Iowa lawmakers hope to finalize $7.17 billion budget this week

DES MOINES - Lawmakers were finalizing details Monday of a budget deal that would spend $7.168 billion for the coming fiscal year and provide another $125 million in one-time surplus money to supplement priority areas. The deal aims to resolve partisan differences and enable the 86th General Assembly to adjourn its overtime 2015 session later this week.

After weeks of closed-door talks, leaders of the split-control Legislature agreed to boost state aid for K-12 schools by 1.25 percent in fiscal 2016 and spend an extra $55 million in one-time ending balance to resolve an impasse between Republicans who control the Iowa House and majority Democrats in the Iowa Senate. The budget deal also funds a $50 million commitment to education reform and $133 million to fund a property tax reduction primarily for commercial enterprises.

House Republicans said they were pleased that Senate Democrats accepted their spending targets with a handful of exceptions given the economic uncertainty that requires a cautious approach to holding the line on spending. For their part, Democrats said they worked within the constraints of a divided government where Republicans control the House and the governorship to get an outcome that was favorable but far short of the needs they hoped to address.

'This is a warm bucket of spit,” Sen. Matt McCoy, D-Des Moines, said of the budget compromise. 'You just take what you have to take and swallow, and that's where we're at.”

House and Senate leaders started their closed-door negotiations last month about $166 million apart on the fiscal 2016 spending targets.

House Republicans capped state general fund spending at $7.168 billion for the fiscal year beginning July 1, saying they would not spend more than the state takes in or use one-time money to fund ongoing expenses, while Senate Democrats and Gov. Terry Branstad offered separate plans seeking to spend $7.341 billion next fiscal year before agreeing to settle closer to the House GOP position.

'I think we're doing our best to come to conclusion and avoid gridlock,” said Sen. Joe Bolkcom, D-Iowa City.

Along with the $55.7 million for K-12 schools, legislators agreed to use one-time commitments from the ending balance to provide $43 million in Medicaid supplemental funding for the current fiscal year that ends June 30, as well as $2.5 million for the community colleges, $2.9 million for the University of Iowa, $2.3 million for Iowa State University and $1.1 million for the University of Northern Iowa. Negotiators said the increased money should enable regent universities to freeze tuition for instate undergraduates for a third straight year but funding was not included to finance a performance-based funding change supported by the state Board of Regents.

'I feel good about the agreement,” said House Speaker Kraig Paulsen, R-Hiawatha. 'I think it makes sensible use of the money that taxpayers sent us.”

Overall, state government functions in fiscal 2016 will receive about $174 million more than the current $6.994 billion general fund level excluding the one-time expenditures. Other education areas were in line for increases totaling about $6.1 million and justice systems were slated to get a $4.3 million increase, while funding for health and human services programs next fiscal year was cut by about $19.3 million and economic development was shaved $331,000.

'Iowans expect legislators to live within our means,” said Rep. Chuck Soderberg, R-LeMars, chairman of the House Appropriations Committee, who noted the split-control Legislature reached an agreement to balance ongoing expenses with ongoing revenue for the fifth year in a row. 'Living within one's means is something the hardworking taxpayers of Iowa do every day. Once again, government will do the same.”

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Senate Democrats tried to find compromise where it was possible and believe the targets issued Monday represent common ground within a divided Statehouse.

'Left to our own devices we would pass a very different budget,” he said. 'There's plenty to be happy about it and there's plenty to be sad about it when it's all said and done, and I suspect that's true to the other side as well.”

Sen. Bill Dotzler, D-Waterloo, co-leader of the House-Senate economic development budget subcommittee, said the fiscal 2016 targets will mean cuts because there is no money to fund state employee salary increases so agencies will have to finance them by reducing in other areas.

Dotzler said he supported commercial property tax relief in 2013, but was 'disappointed” and 'disheartened” that quality of life and education priorities won't be funded at levels he deemed to be adequate given the state's surplus position due to the tight budget precipitated by the joint spending targets that were announced Monday.

'It kind of boggles my mind that we would almost punish the other sectors of Iowa to get these passed,” he said. 'We realize we have tight budgets but we have the resources to be able to do them no harm. But it's going to end up being that way.”

McCoy said he was concerned the funding levels for human services would result in 'slashing and burning of programs” in a way that would put vulnerable Iowans at risk while underfunding Medicaid programs and causing government to operate less efficiently.

'Obviously, elections have consequences and I think, in this particular case, the House is wanting to go home with a bunch of unspent money. Ultimately, the only reason I can see them not spending this money is they want to do income tax cuts next year,” McCoy said.

The Des Moines Democrat said the session's tough budget talks were a byproduct of a gas tax increase that was passed earlier in the session over the objection of GOP representatives that carried over into a hard line on the spending discussions.

'I think it had a profound impact,” McCoy said. 'I believe they made a decision that this was something they just could not back up on and I think the gas tax was the main driver of that.”

Lt. Gov. Kim Reynolds told reporters Monday the governor's office will reserve judgment on the split-control Legislature's work product until the budget bills are passed and arrive at Gov. Terry Branstad's desk. The governor was in Ohio Monday attending a conference and was unavailable for comment.

'We're going to wait to see what that looks like in its final form,” Reynolds said.

The lieutenant governor said the governor's office was 'encouraged” by the tentative budget agreement, but was disappointed that lawmakers were unable to reach an agreement on state supplemental aid for K-12 schools in the second year, fiscal 2017, of the upcoming biennium.