DES MOINES — Gov. Terry Branstad urged legislators Monday to balance their funding expectations with budgetary realities as they begin the process of resolving partisan differences on school funding, tax policy and other issues that will shape fiscal 2017 spending.
The first challenge for the split-control Legislature is to carve out the largest piece of next year’s budgetary pie by deciding how much new state money K-12 schools will get for their operations.
Majority Republicans who control the House voted 55-43 after Monday’s floor debate to give public schools an extra 2 percent in state aid, or nearly $81 million, in fiscal 2017 — a level below the GOP governor’s proposed 2.45 percent increase and halfway to the 4 percent boost that majority Senate Democrats favor.
Democrats who hold sway in the Senate are expected to reject the House position, and the issue is expected to end up in negotiations.
“We recognize that 2 percent is not a big increase but, when you consider the financial realities that currently exist, it is an appropriate number,” said Rep. Ron Jorgensen, R-Sioux City, who managed Senate File 174 during Monday’s debate.
He said that $134 million that would go to base school budgets and the third year of the state’s education reforms would take up 88 percent of the new money that House Republicans believe is available to spend next fiscal year.
Minority House Democrats challenged GOP revenue projections in arguing against a 2 percent increase they said would short change kids and raise property taxes for K-12 schools to make ends meet in fiscal 2017.
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“This level of funding continues to tighten the chokehold we have put on our public schools,” said Rep. Patti Ruff, D-McGregor, ranking member of the House Education Committee that Jorgensen chairs. “Let us put a stop to this and prove to Iowans that public education is our top priority again.”
Another fiscal divide emerged Monday when House Republicans parted ways with Branstad in supporting a plan to couple state income tax laws with federal changes and make them retroactive to the 2015 tax year — which carries a nearly $96 million price tag. House Study Bill 535 cleared a subcommittee and the full House Ways and Means Committee by a 23-1 vote.
In his budget proposal, Branstad recommended coupling much of the state’s tax code with federal changes for the 2016 tax year at a cost of about $49 million, but he did not seek to make the changes retroactive.
Sen. Joe Bolkcom, D-Iowa City, chairman of the Senate Ways and Means Committee, said Democrats would review the House approach but added “we think the governor has made a proposal that is probably more manageable, given the state’s budget.”
Rep. Zach Nunn, R-Bondurant, said coupling state and federal tax changes “best rewards” small businesses for making investments.
“We’ll start putting the puzzle pieces together on the board,” said Nunn, noting the state money to make tax coupling retroactive for 2015 would have to come out of the existing budget year. “Education is going to be a huge piece. That’s the biggest chunk of money we’re going to spend. But this is right up there with it. I don’t see us going back and trying to take money out of (taxpayers’) pockets on this.”
During his weekly news conference, Branstad told reporters full tax coupling would adversely impact school funding immediately and fiscal sustainability into the future based on his five-year projections.
“What I’ve been told is that it basically would wipe out the opportunity, or dramatically reduce, our ability to provide additional funding “ for schools, he said.
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“That’s one of the reasons that I recommended what I did. Sure, I’d love to couple. But we didn’t have the money to do it, so we’re coupling where we can,” he said. “We feel that impact on the budget would make it impossible to meet the goals that we have for education funding and elsewhere.”
The same was true, Branstad said, of a request made by Iowa Agriculture Secretary Bill Northey for $500,000 to help state and animal agriculture officials take proactive steps to be able to deal quickly with future animal health emergencies like another bird flu outbreak.
Branstad did not include it in his proposed budget.
“I had to really stretch and not do a lot of things,” he said, “in order to recommend the 2.45 percent of supplemental state aid, in addition to the $53 million that teachers are going to get for teacher leadership and compensation.”