but not much about the state problem.

ARNE CARLSON: Yeah, I think it's customary in politics to avoid talking about issues that compel candidates to make some very difficult choices. And so there is obviously an awful lot of avoidance, but lately, there has been more discussion about it. There was a good story in the Saint Paul Pioneer Press about it. Steve Sviggum and Dwayne Benson have spoken out about it. So it's starting, just now starting, to come into the campaigns.

GARY EICHTEN: The Democrats probably will retain control of both houses of the legislature, do you think? I know what you'd like to see happen, but as a practical matter.

ARNE CARLSON: I'm not very good at forecasting. I don't know how it's going to work out.

GARY EICHTEN: Well, let's just assume for a moment, given the fact that they have such a huge majority at this point that they manage to hang on. Things were pretty nice and mellow, really, last spring, spirit of compromise at the state capital and all. Do you expect that same spirit of compromise to prevail, then, with the DFL controlled legislature this coming year?

ARNE CARLSON: Traditionally, what happens is that whatever kind of a budget any governor gives to the legislature, the legislature tends to criticize it and spend several months criticizing it, and then they finally wrap up their own budget in the fading hours of a session.

Now, I would suspect this is going to be a fairly difficult session. Because when you have an $840 million gap between revenues and expenditures, you're going to have those people who would like to increase taxes. And you can have those people who think we should reduce the growth in expenditures is going to cause a tremendous conflict.

And that's why I think it's good for this conflict to occur today, so that the legislative candidates can talk openly and honestly to their electorate about what they plan to do. But I think the more silent we are on that issue, then I think the more acrimonious the session is going to be.

GARY EICHTEN: Don't you think both, ultimately, are going to be needed some tax increases and spending cuts as well?

ARNE CARLSON: No, I would say no. Absolutely not. I think Minnesota has been. It is. It's a high tax state. It's frankly hurting us in terms of jobs. We have raiding parties literally coming in every month from Wisconsin, Iowa and other places.

You just read the article in this morning's paper about the Iowa delegation coming in, basically telling us what? That they have lower commercial industrial property taxes in Iowa, telling us that they have lower workers compensation rates in Iowa, lower income tax rates in Iowa. And that hurts us.

So if we want to be careful about our job climate, then we have to be very careful about our tax climate. Government can't always come back and say that its problem is much more important than the problem of the people. If people sincerely felt that a tax increase were necessary, they should speak up now before the election.

GARY EICHTEN: All right. We have a caller on the line to speak with the governor. Hello.

AUDIENCE: Hi. Good afternoon, Mr. Carlson.

ARNE CARLSON: Good afternoon.

AUDIENCE: I'm from Apple Valley. And my question, I guess, relates somewhat indirectly to the budget, but I'm very concerned about the crime and, in particular, gang crime in the metro area. And I don't feel like that's necessarily just a metro area problem. I think there needs to be a statewide concern about it. And I guess, I'd be willing to put my taxes into something that prevents it.

As I understand it, if you don't get it, nip it in the bud, it just gets out of hand, and you can't do anything about it. And I'm wondering if you have any plans, if there's anything been done. I just hear about stuff going on in Minneapolis, but I don't hear about a statewide response to that. I'll wait for your answer.

ARNE CARLSON: No, I think it's a very good question. It's a very good concern. And frankly, I think you have heard a lot about it. And let me tell you what you have heard. When we talk about gangs, we're talking about an outcome. What we have tried to address from day one are, what can we do to prevent faulty outcomes?

And that's why we're so heavily involved in early learning education programs like Head Start, starting weeks that are dedicated to nonviolence, all sorts of programs that are geared to work with children prior to the time they enter K through 12 education, and then at the same time, trying to do everything we can to buttress up and direct K through 12 so that it really has genuine meaning for our students. Those are, frankly, the best avenues of approach that we can take. Once a kid is in a gang, then you've got a problem of where you have already lost the child.

And at that point, you've got to bring the community together with the police. They have to work literally hand in hand and make sure that the young people in those gangs understand that unless they change their pattern of behavior, they will end up in prison and they will cause considerable harm to other people. But we've got to give them the kinds of options, such as job training, and frankly, an economy that is oriented toward job growth so that they begin to see that there are other options and very meaningful options that are available to them.

GARY EICHTEN: Governor, you, of course, represented Minneapolis City Council and a state representative. Has the city gotten materially worse than, say, the early '70s? There are some people who suggest-- I know Gary Sudduth of the Urban League said the other day that for the first time, he really feels scared.

ARNE CARLSON: Well, I think there were many people in the mid 1960s that would argue that they also felt scared. There were a whole series of events that really hurt that city. You recall an enormous amount of violence, a lot of demonstrations. Buildings were burning. There were fires. Neighbor against neighbor, community against community. There were some very difficult years there.

Ultimately, the broad community, the political system, the police system all coalesced and made, I think, some very significant reforms. And I think those reforms have allowed Minneapolis to grow and prosper. And there's been a lot of gains. And now, we're beset by a new kind of a problem. And that's the gang problem.

And how much of that gang problem is caused by people coming from other states into Minneapolis Saint Paul? I truly don't know. But it's something that we're in the process of starting to identify, trying to get a hold of the numbers, trying to get hold of the origin, and trying to get a whole variety of ideas as to what can be done to deal with them.

