Branstad willing to take as long as needed for two-year budget

DES MOINES – Gov. Terry Branstad signaled Wednesday that he might not accept proposed tax changes that were part of a bipartisan budget pact approved this week by lawmakers and that the 2011 legislative session may continue into May to settle major issues still standing in the way of adjournment.

“I'm going to be here as long as it takes and I think we need to do it right,” Branstad told reporters in rejecting a “middle-ground” proposal made by majority Democrats in the Senate that they hoped would satisfy his demand for a two-year state budget plan. “I'm very patient and very willing to work with both houses of the Legislature to try to work the differences out.”

The immediate task at hand for the governor is to pass judgment on Senate File 209 - a package of $46.7 million in supplemental spending for the current fiscal year and several tax-related issues that would establish a special taxpayers' trust fund to capture surplus state revenue for tax relief and expanded breaks for businesses and lower-income working families.

Branstad acknowledged it was a “difficult task” for House and Senate conferees to resolve their differences, but he told reporters “there are some extraneous things that I do have concerns about and we will address that but things can also be addressed in the upcoming days and weeks.”

The governor said he was handed a “financial mess” when he took office in mid-January due to bad budgeting practices and underfunding of programs for the current fiscal year that require supplemental money that includes $18.6 million to pay unmet obligations for state's indigent defense and public defender programs, $14.2 million for the state Department of Corrections, $5.9 million for community colleges, nearly $3 million to restore cuts to the Iowa State Patrol and public safety functions, $1.2 million for public health, and more than $2.6 million for mental health institutions with the state Department of Human Services.

The governor indicated he was inclined to approve funds need to correct a lack of legislative action last session, however, he noted that other issues involving tax policy “are better to be resolved in a bill that deals with taxes, not supplemental appropriations. So, I have some concerns about that and we're going to be addressing that when we make a final decision, but I am reviewing some of the items that are in that legislation.”

House Majority Leader Linda Upmeyer, R-Garner, who was present when Branstad made his comments to reporters, said afterwards “I think there was a signal there perhaps that he hadn't decided to just sign the whole thing, but I don't know what else.” She said it would be “disappointing” if the governor rejects a newly created taxpayers' trust fund that GOP legislators championed as part of the overall $141 million worth of tax relief included in the S.F. 209 compromise.

House-Senate negotiators agreed to establish a taxpayers' trust fund that would capture up to $60 million annually from the state's general fund ending balance to be available for providing tax relief effective in the fiscal year that begins July 1, 2012. The Senate File 209 pact also included provisions to increase the earned income tax credit from 7 percent to 10 percent for about 240,000 working families making up to $45,000 annually and to provide bonus depreciation tax briefs for businesses that make equipment and machinery purchases.

Branstad said Wednesday he believed it would be better to address all outstanding tax-related issues in a comprehensive way that would improve the economic climate while reducing tax and regulatory barriers to businesses that create jobs.

“I think having all of those issues before us would facilitate trying to get the results that we'd like to have,” he said. “Rather than piecemealing these issues, I think doing it in a significant and comprehensive way and one that does get commercial property tax relief – something that's been talked about for 30 years – I don't want to let this session go by without seeing that addressed. That's not addressed in that legislation.”

Upmeyer said legislators had hoped to set aside the issues addressed in S.F. 209 to be able to focus on the remaining tax and budget differences, but she added “we're certainly interested in hearing what the governor has to say about that if in fact he does veto that whole provision of the bill. I'm hopeful that he'll look at it as an entire package.”

Earlier Wednesday, Senate Majority Leader Mike Gronstal, D-Council Bluffs, and Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee, offered a “middle-ground” proposal to pass a fiscal 2012 budget and 50 percent of the following fiscal year's spending plan in hopes of meeting Branstad's demand that lawmakers pass a biennial budget before they adjourn the 2011 session.

“We're trying to meet him half way on this,” Gronstal said.

“The governor gets part of what he wants, but the Legislature retains the authority and the ability to pass additional appropriations as agencies come to us and justify their appropriations,” he added. “The governor has talked about a more-intensive process and we take him at his word that it's not a power grab by the executive branch” to demand a two-budget that would amount to the Legislature giving him a two-year “blank check” without public accountability.

However, the governor indicated to reporters that he was considered his campaign pledge to require a two-year state budget and a five-year long-range strategic plan to be “not negotiable” as he works to rebuild stability and predictability back into the state budget process.

Gronstal said long-range revenue estimates have not been reliable enough to use as a foundation on which to build spending priorities for the next 24 months and that “it's irresponsible to craft a budget on some pretty shaky numbers historically.”

Gronstal said. “The governor has talked about a more-intensive process and we take him at his word that it's not a power grab by the executive branch” to demand a two-budget that would amount to the Legislature giving him a two-year “blank check” without public accountability.

Upmeyer said legislative Republicans support the two-year budget concept and it would fall to the governor and Senate Democrats to resolve their differences.

“My caucus has said that I have offered enough olive branches to start an olive grove,” Gronstal said in holding firm to his proposal to pass a fiscal 2012 budget and 50 percent of the fiscal 2013 state spending plan.