Branstad: Balancing state budget will require “lifestyle change”

Like someone who needs to shed weight with exercise and better eating habits, state government needs “a lifestyle change” to bring excessive spending in line with available revenue, Governor-elect Terry Branstad and his new budget chief said Monday.

David Roederer, Branstad's pick to direct the state Department of Management when his new administration takes power Jan. 14, projected the state's general fund faces a $605 million problem in fiscal 2012 which grows to $1.3 billion in fiscal 2015 if left unchecked – a problem rooted in funding shifts and one-time sources to cover ongoing expenses that total between $800 million and $900 million this current budget year.

“Right now we have an unsustainable operation the way it is. We have to get back to a system that's sustainable and that's going to be our challenge,” Roederer said during Monday's state budget briefing. “We've got the wherewithal to do this, but I think the message needs to be this isn't going to be easy and postponing it or just doing a little to get by is only going to exacerbate our problem.

“The fact of the matter is that sometimes you get to a point where you decide that we've got a lifestyle change that we've got to make,” he added. “This isn't a matter of temporarily doing this. This is a matter of rethinking how we operate.”

Branstad called the state's budget situation “pretty sobering” because “we have a huge hole to dig out of” and the overwhelming share of spending is for K-12 schools, Medicaid, corrections, and wages and benefits paid to state employees. Also, the federal government accounts for half of the overall $12.4 billion that finances state operations and Branstad expects less money to be flowing from Washington due to expected cuts there as well next year.

“We're going to need everybody's cooperation to come up with the most fair and equitable way to deal with those issues,” Branstad said.

“We only have a limited amount of money and we're going to have to find the most efficient and economical way of delivering those services, and that means that there needs to be shared sacrifice,” he added. “It's going to be a challenge but it's not nearly as painful as a lot of families have gone through. A lot of families have had to cut their budgets substantially, get rid of their credit cards, live with a member of the family unemployed, a lot of companies have done spending cuts, people have taken salary reductions.”

Branstad has been a vocal critic of new contracts for state employees negotiated with outgoing Gov. Chet Culver that include pay increases at a time when the GOP governor-elect would like to scale back benefits and freeze wages at a minimum.

According to Roederer's presentation, wages and benefits from all state funds total $3.9 billion - with about half that amount covered by the state's general fund. The state's K-12 school aid formula accounts for $2.6 billion in state spending, while Medicaid accounts for about $1 billion in state spending.

Normally, Iowa averages a 4 percent yearly increase in state tax collections, but Branstad said has not been the case in recent years due to the national recession and he was encouraging House Republicans to be aggressive in finding places to cut state spending yet this fiscal year that will help ease problems in the out years.