Branstad hopes fiscal 2018 budget accord close to his plan

DES MOINES - Gov. Terry Branstad expressed hope Wednesday he and GOP legislators would be able to agree on a fiscal 2018 budget close to his downwardly revised $7.283 billion spending level that preserves their K-12 education commitment and addresses other priorities.

Branstad said he took a thoughtful approach to paring back by $173 million the budget he had outlined in January to reflect slower-than-expected revenue growth, leaving about $24 million in new money to spend after earmarking $131 million over two years to refill reserves needed to cover a current shortfall.

'It's not easy. There are a lot of tough decisions that already have been made and others that are going to have to be made as part of this 2018 budget,” he said. 'I'm hopeful that at the end of the day we can reach an agreement and it can be something close to what we've recommended.”

Along with repaying $104.8 million in fiscal 2018 and $26.3 million the following year to the cash reserve, Branstad's proposed 0.3 percent growth in next year's state spending has increases of $40.1 million for K-2 schools, $42 million for Medicaid and $3.7 million for water quality. His plan also bolsters public safety, does not close any state institutions and attempts to minimize the need for layoffs, the governor added.

Republicans who hold majorities in both legislative chambers welcomed the governor's revisions but said they will need time to analyze them and issue their own spending targets, while minority Democrats generally were critical on the changes and GOP handling of state finances.

'It's a good starting point for our conversations,” said Sen. Charles Schneider, R-West Des Moines, chairman of the Senate Appropriations Committee. 'We still have to look through it in more detail and put our targets together.”

Branstad's fiscal 2018 spending plan scoops gambling money earmarked for other purposes to help balance the ledger and uses the ending balance to replenish the cash reserve, but Schneider said he would prefer to see a bigger cushion after watching revenue expectations repeatedly downgraded this year.

'I don't want to do another de-appropriation. That's bad for departments and for other people who receive state funding. It's a fire drill that I would like to avoid if at all possible,” said Schneider, who agreed the money already committed for K-12 schools would not be altered in the search for savings.

Sen. Rob Hogg, a Cedar Rapids Democrat who leads the Senate minority, said he was 'very concerned” to see the spending rollbacks the governor was advocating after a series of damaging midyear cuts, and he was especially upset Branstad was diverting money for worker skills and job creation.

'I think it's a really bad, ugly budget that's going to hurt Iowans,” said Hogg, who worried things could get worse once Republicans unveil their financial direction. 'Iowans have to stay engaged because it could get uglier I guess, but this is really bad.”

In revising his original budget, Branstad downgraded funding for human services by $86.2 million, education by $58.4 million - including $5.3 million for the University of Iowa, $5.9 million for Iowa State University and less than $1 million for the University of Northern Iowa - $19.4 million for administration and regulation, $7.8 million for the judicial branch and $4.6 million for the legislative branch. Justice systems, which include prisons, would get a $4.9 million increase.

Comparing year to year, Branstad would boost overall spending in fiscal 2018 by $24 million over the nearly $7.26 billion revised appropriations for the current year ending June 30, and his $7.52 billion plan for fiscal 2019 would be a 3.2 percent increase. For fiscal 2019, Branstad stuck with a 2 percent increase for K-12 schools and higher education, $78.2 million more for Medicaid, $17.5 million for his technology reinvestment fund and $10 million for the Future Iowa Ready program.

'I'm optimistic looking to the future,” said Branstad, who noted cattle prices are rebounding, Iowa has a low unemployment rate, land values are rising, companies like John Deere are hiring and other signs of an economic comeback. 'That's encouraging.”

Senate Majority Leader Bill Dix, R-Shell Rock, said GOP senators agree the best method for solving the current shortfall is using reserves and repaying them over two years. Beyond that, he said, no decisions have been made as legislators begin to set spending targets that could surface yet this week.

Rep. Chris Hall, D-Sioux City, ranking Democrat on the House Appropriations Committee, said the governor's new numbers were nothing more than a plan to borrow from the state's savings account to cover corporate tax credits with taxpayers' money.

'There is nothing conservative or fiscally responsible about this GOP proposal,” Hall said in a statement. 'The governor is proposing a shell game to fix the GOP's budget problems.”

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