GARY EICHTEN: Let's go to another caller. Hello.

AUDIENCE: Hello.

GARY EICHTEN: Yes.

AUDIENCE: Hello.

GARY EICHTEN: Yes, go ahead.

AUDIENCE: Governor?

ARNE CARLSON: Yes?

AUDIENCE: Yes, I'm given the fact that K through 12 is pretty much always gotten an increase in funding every year for their needs, and the University of Minnesota lately has taken a hit and not gotten an increase in funding, and in fact, at certain times, has not even been able to give faculty and staff pay increases, where public school teachers have always gotten a pay increase. In the next legislative session, are we going to hit public education harder than we have the university, or at least make them take as big a cut as we give the university on a percentage basis?

GARY EICHTEN: Governor is talking with John Gunyou, who knows all about finances here.

ARNE CARLSON: The problem you always get into is one spending system, one something from another spending system. I'd like to see all spending systems begin to understand that the problem, frankly, is their problem, and they can start to participate in the solution. Every spending system, without exception, basically says the same thing, that our function is of paramount importance, and therefore, we should be exempt from the reductions in growth.

Now, the university, in fairness to the university, they are the system that laid off 1,000 employees. And so I admire that. But at the same time, our state agencies were the ones who actually reduced the budget. So we've taken some fairly big hits ourselves. But he's right. The rest of the systems, frankly, have had growth. Their problem is they haven't had the kind of growth that they would like.

Now, the university also has a second problem. And that problem is it also had a significant reduction in the number of students. Now, what I've suggested to the university, and I've suggested to all of higher education, that they have to see the current crisis not solely in the context of today, but also tomorrow.

During the 1980s, for instance, their tuition increases were well over the rate of inflation. It's been extremely harmful to the students. And what they have to look is internal to themselves as to what kinds of changes are they willing to make to become more consumer-oriented?

We put out a report. We think it's a significant report. It was drafted by the Commission that was headed by Connie Levi, that basically pointed out that colleges and universities cannot be all things to all people, and they cannot expect to survive long-term in the current state. They're going to have to make changes. Every institution without fail is going to have to reform. And what that means is-- her recommendation was, for instance, that each of our college systems become centers of excellence in certain academic areas. That's one way to approach it.

Two, we have to drift away from this bit that we have to have a college within a certain number of miles of every student. We have about two to three times as many colleges as our neighboring states do on a per capita basis. So that kind of an overload, frankly, the taxpayer cannot expect to continue to fund.

And thirdly, and this is going to be painful, colleges and universities are going to have to look internal to themselves. They're going to have to examine their teaching load, their research load, how many hours of productivity they have, can they improve that productivity, and ask the same questions of themselves that we have to ask of our own state agencies. So there's a lot more here than just coming back and saying, can the state give us more money? Because there is not, as you can well imagine, a great support for a tax increase to continue business as it was.

Now with the university, they also have to have access to some audit reports that I think they'll find very helpful. And those audit reports suggest that a lot of internal reforms that they can start to put in place. But the problem is it involves painful decisions. And frankly, there's a lot of avoidance.

GARY EICHTEN: On K through 12, do teachers deserve a raise across the board? A recent report came out, indicating that Minnesota teachers are actually-- their pay is actually below average nationally. And I think that came as a surprise to a lot of people. Is there some way that the state should help boost that salary level up?

ARNE CARLSON: Well, the state has-- the biggest increase of all went through K through 12. And that's what your previous caller was complaining about. What he was basically saying, gee, why were you so good to K through 12 and why weren't you as good to us?

GARY EICHTEN: But they're still apparently falling behind, or at least the teachers are.

ARNE CARLSON: Yeah, it's a dilemma. We're going to try to be as good to K through 12 as we possibly can, but let me just focus on the overall problem. I wish somebody would call up and tell me what the solution is. We keep complaining that we're not spending enough.

GARY EICHTEN: Right.

ARNE CARLSON: But I haven't heard anybody call in and say, I'm not paying enough taxes. Minnesota is one of the highest taxed states in the United States, and we have to recognize that. And we have to be more competitive on the tax side than we are with other states. Otherwise, we're going to continue to suffer job losses. So we're going to have to make some very difficult decisions.

And that's why I suggest to every single spending system, focus on internal reform, internal productivity, what kinds of changes can you truly make to be more cost-efficient and more consumer-driven. Those are the bottom line questions. And I think we're trying to do as good a job as we possibly can. You have to remember, it takes a little bit of time to undo all of the harm of the 1980s.

I mean, I can tell you from the perspective of Democrat and Republican governors, the anger that they have towards the leadership of the 1980s is stunning. There, we had tremendous economic growth. Every program in Minnesota, if it moved or if it wiggled, we threw money at it. And then the leadership walked away. And the new leadership of the 1990s came in, and they got to deal with some horrendous problems.

I mean, you take Rhode Island, for instance. The new governor of Rhode Island in 1991 instantly had to close the banks because they had a credit crisis. A 10% layoff in all of his state employees and a 10% cut in salaries. Mario Cuomo of New York had to cut salaries, lay off over 20,000 employees. We, in Minnesota, frankly, have done probably the best job of avoiding salary cuts or massive layoffs. And the biggest hits that have been taken so far have been taken by my own agencies.

GARY EICHTEN: Let's go to another caller.

