Democrats agree to work within GOP spending limit

DES MOINES – Senate Democrats have agreed to accept the $5.99 billion spending cap set by House Republicans and Gov. Terry Branstad for fiscal 2012, but they still hope to be able to shift some funding within that limitation to get more money to education and other priorities en route to a budget compromise that will end the 2011 legislative session, top Democrats said Monday.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said it has become apparent during the stalled budget talks that Republicans are not interested in providing additional general fund money for education beyond what has been offered for K-12 schools, regent institutions and community colleges so Democrats are trying to close a deal within the spending constraints that would provide a few extra resources for their priority areas as negotiations continue in the split-control Legislature.

“I don't see much likelihood that they're going to move on that,” Gronstal said in an interview Monday.

“We recognize the reality that Republicans want a two-year starvation diet for K-through-12 education and the regents and community colleges. We're going to continue to fight for those things that we think are important,” he added. “We've agreed to a number that we think we can make work to the best of our ability and we'll see what the Republicans have to say.”

Monday's negotiating session did not produce an overall agreement but the two sides are slated to meet again on Tuesday. Branstad and Gronstal also have scheduled a separate meeting on Tuesday.

“I think we'll get it worked out and get it worked out sooner rather than later,” said Rep. Scott Raecker, R-Urbandale, chairman of the House Appropriations Committee. “I'm very optimistic that we'll be closer by the end of the week than we are now.”

The latest budget plan approved by the Republicans, who hold a 60-40 majority in the House, called for pumping $277 million of state money into the K-12 system over two years - including up to $215 million in increased funding in fiscal 2012 to “backfill” reserves and property taxes used to cover previous cuts in state aid and nearly $65 million in new money for fiscal 2013 with a 2 percent boost in “allowable growth” spending. That approach would freeze “allowable growth” in per-pupil state aid in fiscal 2012.

Legislative Republicans also agreed to keep intact the current state preschool program, but they would provide about half of the per-pupil funding – dropping the level from about $3,600 for each participating 4-year-old to about $1,800 per pupil in the fiscal 2012 budget. That would save the state about $35 million next fiscal year. They also came up $10 million on fiscal 2012 funding for community colleges and $2 million for regents but both adjusted levels still are below current spending in those respective areas.

“I think that 2 percent in (fiscal) 2013 was a pretty good victory, actually,” said Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee.

House Speaker Kraig Paulsen, R-Hiawatha, said he was not convinced Senate Democrats were working within Republicans' $5.99 billion spending cap for the budget year that begins July 1 because their latest counter offer did not conform with their general fund limit because a number of budget areas remained underfunded. Paulsen and Branstad indicated they want a two-year spending plan whereby the state appropriates less than the revenue it collects and does not require supplemental spending for entitlements because the initial funding levels were too low.

During his weekly news conference, Branstad added adequate funding for job-creation incentives along with property tax reform and a two-year, sustainable budget as requirements for the completion of a successful 2011 legislative session, which has moved into its seventh week of overtime. The governor wants to reduce rates for new and remodeled commercial properties by 60 percent of the full assessed value, and to phase down existing commercial rates to 60 percent over five years while capping future increases for agricultural and residential property classes at 2 percent annually.

The “omnibus” bill passed by House Republicans last week lowered those commercial rates to 75 percent, which would have a $361 million impact on the state's general fund in fiscal 2018 when the plan would be fully implemented, according to the nonpartisan Legislative Services Agency.

“Property tax reform needs to happen this year,” Branstad told reporters. “Failure to do so again would be kicking the can down the road and that's happened for 30 years and as you travel down that road you see more and more empty storefronts. So that is a critical priority that I have in resolving the differences on this budget.”

Both political parties have agreed that commercial property taxes in Iowa are out of line with neighboring states, but they have proposed different methods for addressing the issue.

Dvorsky expressed concern Monday that Branstad was threatening to “hold the state budget hostage” by insisting that lawmakers adopt commercial property-tax changes that would amount to “massive” cuts for out-of-state corporations, shift tax burdens to other property classes and hurt local governments.

“Senate Democrats earlier passed a commercial property tax cut that would provide more help to Iowa's Main Street businesses than the governor's plan would provide, and do so without raising residential property taxes,” Dvorsky said in a statement. “Although we are a few inches away from reaching an agreement on the state budget, our competing property tax plans are miles apart.”

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