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Iowa Politics Roundup: Branstad Estimates 2012 State Deficit Over $600 Million PDF Print E-mail
Commentary/Politics - Iowa Politics
Written by Lynn Campbell   
Friday, 07 January 2011 14:09

Governor-elect Terry Branstad and incoming Department of Management Director Dave Roederer said Thursday that state expenditures are expected to exceed revenues by $605 million in Fiscal Year 2012 – more than twice as large as the gap projected by the nonpartisan Legislative Services Agency.

“We’ve got a big challenge,” Branstad said. “A lot of one-time money has been used for ongoing expenses. We want to stop what we consider to be bad budgeting practices and really get us back into an affordable, sustainable way to deliver the best quality services in the most efficient and economical way that we can.”

In a budget presentation Thursday at the Capitol to reporters and editors, Roederer said the projected budget “deficit” would be $1 billion for Fiscal Year 2013, nearly $1.2 billion for Fiscal Year 2014, and $1.3 billion for Fiscal Year 2015.

“We can’t keep doing business as usual,” Roederer said. “It’s unsustainable. We’re going to have to change that.”

The Legislative Services Agency (LSA) on Thursday said the estimated budget gap for Fiscal Year 2012 is $263 million, which is below the average spending gap of $424 million over the past decade. The gap grew over the past three years during the recession and topped $1 billion in the current fiscal year.

When asked about the difference in estimates, Dave Reynolds, a senior legislative analyst with the LSA’s fiscal services division, said it’s probably due to the $327.4 million that would transfer back to the state’s general fund once its rainy-day funds are filled.

“That’s correct,” Branstad said. “We have already talked with the new speaker of the House and Republican leadership in the House, and they believe that money should go to reduce taxes.”

Branstad said the excess from the rainy-day funds is one-time money left over at the end of the fiscal year. Under the new Republican leadership, that money wouldn’t be transferred back to the general fund but would instead be used for tax relief.

Both Branstad and Roederer on Thursday criticized Governor Chet Culver for ordering an $84-million budget reduction this week (halfway into the fiscal year) as part of the state’s government reorganization and efficiency efforts.

Roederer said the Department of Human Services was expecting to have to come up with $14 million in savings, but found out that its share is actually $26 million.

“This is the kind of surprises that we don’t want to ever happen in the future.” Branstad said. “We want to get stability and predictability in budgeting, and we’d much rather under-promise but then be able to be sure we can deliver what we say we’re going to do.”

Culver ordered $83.7 million in efficiency savings from the state’s general fund, which is the last part of a $300-million reform and reorganization effort for fiscal year 2011.

“We have made an effort to allocate the $83.7 million among state agencies and departments in a serious, targeted, thoughtful manner,” Culver said. “Rather than impose an across-the-board reduction, we have allocated these savings based on each department’s proposed savings under the State Early Retirement Program. In addition, we have identified efficiencies from Executive Order 20 and SF 2088 for such items as consolidation of cell-phone contracts, reduced subscriptions, improved centralized purchasing, better vehicle-fleet management, [and] negotiation of information-technology contracts ... .”

Culver also ordered that some funds be put back into appropriations for the departments of Corrections, Human Services, and Safety, as well as several smaller agencies. Culver also ordered the Department of Management to transfer $5 million from the Cash Reserve Fund.

House GOP Proposes $500 Million in Budget Cuts

Iowa’s voluntary preschool program for four-year-olds, the Iowa Power Fund, the Grow Iowa Values Fund, the Iowa core curriculum, and money for passenger rail would all be eliminated under a plan for $500 million in budget savings over three years released by Iowa House Republicans.

In other changes under the budget-cutting plan, state workers would be charged for health insurance, the Iowa Communications Network would be sold or leased, the state’s mental-health law would be repealed, and the state would end all benefits to illegal immigrants.

The Taxpayers First Act would also:

• Create a Tax Relief Fund to capture any remaining general-fund surplus and direct it back to taxpayers;

• Eliminate Just Eliminate Lies, Quitline Iowa, and other smoking-cessation efforts;

• Eliminate $8.5 million for rail projects, returning funds to the original source;

• Eliminate $30 million for sustainable communities and heated sidewalks; and

• Cut Area Education Associations by $10 million, having them use reserves or make cuts to fund the difference.

House Study Bill 1 will be the first bill approved this year on the floor of the Iowa House. Republicans plan to enact cost savings in the Fiscal Year 2011, 2012, and 2013 budgets.

House Democrats contended that the plan saves less money than Republican pledged. “After promising to save $200 million to $300 million in the current fiscal year, Republicans have dramatically missed their own goal by several hundred million dollars,” said House Minority Leader Kevin McCarthy (D-Des Moines). “The plan outlined by House Republicans today stunningly spends $23 million more from the state’s general fund than was approved during the 2010 session. Including savings outside the general fund, the plan only saves a paltry one-third of 1 percent.”

Citing an analysis from the Legislative Services Agency, McCarthy said the Republican plan also rewards big tobacco companies by ending smoking-cessation efforts that help Iowans kick the smoking habit.

“Unfortunately, the Republican plan puts our kids and small businesses last,” said state Representative Tyler Olson (D-Cedar Rapids), who is ranking member of the House Appropriations Committee. “I’m extremely disappointed that the largest cost-saving measure suggested by Republicans is to kick four-year-olds out of preschool next year. Republicans also eliminated an effort to help small businesses expand and create new jobs. House Democrats will work with Republicans to make state government more efficient, but we won’t do it at the expense of hard-working families and small businesses.”

Advocates of state programs identified as targets for budget cuts are counting on the Democrat-controlled Iowa Senate to prevent the cuts, and hope they can still educate lawmakers about the value of their programs.

“It’s one thing to propose and another thing to get it passed,” said former Iowa House Speaker Brent Siegrist, a Council Bluffs Republican who’s now director of state services for the Iowa Area Education Agencies. “I think you’ll see the House pass budgets that are very, very strict. They know [that] ultimately, they’ll have to deal with the Senate.”

Republicans will control the Iowa House 60-40 this year, but Democrats will retain their majority with 26 seats in the 50-member Iowa Senate. Any proposal would have to be approved by both chambers before reaching Branstad’s desk.