AUDIENCE: Hi. First, let me say that I'd be happy to pay more taxes. I'm a homeowner. I'd be happy to pay a little higher property taxes. And I'm an income earner. I'd be happy to pay a little bit more to pay for quality education and order in the streets, as it were. So there's one vote for higher taxes to pay for.

ARNE CARLSON: OK, very good.

AUDIENCE: But as I've said, with the National campaign, it seems like a lot that's going on is President Bush complaining about Congress unwilling to pass his measures. And I thought, gee, you're a governor who has to deal with a legislature of a different party. And I wonder if you were to reflect a little bit upon the need for compromise in a system that is both two-party system and has a separation of powers. Because it seems like--

GARY EICHTEN: OK, gridlock.

AUDIENCE: Yeah, either you're going to take all my packages as they are, or I'm going to veto them.

GARY EICHTEN: All right.

AUDIENCE: I think if it's economic packages, where he sent them to Congress [INAUDIBLE].

ARNE CARLSON: Yeah.

GARY EICHTEN: OK.

ARNE CARLSON: I think we have to be fair to all sides on that. And there's no question about it. There's an enormously high level of partisanship in American politics. I mean, you know that and I know that. And I think we would both prefer that be substantially toned down, and that there be a broader focus on the welfare of America.

But I would also argue that I'm not persuaded that it's partisanship that's causing congressional deadlock. I think what causes the gridlock overall is the enormous power and capacity of special interest groups to literally paralyze enough votes in Congress and legislative bodies to prevent any kind of action from taking place.

We tend to see single issue voters in the context of the abortion debate, but I would argue it goes well beyond that. Virtually, every group that I can think of has perfected the system of being able to control votes, controlling mailing operations to legislators, to congressmen, so that if they take any action, they're fearful that they will lose that segment of the vote.

The best thing that we could do, frankly, is to impose term limits. Limit congressmen and limit legislators to 8 to 10 years. And that way, they wouldn't have to worry about looking upon service in Congress or the legislature as a lifetime commitment and be more free to start to deal, if you will, with broad public service issues. But I suspect if you get a Democrat Congress and a Democrat president, et cetera, you're still going to see some gridlock. Don't kid yourself.

If there's any lesson we should have learned in Minnesota was, take a look at how difficult it was to pass health care in Minnesota. On one hand, you have polls that overwhelmingly showed Minnesotans wanted health care. There was probably nothing as popular as that. On the other hand, it was an extraordinary effort to scrape off enough votes for any bill on health care to pass.

GARY EICHTEN: Right.

ARNE CARLSON: Because the truth is, by the time you get through with a good bill, you've offended every group inside the medical system itself, and they do have considerable power. Likewise, with worker's compensation reform. Everybody deep down, Democrat, Republican, knows full well we have to reform the system, but getting the votes is extraordinarily difficult. Why? Again, because those people affected have considerable political power.

GARY EICHTEN: Now, when people hear that, they think, well, the legislators, you're suggesting legislators are selling their votes. Is that what you're saying?

ARNE CARLSON: No, I don't think it's a question of selling votes as much as it is driven by fear of defeat, fear that one special interest group will mail, direct mail, to all of its people. And if the election is close enough, that could tip the election. So why offend somebody? And the result is it's easier psychologically to vote no on something, because that's an easier vote to explain, than to take a risk and vote yes for something, which becomes very difficult to explain.

GARY EICHTEN: Let's take another caller. Hello.

AUDIENCE: Yes. Good afternoon, Governor Carlson.

ARNE CARLSON: Good afternoon.

AUDIENCE: Yes, I'm calling from Winona. And my question is, do you still intend to actively pursue further reductions in the workmen's compensation premiums? Even with the 16% reduction that business received this year, it's still a rather burdensome cost, particularly with small businesses.

ARNE CARLSON: I fully agree with you. I couldn't agree with you more. You bet your life we're going to pursue it actively, and that's why we want every single candidate for the legislature to speak out on that issue before the election. You take our rates, you're competing with Wisconsin. When we started out, prior to the passage of this last reform bill, we were about 32%, 35% higher than the costs were in Wisconsin. And even with a 16% reduction, we're still significantly higher than Wisconsin. So we have a lot of trimming to do.

And I'm glad you called on that issue, because I think there's an assumption that because we passed one reform bill, that's the be all and end all for the next 20 years. And no, that isn't the case. That's a system that we have to continuously reform to make sure that we are competitive with other states.

GARY EICHTEN: Governor Arne Carlson is waiting to take your call. Hello.

AUDIENCE: Hello, Governor Carlson.

ARNE CARLSON: Yes, good morning. Afternoon, my apologies.

AUDIENCE: Good afternoon. I was just wondering if you had any ideas about how we can stop the clear cutting going on in Northern Minnesota, in the forests, on public land.

ARNE CARLSON: Well, we're waiting now for a report that will come from a consultant. I believe it was a Finnish consultant that's coming to the Department of Natural Resources. And I believe that's going to be an issue in the 1993 legislative session. And basically, what it's going to deal with are the questions of supply, demand, harvesting techniques of harvesting, et cetera. So that's going to be dealt with in the months ahead.

GARY EICHTEN: Now, the caller on the line for the governor. Hello.

AUDIENCE: Hello.

GARY EICHTEN: Yes, go ahead. Hello.

