Merits of two-year budgeting debated

DES MOINES – Biennial budgeting leads to more long-term planning, according to a legislator from Minnesota, where two-year budgeting has been a long-time practice.

However, a staffer involved in putting Missouri's budgets together said his state abandoned the practices because “off-year” supplemental budgets began to look more and more like annual budgets.

Minnesota Democratic Sen. Larry Pogemiller and Marty Drewel, an assistant director in the Missouri Division of Budget and Planning, said Monday both practices have their advantages. They discussed budgeting practices on Iowa Public Radio's The Exchange.

Gov. Terry Branstad and legislative Democrats are at loggerheads over his insistence they send him a two-year budget. Nineteen states use two-year budgets, including Wisconsin, Minnesota and Nebraska. However, Iowa's neighbors, Illinois and Missouri, use annual budgets to guide spending.

There are a variety of approaches to two-year budgets, added Todd Haggerty, fiscal policy analyst with the National Conference of State Legislatures. Only two states produce true two-year budgets. Others pass two one-year budgets at a time. Arizona has a hybrid budget practice – annual budgets for the departments with large budgets, two-year budgets for smaller agencies.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, has said legislative Democrats would be willing to use the two-year budgeting approach for smaller funding areas, but not for education and health care that comprise the largest share of yearly state spending commitments.

That's because his interpretation of data from the nonpartisan Legislative Services Agency indicates yearly revenue estimates rarely hit within 1 percent of the actual number and that more times in the past dozen years they've significantly missed the mark – a trend that points to increased uncertainty and miscalculations rather than the stability and predictability that Branstad claims would come with biennial budgeting.

House Speaker Kraig Paulsen, R-Hiawatha, said Republicans see it as a way to slow the growth of government or cut spending.

Pogemiller doesn't think Minnesota's biennial budgeting necessarily leads to more conservative budgets. However, he thinks the legislature is more conservative in its budget reduction patterns and spending patterns “so you can be closer to reality when it hits.” He thinks the Minnesota Legislature will move to four-year budgets.

Drewel warned that could take some budget control away from lawmakers, a concern of both Iowa Democrats and Republicans.

Senate Democrats have proposed a two-year budget that fully funds the first year and provides half that amount the next year. That way the governor, department heads and legislators will have time to review the state budget and fill in the rest of the spending plan in the second year.

That is common in states that use biennial budgets, Haggerty said. It's common for lawmakers to use the “off year” to review budgets and make long-term changes.

Minnesota lawmakers refer to the second year of the budget cycle as the “clean-up year,” Pogemiller said.