Balancing state budget might go down to the wire

DES MOINES – Ending the fiscal 2009 budget year with a positive balance may come down to a photo finish, state officials said Tuesday.

 “We think that we're at a place where we will be able to finish this year and go into the next budget with the books balanced,” said Lt. Gov. Patty Judge. “There has been a lot of austerity, so I think we're in a good place.”

Hopes for riding out a rocky fiscal year with a comfortable financial cushion were buffeted this week when state revenues dropped to 4.5 percent below the same 11 month-period a year ago – due in part to higher state tax refunds totaling twice the projected growth level through May.

Gov. Chet Culver already instituted an across-the-board cut and lawmakers pared back many state agencies through June 2010 – although a $150 million infusion of federal stimulus money helped prop up this fiscal year's budget and another $529 million balanced the fiscal 2010 ledger.

Legislative Services Agency officials said May's double-digit decline in net revenue during what traditionally is the state's largest tax-collection month could create a potential $111 million problem for a current-year budget with a $44.6 million projected ending balance.

The governor has options if necessary, Judge said, including furloughing or laying off state employees, cutting spending across the board again -- although little savings could be achieved with less than one month left in the fiscal year – temporarily delaying some state payments, transferring up to $50 million from the cash reserve, or calling lawmakers into special session to address a potential shortfall.

However, she said neither she nor Culver believe those steps will be needed by the time the fiscal 2009 ends June 30 and the overall budget books officially close next September.

“We have made the cuts we need to make and that we'll finish this fiscal year in the black and that we have a good budget going into next year,” the lieutenant governor said.

 “I think it's early to say that we're out of the woods but I think we've certainly taken the right steps to get ourselves where we want to be by this time next year,” she added. “We'll continue to look closely at the numbers and if it's necessary we'll make adjustments but I don't believe that we're there today.”

Minority GOP legislative leaders said the May revenue report was further evidence that Culver and majority Democrats spent money at “unsustainable record levels” while obstructing Republican efforts to reduce government bureaucracy last session.

“It is clear that the Democrats do not understand the severity of this spending problem and the taxpayers of Iowa will once again suffer because of their failure to keep government living within its means,” said Senate GOP Leader Paul McKinley of Chariton.

 “Democrats have spent too much, cut too little and have left Iowans with two budgets that are likely out of balance and a third budget that has $1 billion spending gap,” added House GOP Leader Kraig Paulsen of Hiawatha.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Democrats took appropriate action to pass a significant state economic stimulus package that should help jump-start Iowa's economy and get people back to work.

The fact that May's final two calendar days landed on a weekend may have skewed the revenue figures, Gronstal said, and he believed Culver has the flexibility to deal with deteriorating budget numbers, although he did not rule out the possibility of a special session if need be.

“I'm cautiously optimistic that it will be enough and we're all hopeful that the economy will turn around,” he said.