AUDIENCE: Yeah, I have a couple of things. One is that a lot of us are willing to pay higher taxes for good government. What we're not willing to do is pay higher taxes for the lousy government we've been getting. That's the statement. Now, the question is, are you aware that Northern States Power Company is planning to build a new facility for dumping highly radioactive waste next to the Mississippi River? And if so, are you going to allow it to happen? And if not, will you investigate and try to stop it?

GARY EICHTEN: This is the expansion at Prairie Island.

ARNE CARLSON: You're talking about Prairie Island. The issue is not quite as simply as a gentleman has stated. There's much more beyond that than what he has talked about. The Public Utilities Commission has examined it, and they've examined it from the viewpoint of long-term public safety, long-term environmental, et cetera. And they have reduced the size of the storage facility. And that's their recommendation. And that will be the recommendation of this administration.

Now, that will ultimately-- as I understand, it go to the legislature, and we'll see what the legislature does with it. But it's an enormously complicated issue. It's just not a simple of good versus bad. But it's also going to get down to a long-term a question of where will Minnesota get its electrical supply.

GARY EICHTEN: And where will the waste ultimately be dumped?

ARNE CARLSON: Exactly. Now, the federal government had made a promise that they would resolve that problem. I can't remember when, but it was 2000 something. And of course, that promise has been broken. And you're right, it's the same old problem. We want the benefits. But on the other hand, no state wants to be the place that ultimately stores nuclear waste.

GARY EICHTEN: Another caller on the line for the governor. Hello.

AUDIENCE: Good afternoon, Governor.

ARNE CARLSON: Good afternoon.

AUDIENCE: I'm calling from Lake Elmo.

ARNE CARLSON: Yes.

AUDIENCE: State gasoline tax is distributed by our state Constitution, with 62% going for state roads, 29% for County, and 9% for city roads. I think this made sense in 1945 when it was incorporated into the Constitution. But many of us think that the counties are receiving way too much money now, and the city is way too little. Do you agree? Any chance for reform? Thank you.

ARNE CARLSON: The hardest thing to do with any formula is to deal with the winners versus the losers and the projected winners and the projected losers. Every year that I can remember, somebody has been trying to undo allocations on it without very, very much success. We had toyed with the idea of substituting instead of a per gallon tax, a sales tax on the overall thing, and then we would make some changes in the formula. But that did not work out.

I would say, yes, it's-- the tinkering will continue. I think that's an absolute given. Particularly though in all honesty, if it's based on legitimate engineering needs, I think that's what truly has to drive whatever changes are going to be made.

GARY EICHTEN: Do we have too many roads here in the state, Governor? A lot of people have suggested there are simply-- we're maintaining too many roads. It's eating too much-- eating up too much of that budget.

ARNE CARLSON: It shows up in the charts. When you compare us to other states, your observation is on target. We're basically a sparsely populated state relative to the size of our geography. So the answer to your question is that on one hand, we don't spend. If I recall correctly, in the back of my mind, we're about average in what we spend per mile, but it's the number of miles on a per capita basis.

But you know, if you live in Koochiching County, you want some good roads going into International Falls with good reason, Warroad needs them, Southeastern Minnesota, Southwestern Minnesota. So essentially, we're a rural state. Your big debate comes down to is to-- as this gentleman is saying, as to, who's going to pay? Is it going to be the county? The County would like to have the state pay, and it goes on like that.

GARY EICHTEN: 29 minutes before the hour. Governor Arne Carlson here in our studios. Another caller on the line. Hello.

AUDIENCE: Hello.

GARY EICHTEN: Yes, go ahead.

AUDIENCE: Oh, good afternoon, Governor.

ARNE CARLSON: Good afternoon.

AUDIENCE: I'm a dairy farmer, and I'm also one of those people who is willing to pay more taxes, both income tax, and--

ARNE CARLSON: There's a lot of tax increase people on the phone today.

AUDIENCE: And why? I really feel we get much more for our tax dollars in Minnesota than the tax dollars we send to the federal government. And I know for a fact that a dairy farm my size in Wisconsin, the property taxes over there would be three times what they are in Minnesota.

ARNE CARLSON: That's correct. That's the Best Buy that Minnesota has. You're absolutely right.

AUDIENCE: My question does relate to the dairy industry. As you know, and I'm sure many people in Minnesota know, the dairy industry has really been in decline here in Minnesota and in the Midwest, in general. And part of that is the way the federal milk marketing orders are set up. I know Commissioner [? Vidalin ?] has been doing some work in this area. I'm wondering if you have labeled-- have lobbied the Secretary of Agriculture to change the federal milk marketing orders so that Midwestern dairy farmers would receive the same price as--

ARNE CARLSON: Yeah, we're very, very sensitive to it. You bet your life we've lobbied. It's clearly to the best interest of Minnesota. And the current policy is frightfully discriminatory to places like Minnesota, Iowa, Wisconsin, et cetera. We would love to change it and we'll continue to work for it.

GARY EICHTEN: Another caller on the line. Hello. Go ahead.

AUDIENCE: Hi, Governor Carlson. Just a quick question. I was wondering if there was any way we can get state monitors here. Actually, what we need is really federal monitors here. It seems as though after the killing of the police officer, that the due process for Black citizens in Minneapolis is being violated. We have-- it's like we're under a state of siege. And the police officers, I mean, they're just totally violating the rights of Black citizens here.

