Iowa state auditor praises, criticizes Branstad budget plan

State Auditor David Vaudt gave high marks Monday to Gov. Terry Branstad and the split-control Legislature for shrinking a “spending gap” to $139 million and improving the state's fiscal position, but he expressed concern that they are not adequately funding employee pay and retirement benefits that might portend future budget problems.

Vaudt, who endorsed Branstad during the 2010 campaign, said the governor's fiscal 2013 spending plan take a long-term view in financial planning that has been absent in past years – an approach that has helped lower a projected $764 million gap in fiscal 2013 between spending commitments and revenues flowing into the general fund by 82 percent to an estimated $139 million spread in next year's proposed state budget plan.

“Keep in mind it took us several years to dig that $764 million hole, so it's going to take a few years to climb back out of it,” the auditor told reporters during a Statehouse news conference. “We're not going to be able to create miracles, but we do need to say where do we want to head and we've got the train headed in the right direction and we're substantially down the track because of the changes that were made.”

Vaudt said he is concerned that the governor and lawmakers who share control of the Legislature – Republicans hold a 60-40 edge in the House and Democrats a 26-24 majority in the Senate – are continuing to play tricks with budget numbers, such as using $59 million in one-time sources to fund ongoing expenses that require “notwithstanding” language that Branstad pledged to veto on the campaign trail, but has since agreed to as part of the process the governor said Monday is necessary sometimes to reach compromise.

While legislative spread sheets show general fund spending at slightly over $6 billion, Vaudt said the “apples-to-apples” comparison of spending to revenues reveals the current general-fund appropriations total $6.446 billion through June 30.

Other concerns that Vaudt cited were the fact that salary and benefit increases provided for state employees are not funding in the governor's fiscal 2013 budget plan – marking the fourth straight years that agencies have been directed to cover those costs with internal savings, layoffs or other methods. The auditor feared that continuing trend “will eventually affect services” and he recommended that future decisions to grant pay or benefit increases should be accompanied by enough money to funding fund them.

The state auditor expressed concern that the Iowa Public Employees Retirement System (IPERS) account has a projected long-term liability of $5.7 billion, which is subject to stock market and other financial fluctuations, and worried that federal tax policy changes could cut state revenues by $175 million in fiscal 2014 and that federal health care changes will add 150,000 Iowans to the Medicaid eligibility rolls with the state gradually expected to take on 10 percent of the cost for those new recipients.

Branstad told reporters he is “very encouraged” by the budget progress that has been made since he started his fifth term in January 2011.

Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee, said “anything the auditor says in a bipartisan fashion is helpful.” He agreed that the Legislature should get back to the practice of approving a yearly appropriation for state salaries “but the House and the governor don't see it that way.”

Vaudt's analysis only looked at the governor's fiscal 2013 budget proposal -- not the spending targets legislative leaders in both chambers issues last week.