Funding cuts likely in Branstad’s budget proposal

State legislators, Iowans who rely on state services and programs, and especially state employees will be paying close attention when Gov. Terry Branstad presents his budget recommendations to a joint session of the 84th General Assembly on Thursday.

Less than two weeks into his fifth term, Branstad will spell out his state spending and tax-cut proposals to lawmakers and a statewide television audience - a combination of budget plans for the next two fiscal years and a long-range map to guide projected spending for state agencies for the next five years.

House Speaker Kraig Paulsen, R-Hiawatha, said Branstad's proposals will represent “a big piece of the puzzle” and he is looking forward to getting some “bold proposals” from the GOP governor.

Branstad has promised an austere spending plan for fiscal 2012 - a year where he and lawmakers must make up for about $700 million in general-fund spending in the current year that was covered by one-time sources that will not be available when the new budget year starts on July 1.

David Roederer, Branstad's director of the Iowa Department of Management, said that likely will mean reduced funding levels for much of the state budget, given that projected growth in just the main funding areas - education, human services and corrections - outpaces expected tax revenues by $60 million before the rest of state government is taken into account.

Another problem area is a new two-year collective bargaining agreement that former Gov. Chet Culver negotiated with state employee unions that included modest pay increases, which Branstad budget architects say are not affordable or sustainable. Roederer said the budget-making task also would have been easier had Culver administration officials not filled about 1,000 of the more than 2,200 jobs that were vacated when senior state workers took an early-retirement option last year.

Branstad said last week that his administration likely is “going to have to dramatically reduce” state government employment to balance the $6.2 billion spending plan, but Roederer said Friday that potential reductions in force likely will vary among departments and he was hopeful that personnel costs could be reduced through attrition or terminating new hires still in probationary status.

“I think laying people off, disrupting their lives, is the last thing that we want to see departments do,” he said.

Rep. Scott Raecker, R-Urbandale, chairman of the House Appropriations Committee, said he didn't see how state budgetmakers could address the one-time funding issues and hold fiscal 2012 spending below revenue levels without affecting personnel.

“I think Gov. Branstad's been fairly clear there will be a reduction,” he said. “There will be an impact on employment. What that number will be I don't know, but there will be an impact.”

One the first budget decisions that lawmakers will face will be K-12 education funding levels - something that was deferred last session to give lawmakers and the governor more time to gauge how efforts to recover from the national recession were progressing. Roederer said doing nothing carries a cost of up to $160 million just to “backfill” underfunding issues under the school-aid formula.

Majority Republicans in the House have indicated they prefer to provide no allowable growth increase so what state aid is available can be used to cover costs that were shifted to property taxpayers in the wake of Culver's 10 percent across-the-board cut in October 2009. Majority Democrats in the Senate have not committed to an allowable growth number but expect it should be something more than zero.

“It's an interesting situation this year where you have three players. It's going to be interesting to see how that all shakes out,” said Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee. “I don't think anyone is walking in lock-step at this point. I think you're going to have three different ideas. We'll have to wait and see what (Branstad) comes up with and then go from there.”

Roederer said fiscal 2012 is a good news-bad news situation in that it will be the toughest budget year to deal with, but once the state has weathered the required sacrifices, the outlook should get better.