ARNE CARLSON: Well, I mean, have you had the opportunity to sit down with the mayor and discuss this concern? Because it's obviously an important concern to you, but he is the individual. And I know he's very, very sensitive to that issue. He is the individual that it might be well for community leaders to sit down with and go over those kinds of concerns.

AUDIENCE: Well, our community leaders-- the ones community leaders that we have, most of the members have been appointed by the mayor and the police chief. And they're just not--

GARY EICHTEN: Not responsive enough.

AUDIENCE: Right. They're not responsive enough. It seems that mainly what they want to do is be on the front page of the newspapers, to be there shaking hands or whatever.

ARNE CARLSON: Well, if you try-- well, maybe it'll be well for you to try to sit down with the mayor or one of his staff members and go over your concerns. But that really is-- in all honesty, that's an issue for local government to try to resolve as best as they can.

If there's a flagrant abuse, then I believe the federal government has jurisdiction. And we certainly on the state level, will do everything we can to be helpful. But I do think it would be well for you to sit down with the mayor. I know he's very sensitive on that issue, and I think he'd appreciate hearing from you.

AUDIENCE: OK.

GARY EICHTEN: Thanks a lot. Another caller on the line. Hello.

AUDIENCE: Hello. Regarding term limits, if there were term limits, each representative and senator would be thinking about what their next job would be after their term limits were up. Wouldn't that put them more in the pockets of special interests than they are now?

GARY EICHTEN: Lame ducks and it kind of went moving on to industry.

ARNE CARLSON: I'll be honest with you, I can't think of any political reform that this country could make that would equal that of term limits. I mean, really start to think about what we're talking about here.

GARY EICHTEN: But why not let the-- why not let the voter-- if they've got a good representative, good state senator, good governor, for that matter, let them vote them in again.

ARNE CARLSON: All right. Here's the answer to that is because the legislature has the power to create districts itself. It's an inherent conflict of interest. So if you sit-in a safe political district, you have no fear of ever losing. You then get rewarded by becoming a chairperson. And so you have inordinate powers to decide legislative outcomes.

Now, on the other hand-- and take a look how we teach our children. We teach our children. We like competitive political politics. If you're in a legislative district where there is competition between the two parties, and nobody's job is secure, that person is punished, that district is punished, because it doesn't go on to become chairs. If you take a look-- if I recall right in my mind, but I may be wrong, if you go South of the Twin Cities, all the way South, I believe the whole Southern part of the state is only two or three chairs in the entire legislature.

GARY EICHTEN: It's because there's such turnover.

ARNE CARLSON: Yeah, and there's a disproportionate power given to other regions. It is not beneficial. When we teach civics to our children, we say we like competition, fairness, et cetera. But bear in mind who sets the rules. The legislative incumbents set all the rules. They decide the districts, they decide the campaign pain rules, et cetera. So it's not a totally open or fair system, and I don't think it's out of line to suggest that.

Now, our founding fathers spent a tremendous amount of time on the area of term limits. And they did not come down supportive of it, but they certainly didn't come down opposed to it. But I think you're finding a lot of Democrats and a lot of Republicans are coming to the conclusion, if you truly want to change the system, make it more responsive and much more equitable than it currently is, term limits is the way to go.

GARY EICHTEN: Another caller on the line. Hello.

AUDIENCE: Yes. Good afternoon, Governor Carlson.

ARNE CARLSON: Good afternoon.

AUDIENCE: I'm calling from Minneapolis. My question is, do you think the free trade agreement between the United States and Mexico would help the Minnesota economy? And has the free trade agreement between Canada and the United States helped the Minnesota economy?

ARNE CARLSON: Well, let me answer the Mexican side, if I may. My response would be yes. And the reason is this. First of all, particularly Mexico City is very much in need of electronic equipment related to pollution. It has terrible air pollution problems in Mexico City.

They're going to spend about $100 million on purchasing of that equipment. And we're reasonably confident that much of that can come into Minnesota, because that happens to be one of our strong suits. Medical technology is another area where we win big, and we win big in Minnesota on that one.

Down the line-- it's not going to be immediate. But down the line, Mexico is going to engage in a lot of agricultural reform. And believe me, the more markets that are opened up, the more our farmers benefit. So I'd say on balance, Minnesota is a winner. The states that tend to be most nervous about it are the ones that have fairly old manufacturing bases, and that tends not to be a problem in Minnesota.

On the Canadian side, I'm not so sure I can intelligently answer that question because I was-- I've been involved somewhat on the Mexican side, but I came into office after the Canadian agreement was reached. But my understanding is that it has been beneficial to us.

But there are some distortions in that relationship, largely because of the strength of the American dollar and the value added tax in Canada, which has caused vast numbers of Canadians to come over the border and purchase goods and services in the United States. And so we've reaped the benefit of that. But I believe, on balance, it's fair to say that the agreement is probably beneficial to both sides.

GARY EICHTEN: Governor Arne Carlson, another caller is on the line. Go ahead.

AUDIENCE: Yes. I'm calling from Grand Portage. And I just wanted to thank the governor for declaring Jimmy Hendrickson Day this summer when we honored their retiring executive director of the Reservation Business Council in Grand Portage. But I would like to ask the governor if he plans to visit our reservations in person, to get a feeling for the grassroot developments. We hear a lot in the media about hunting, fishing, gambling, but who's going to try to relate on a higher echelon of government with our Native Americans?

