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Iowa Politics Roundup: Branstad Sees Budget Cuts on the Way PDF Print E-mail
Commentary/Politics - Iowa Politics
Written by Lynn Campbell   
Friday, 10 December 2010 14:40

Governor-elect Terry Branstad says budget cuts in the upcoming year will include reductions in the Iowa governor’s office staff and security detail, and he will ask other state agencies to make similar cuts.

Branstad did not specify the number of positions that will be eliminated in his office, but said that he would have only one legislative liaison instead of two. He also said he would likely not fill some deputy-chief-of-staff positions. He said reducing his security detail will allow the state to put more state troopers on the road. He also said he’ll lead by example with a goal of cutting the cost of state government by 15 percent over five years to align state spending with ongoing revenues.

House Speaker-elect Kraig Paulsen (R-Hiawatha) reiterated that a deappropriations bill making cuts to the current fiscal year will be among the first in the 2011 legislative session, saying every government agency will be required to justify the money it receives. The starting point will be cuts proposed by House Republicans over the past two years. Paulsen said he’s heard evidence of Medicaid dollars going to some who are ineligible because the Department of Human Services has not been doing its due diligence.

“We’re very open to making cuts in state government,” said Senate Majority Leader Mike Gronstal (D-Council Bluffs). “I think we showed that last year when we did about a quarter of a billion dollars. We’ll certainly look at other suggestions this year.”

Gronstal said Democrats support better enforcement of Medicaid dollars to make sure they only go to those who are eligible. However, he said there aren’t easy answers to curb Medicaid costs. “The reality is: This is a challenge for state government,” he said. “For the newly eligible people on Medicaid, it’s a disaster in their lives and we’re not going to double that disaster by throwing them off the rolls.”

House Minority Leader Kevin McCarthy (D-Des Moines) predicted that additional cuts will be a greater challenge than anticipated. McCarthy said it’s easy as the minority party to talk about what you want to do, but the majority party must govern and abide by the fiscal impact as determined by the nonpartisan Legislative Services Agency.

Branstad will spend the holidays holding regional budget and policy hearings across the state to gather information as he crafts his proposed budget due by January 31.

The budget hearings will be held the week before Christmas and the week between Christmas and New Year’s Day, Branstad said. He’s also working with the Iowa Newspaper Association and Iowa Broadcasters Association to hold a session January 6 to educate people about the spending process.

State Revenue Committee Boosts Budget Estimates

The Revenue Estimating Conference (REC) has bumped up its net general fund revenue estimate for Fiscal Year 2011, to $5.791 billion from its October estimate of $5.757 billion.

The REC declined to take into account the positive impact an extension of Bush-era tax cuts at the federal level would have on state revenue, instead deciding to make its Fiscal Year 2012 estimate based on those tax cuts not being extended.

The Legislative Services Agency estimates the tax cuts would have a positive impact on Fiscal Year 2012 net general fund receipts to the tune of $147 million, as the lower federal taxes would mean more money coming to the state due to federal-deductibility laws.

Incoming House Appropriations Committee Chair Scott Raecker (R-Urbandale) said he’s glad the REC didn’t add to the Fiscal Year 2012 estimate based on the likely extension of federal tax cuts.

“That’s a conservative viewpoint,” Raecker said. “You should not be estimating based on things that may happen; it should be on the best knowledge you have, so I really commend the committee on taking a conservative approach.”

Branstad Outlines Plans to Cut Corporate, Commerical Property Taxes

Branstad found a receptive audience to his tax proposals when he spoke before members of the Iowa Taxpayers Association at the group’s 75th-annual meeting and tax symposium at the Sheraton West Des Moines.

Branstad outlined how he planned to cut the corporate income tax from its top rate of 12 percent to 6 percent, reduce the commercial property tax from 100 percent to 60 or 65 percent over four or five years, and have no corporate income tax for the first three years for true start-up businesses.

“I hope we can move forward on some of his proposals,” said Ed Wallace, president of the Iowa Taxpayers Association.

Branstad acknowledged that it could cost a half-billion dollars over five years for the state to help local governments with revenue that’s lost as it phases down its commercial property tax. But he said local governments actually saw an increase in revenue from new commercial development when the state got rid of the tax on machinery and equipment.

“The state of Iowa, with a budget of over $6 billion, could indeed provide that much in terms of assistance to local governments,” Branstad said of the half-billion-dollar estimate. “But part of that can also be offset by the growth that comes from the new commercial property that comes on board.”

Wallace agreed that there would be a $500-million price tag over four or five years to make those commercial property tax changes. “I think it’s doable, but you’re going to have to see consolidation of some government services on the local level and also at the state level,” he said. “Those are hard decisions, and it appears that Governor Branstad is going to make some hard decisions.”

Branstad also said he plans to cut in half the percentage increase possible on agricultural and residential property.

There’s currently a 4-percent limit on how much taxes can be raised for those two classes of property. Branstad said that should be lowered to 2 percent to make sure that the lowering of commercial property taxes is not done at the expense of other classes of property.

“That would still give some growth to local governments, but I think we need to protect local property taxes,” he said. “I want to not only reduce the commercial property taxes, but I want to protect the homeowners and the farmers as well.”