State budget process starts in earnest

DES MOINES - Lawmakers in the split-control Legislature agreed Gov. Terry Branstad's $6.16 billion spending plan for fiscal 2012 is a starting point, but what the final end product might look like is hardly settled.

Branstad proposed a two-year budget that cuts about $185 million in general-fund spending while funding priority areas in job creation, education, health care, corrections and public safety - a budget that may mean severe reductions and employee layoffs in state government. The plan eliminated 36 lower priority programs and did not include money to fund collective bargaining agreements or K-12 schools growth.

The governor kept his 2010 campaign promises to provide up to $450 million in relief for property taxpayers and to cut state corporate income taxes in half. He added a new wrinkle, however, by proposing to raise the tax rate paid by state-regulated casinos to 36 percent. That would generate the $200 million needed to offset his plan to lower the top rate on business income from 12 percent to 6 percent.

“With this budget, we have a choice. Do we take the bold and difficult steps, make the painful decisions and honestly align our spending and revenue? Or do we kick the problem down the road yet again?” Branstad said in his budget address Thursday to the Legislature.

Senate GOP Leader Paul McKinley of Chariton said Branstad offered a courageous vision that signals to job creators that Iowa is open for business and boldly leads the charge to force state government to live within its means.

“The big winner is big corporations who are going to receive a sizable tax cut - at least half of what they're currently paying - and the losers are the parents trying to find opportunities for preschool for their kids and middle-class families who will receive no benefit from the tax cut proposals,” said Rep. Tyler Olson, D-Cedar Rapids.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said legislative Democrats do not agree with providing no new money to K-12 school budgets over the next two fiscal years, cutting preschool funding from $71 million to $43 million and establishing a sliding-scale subsidy for families.

Educators are taking a wait-and-see approach.

“No governor has had his budget passed unchanged,” noted Jeff Berger, the state Department of Education's chief financial officer, when asked by members of the Iowa Board of Education about Branstad's plans for education.

“So what I'm hearing is it's a little bit early to get all hysterical about this,” said Board of Education Vice President Charles Edwards. Berger agreed.

Branstad's budget doesn't include a flood-recovery funding plan proposed by Cedar Rapids Mayor Ron Corbett, but the governor told Gazette editors in a meeting Thursday that he'd consider the proposal. The plan calls for Cedar Rapids and Linn County to keep at least a share of future growth in state sales taxes collected locally.

“We didn't address that specifically, but we are open to looking at ways to deal with that,” said Branstad. “I understand you have a unique problem, because of the flood loss and the impact that's had on the property tax base.”

Rep. Scott Raecker, R-Urbandale, chairman of the House Appropriations Committee, applauded Branstad's long-range financial vision to bring expenditures in line with revenues by halting the use of one-time money to fund ongoing expenses. He conceded it likely would require a significant reduction in employees.

Sen. Herman Quirmbach, D-Ames, an Iowa State University economist, called Branstad's spending plan “ideology dressed up as a budget” that attempted to paint a sour budget situation as a reason for implementing draconian measures.

Branstad has given state department directors six months to identify non-priority programs and employees.

The governor also proposed supplementing the current state budget with $40 million for human services, corrections and public safety. He plans to maintain 45 state trooper jobs funded from one-time federal money in next year's spending plan.

Danny Homan, president of American Federation of State, County and Municipal Employees Council 61, the state's largest employees union, is concerned about potential layoffs, but he noted the governor has not approached his union about reopening contract talks.

The union leader said he was more concerned and disappointed that “the self-proclaimed education governor” was proposing that all aspects of education take severe hits, while corporations were not being asked to share in any sacrifice.

House Speaker Kraig Paulsen, R-Hiawatha, said he was pleased that Branstad focused on job creation, tax relief and getting government spending under control. He was surprised, though, by the request to raise the tax rate for riverboats and racetrack-casinos.

Wes Ehrecke of the Iowa Gaming Association said the state-licensed casinos would oppose a higher tax rate.

"We want to have our industry thrive, not just survive,” Ehrecke said.