ARNE CARLSON: Yeah, I think that's a very fair question. I did visit some reservations when I was State Auditor, and I will do so also as governor. I thank you so much for the invitation. And I'd be delighted to take you up on it.

GARY EICHTEN: Governor, as you know, quite a controversy over gambling, the Indian run gambling casinos. And a lot of the bars, restaurants want a shot at video gambling now as a way to hold their customers. I know you're opposed to an expansion of gambling, but does that seem like a reasonable exception to the rule?

ARNE CARLSON: I'm so saddened that Minnesota opened the doors to gambling, I really am, because it's just become a Pandoras Box. The solution to the problem is always seen as more expansion, more expansion, more expansion. And I don't know when we're going to reach the point of saturation. And I think the public, frankly, is fed up with it.

I think it's going to be very difficult for this legislature in 1993 to come back and pass any kind of an expansion. I don't see that happening. I could well be wrong. And I know the arguments are persuasive. I know they have tremendous validity, but I think the mood is, frankly, to go the other way to start constricting gambling.

GARY EICHTEN: Another caller on the line. Hello.

AUDIENCE: Hello. My name is Norman Cattell. I'm from Sherburne County. I'm calling regarding the state finances and some statements that were made. I think one of the main reasons for increased state spending is the fact that federal grants to the states were sharply decreased in the '90s. Also, the federal government supplies fewer citizen services. So therefore, the states have had to meet citizen needs and therefore increased expenditures. And this has gone on in virtually all the states.

And one other area on alleged high tax, Minnesota being an alleged high tax state. I think the differences in ranking are frequently $10 or $20 between the states. And I've seen figures that expenditures in Minnesota are slightly above the national average, about $300. And I would say snow removal may well account for much of a difference. I think there's been an awful lot of overblown rhetoric from the Republican Party on this.

GARY EICHTEN: All right. Thank you, sir.

ARNE CARLSON: Well, I'll tell you-- let me just-- I'll answer your two parts of your observations, if I may. Your first observation is that the overspending of the '80s was largely due to the withdrawal of federal funds to state governments. There's some truth to that. But in your own words, slightly overblown.

If that were the driving cause of Minnesota's problems, then why was Minnesota's growth in expenditures substantially higher than 48 other states, including, by the way, Arkansas? So I would be very careful on that, because frankly, the problem goes well beyond that. The truth is, Minnesota did engage in a tremendous growth of expenditures on all levels of government, and it's gotten us into a lot of trouble in the 1990s.

The second part of your question, relative to taxes, if you sincerely feel-- and I don't want to question your sincerity, but if you do sincerely feel that a tax increase is necessary in order to close this gap in expenditures, then I think it would be well for some of your legislators on your side of the political aisle to stand up publicly and say, yes, they will support a tax increase. So far, I haven't heard one person come forth and say that.

And then I look at Bill Clinton. And I happen to like Bill Clinton. I think he's a very nice person. And his ads are basically how Arkansas leads in job growth and has very, very low taxes.

GARY EICHTEN: Another question for the governor. Hello. You're on the line.

AUDIENCE: Yes, I'm calling from Austin, Minnesota.

GARY EICHTEN: Yes.

AUDIENCE: Two things, Governor Carlson. One--

GARY EICHTEN: Hi.

AUDIENCE: Again, I don't-- I'm in favor of raising taxes, if we get some responsible government. And I'd love to see a legislature or political figure actually say and do what needs to be done. Second, I'm a little disturbed over the park department's DENR, some of these County and state agencies that had to lay off people. And we have people out that are manicuring the Interstate roads, doing what I feel is rather unnecessary work.

GARY EICHTEN: Questioning some of the priorities.

AUDIENCE: Yeah, we're down to our last dollar. And we got guys out mowing grass.

ARNE CARLSON: Well, you could be right. There's always been a problem of transportation departments and states, largely because they have dedicated funds. To some extent, I think you can make the argument that they're the Pentagon of state governments. But the result is that, yes, there are some cutbacks in places like the Department of Natural Resources, and there may well be some expenditures in the Department of Transportation that perhaps are not warranted.

And in fairness, though, to the new administration, in fairness to Commissioner [? Dean, ?] who I think has done an extraordinary job, they've already started reviewing every single expenditure that they're involved in. And two, we as an administration have put together the Core Commission, which is a partnership between government and private business, evaluating all of our expenditures so that we can start to focus on how we can become much, much more cost-efficient.

So we are driving those kinds of reforms through the system. And the third part that we're trying to drive through the system is a focus on quality, making sure that we are client-oriented, and not trying to solve every problem by pretending that the status quo is where it's at.

GARY EICHTEN: Another caller.

AUDIENCE: Hello.

GARY EICHTEN: Yes, go ahead.

AUDIENCE: I'm one of those people who don't think that we need to raise taxes. We pay enough.

ARNE CARLSON: Thank you.

AUDIENCE: Seeing that you feel the same way, what would be your areas that you would cut since we have a deficit confronting the next legislative session? And what would you protect from cuts?

ARNE CARLSON: OK, what I'm trying to do now, frankly, is to get the public and particularly legislative candidates, to focus on the problem and to give some indication to the public as to whether or not they're going to go the tax increase route or whether they're going to reduce spending. And I've made my position clear. The moment I get into things like naming what I'm prepared to reduce or what growth I'm prepared to reduce growth in, that tends to become the bone of controversy.

