K-12 schools, Medicaid should be spared from budget cuts, Branstad says

DES MOINES - With $100 million in state spending cuts looming, Gov. Terry Branstad said Wednesday he does not want those cuts to come from spending on K-12 public education, health care for the state's Medicaid recipients or commercial property tax credits.

Branstad conceded state employee layoffs are possible, but he declined to say from which state agency.

Tax revenue has grown slower than estimated, so the governor and state lawmakers must agree to roughly $100 million in spending cuts in this fiscal year, which started July 1, 2016, and ends June 30.

During a meeting with reporters Wednesday to discuss the coming legislative session, Branstad said his budget proposal will include the spending cuts, but not to K-12 public schools, Medicaid or tax credits included in 2013's commercial property tax reform package.

'We are scrutinizing all areas of the budget, and many agencies will see some reductions,” Branstad said. 'But they're going to be selective reductions designed to protect our priorities.”

Branstad declined to say which agencies will be required to make budget cuts. He will present his budget proposal Tuesday, when he gives his annual Condition of the State address to the Iowa Legislature.

Branstad said it will be up to the agencies to determine how the budget cuts are executed and said it is possible the cuts will lead to layoffs.

Branstad said that he does not want agencies to use unpaid furloughs and that his proposed spending cuts largely would be permanent.

'We want to do it in a very thoughtful way,” Branstad said, suggesting some cuts can be achieved through attrition or streamlining.

'These are difficult decisions, and agencies are going to have to make tough decisions. We've tried to thoughtfully go through the budgets with each agency and put together budget reductions that we think maintain the important priorities.

'There could be layoffs, but for the most part, we prefer to not replace people that retire or quit, as opposed to layoffs. But there may be individual incidents where agencies must lay off staff.”

The items Branstad is declaring off limits for budget cuts - K-12 education, Medicaid and property tax credits - accounted for two-thirds of state spending in fiscal 2016, according to budget analysis by the state's nonpartisan fiscal estimating agency.

That leaves the remaining one-third of state spending to bear the brunt of the $100 million in spending cuts. The largest remaining piece of the budget pie - roughly 12 percent of state spending - goes to higher education.

State Sen. Bob Dvorsky, leader of the minority Democrats on the Senate's budget committee, said he is pleased Branstad has declared K-12 and Medicaid funding untouchable, but he expressed concern for higher education funding.

Dvorsky said some cuts could be achieved through unused tax credits in the state's economic development department budget.

'Cuts are going to be made, but I hope they're proportional,” Dvorsky said.