For instance, when a couple of weeks ago I mentioned in a news story that I was willing to put state hospitals, the regional treatment centers on the line, bingo howls of protest all over. Today's newspaper has a big editorial from the union leader saying how could the governor be so cruel to want to close down hospitals, et cetera. And it takes away the orientation from focusing on the problem.

Right now, we have to see the problem in the context. Can we live with an 11% revenue growth over the next two years? If the answer is yes, then we have to make sure that our expenditures are kept at that level. If the answer is no, we want to increase taxes, fine, then we have to come public and tell the public very honestly that I'm running for public office. And if you elect me, I'm going to vote to increase taxes. After that, we can fight about which taxes to increase, and we can fight about, and we will, over where our spending priorities are going to be.

GARY EICHTEN: Now, Governor, I know you're a Bush man, of course, on the federal presidential level, but doesn't seem like any of the candidates, except perhaps for Perot, have seriously addressed the federal budget problem, $4 trillion and growing all the time.

ARNE CARLSON: Yeah, I'm very, very adamant on the deficit question. I think your observations are accurate. I was very impressed with the bipartisan report that was put together by Congress. I thought that report was very, very much on target. The parole report is a very painful report, but at least he's got a focus on the deficit question.

I think both Bush and Clinton are going to have to address in the remaining weeks some of the specifics as to where they're going to make their tough choices. That's precisely what the election is about. So yeah, I would agree. I think that both candidates have talked more about where they would like to spend additional money, and a little too little on what kind of painful choices are we going to have to make so that we do have an equitable and a sensible and a job growth future.

GARY EICHTEN: How long do you think the country can carry on at this level before it basically collapses, unless without some significant bad medicine here?

ARNE CARLSON: Well, what you're starting to hear very early on from some of the financial markets is the possibility that some of the foreign buyers will not show up and buy anymore, causing very sharp increases in interest rates. And that would have the same effect on the economy as the oil crisis of 1973 did. It would be a very painful shock that goes through the system.

So I think we have to sober up, frankly, right now. I think it has to start with whomever is elected president in January has to come in March with a budget that really reflects a willingness to at least commit us over the next five or six years to very significant lowering of the nation's deficits. And it is going to be difficult because what happens is all the spending systems will be howling. They'll be screaming and yelling. But the only other option is to watch us slowly go under and then tell our children, the problem is yours.

GARY EICHTEN: 10 minutes before the hour. Governor Arne Carlson is here taking your questions. Another caller on the line. Hello.

AUDIENCE: Hello. I'm calling regarding the long-term care system. And as somebody in my early 30s and is projected to spend as much time caring for my parents as my children, I'm kind of concerned about that area if there needs to be massive cuts. And I know that there's some real innovative things going on, and I'm hoping that because of those things being new, they're not the first things to go.

ARNE CARLSON: Now, I think it's a very fair question. We put online some of those innovations that you're talking about. So obviously, we're very much committed to them. They're also, by the way, much more cost-efficient. So we are going to-- as I indicated at the outset of the show, we're going to push as much reform through the system, frankly, as we possibly can.

There are an awful lot of ways in which you can improve services to clients and to students, and at the same time, lower costs. I mean, an efficiency ought not to be seen as detrimental to the customer. It can be very beneficial. So to answer your question, we're going to continue to focus on those kinds of creative means that will allow us to perform a high quality level of service without having to have those increased costs.

GARY EICHTEN: Let's go to another caller. Hello.

AUDIENCE: Yes. Governor Carlson?

ARNE CARLSON: Yes.

AUDIENCE: Well, good afternoon.

ARNE CARLSON: Hi, how are you?

AUDIENCE: Good. Governor Carlson, I'm calling from the Hibbing Chisholm area. And I'm curious about what's going on with the mines up here. We're going to lose one mine completely here for about three months, and we've got the others that are cutting back pretty drastically. Is there anything being done to help the mines, or are they just going to let them go and try to go to alternative businesses? And with that, I'll let you go. Thank you.

ARNE CARLSON: Yeah. Well, what we've been trying to do, and we need some help from your legislators up there, is we're trying to create an environment in Minnesota that's much more positive towards job retention and job growth. Worker's compensation reform, for instance, was very important to us. Lowering the commercial industrial property taxes was very important to us. We took a very hard look at the severance tax and recommended there be some changes in that. So that all sorts of changes that we're very amenable to.

But I'll tell you, we need-- in all honesty, we need some help from your legislators there. Because on one hand, you can't be anti-business. On the other hand, pro-jobs. We've got to understand that there's a real relationship between the two, and we'd like to form that partnership. But we're going to do everything we possibly can to be helpful, to make sure that those jobs remain and prayerfully, that they will expand.

GARY EICHTEN: Another caller. Hello.

AUDIENCE: Hi, there. I have a question for the governor about state environmental agency reorganization. I was wondering if you could talk about that a little bit. We had some proposals in the legislature last year, and I wondered what was in the books for this year, either administratively or legislatively.

GARY EICHTEN: I guess rolling together the PCA and the DENR.

ARNE CARLSON: What you saw. Yeah.

GARY EICHTEN: That's sort of thing.

ARNE CARLSON: I think what's going to happen is this. There will be some consolidation, but we will not consolidate the regulator from that agency that's involved in promoting. That would be a frightful conflict of interest. So the PCA will retain its own separate identity, the Department of Natural Resources also.

The questions will be focused on some of the smaller groups, such as the EQB, et cetera. We have asked the Corps Commission to look at all areas, and this happens to be one of their focal points, and they'll be making their recommendations sometime in early January. So that, again, will be coming into the 1993 legislative session.

GARY EICHTEN: Another caller. Hello.

AUDIENCE: Yes. I have a question for Mr. Carlson. I'm wondering on public housing, it seems like if you have over three kids, it's really hard to find a home right now, especially if you're in a lower income. And I'm wondering what you have planned to take care of this problem.

ARNE CARLSON: I just heard something about that last night. You're quite right. Your comment was related to if you have over three children, is that correct?

GARY EICHTEN: Yeah.

ARNE CARLSON: It's just difficult to find housing. Is that right?

AUDIENCE: Anywhere.

ARNE CARLSON: Yeah. Let me do this. Let me give you a-- what I'd like you to do, if you will, is call the Housing Finance Agency or somehow give me a call at the office and we'll get back to you on and find out if they have any special plans. When I was on the board of the Housing Finance Agency, there were some projects that they were involved funding for larger-sized families. But I honestly can't tell you where those projects are located. So if you can give me a call at the office, we'll check it out and get back to you. Is that OK?

AUDIENCE: That's OK. Thank you.

ARNE CARLSON: All right. Thank you.

GARY EICHTEN: Let's take another call. Hello.

AUDIENCE: Hi. I just have another question about the university and spending. What you said earlier about that they need to try and increase their efficiency, and that makes sense, but what is done to force the university to do this? They seem like a huge institution that mostly raises tuition or lays off people to cut the costs, which is kind of an easy measure to do. And one specific example, since I've been here the last 10 years, I've seen at least seven new buildings being constructed. And if the enrollment is declining, that seems a little bit odd.

ARNE CARLSON: Well, what the University of Minnesota has, they play a multiple role. I mean, they're a research facility, they are obviously a teaching facility, but they're also a graduate facility. And they also provide some very direct services to people via their hospitals, et cetera. So it's a very complicated structure.

So some of the capital improvements that you're seeing on the campus right now, probably relate to one of those three areas. I know, for instance, that there is a new building related to health that's going up. One of them, I think, is the refurbishing of Williams Arena. So those kinds of facilities are being built and, frankly, they should be built.

The problem that the university has is, frankly, one of internal management. And that's been a problem, I think, probably ever since you and I have been alive. And at some point, that management system has to really pull together, become centralized, and in all honesty, start to make some very difficult decisions.

The observations I made before were, I think, very accurate. They've got to review the audit reports, and they've got to decide to eliminate some of the cost inefficiencies that they have in their system. Two, they got to start to look internally to their own productivity. And three, they got to really sit down with students and become much more student-oriented and begin to figure out what services are they going to provide to the students.

And fourthly, we've all got to realize, and this goes for all of higher education, that we've got to take a look at that report by Connie Levi and decide, can we all afford to be all things to all students, or should we each bite off a hunk of excellence here and a hunk of excellence there? Am I cut off? And on that basis, start to reorganize.

But I think you're going to find that the university is going to reorganize. I think you're going to find that President [? Haslam ?] is receptive towards reorganization. But on the other hand, I do sympathize with him because these are very difficult choices that they have to make. And I think they will make them.

GARY EICHTEN: We've got just a couple of minutes left to go. One more caller on the line.

AUDIENCE: Thank you. I'm calling from Cass Lake. I've enjoyed your comments and the questions that have been asked.

ARNE CARLSON: Thank you.

AUDIENCE: Mine is about energy efficiency. I was wondering what plans the state has to encourage energy efficiency in the educational institutions, the state offices. I've noticed that a lot of the money that's spent on education and many of the programs in the state actually goes down the tubes in terms of energy. I was wondering if you were planning to encourage co-generation, increasing the error factor in buildings and that sort of thing.

ARNE CARLSON: That's a very fair question. The state really wrestled with this. I'm trying to think of when. But several years ago, and significantly, if I recall, correctly upgraded the energy standards for all governmental buildings, state and local. And I know that Chris Sander with the public service agency has been wrestling with this problem and really pushing.

And in this particular case, if my recollection was right, I think it was NSP and Minnegasco towards more cost efficiencies inside the overall energy systems. I believe that the public service agency is pushing very, very hard on that issue. If you have some specific ideas that you think that they should follow, please drop Chris Sander note. I think she'd very much appreciate your input.

GARY EICHTEN: Governor, we're just about out of time. Quick, basic yes or no answer. Are those air bases, the maintenance bases, going to be built in Duluth in our lifetime?

ARNE CARLSON: We'll know within probably 45 days.

GARY EICHTEN: 45 days when the Supreme Court issues its ruling, is that what you all--

ARNE CARLSON: That plus possibly some other developments.

GARY EICHTEN: So there's new news on that front?

ARNE CARLSON: We'll find out.

GARY EICHTEN: Thank you, Governor.

ARNE CARLSON: Well, I thank you. That's been very enjoyable. You're very kind.

GARY EICHTEN: Glad you could come in.