Iowa lawmakers will return in January to a billion dollar budget gap

State lawmakers will be required to close a billion-dollar funding gap when they return to the Capitol next January to fashion a fiscal 2011 budget, according to an analysis issued Wednesday.

The nonpartisan Legislative Service Agency released projections for the upcoming budget cycle that estimated built-in spending commitments of $6.466 billion and available revenue under the 99 percent spending limitation law at $5.396 billion – leaving a projected budget gap of $1.07 billion.

“It's about what we expected,” said Senate Majority Leader Mike Gronstal, D-Council Bluffs. “The reality is that fiscal 2011 is going to be a very challenging budget year and we're all painfully aware of that.”

Gronstal noted that some of the assumptions used to calculate the projected budget gap – the first time ever that the starting point between spending and revenues has topped $1 billion – are not rooted in reality. For instance, he noted that property tax credits to local governments have not been fully financed via the state general fund since 1992.

State officials also have about $141 million in one-time federal stimulus money available for use next fiscal year and lawmakers almost certainly will have to dip into state cash reserves projected at $541 million in fiscal 2011 to achieve a balanced budget, Gronstal said.

“I think everybody has said at this point in time we're not looking at tax increases,” he noted.

That being the case, Gronstal conceded that elected officials may have to scale back previously made funding commitments that include a $558 million increase to K-12 education, a $189 million in Medicaid assistance and $103 million in state employee salary increases.

“I think we have made it clear coming into this session that there are no sacred cows, that everything is subject to review and that there are few if any areas that will be spared,” he said. “We all believe that there are daunting challenges.”

The future budget projections come at a time when state agencies, employees and Iowa residents are dealing with the impacts of a 10 percent across-the-board cut in current year state spending that Gov. Chet Culver ordered to save an estimated $579 million by June 30.

If nothing changes, the state should end the year with a $204.5 million balance due to deep cuts the governor ordered to cover $415 million drop in tax collections for the first quarter. The state Revenue Estimating Conference is scheduled to meet Dec. 11 to set the revenue target that lawmakers must use in forging a fiscal 2011 spending plan.

Culver spokesman Troy Price said the LSA report was one estimate based on spending only and it would be premature to speculate on fiscal 2011 budget decisions until the officials revenue estimate is established next month.

The governor has indicated repeatedly that fiscal 2011 will be a difficult budget year, Price added, but noted Culver has demonstrated he will make the tough budget decision and is prepared to do so again next fiscal year.

“The bottom line is Gov. Culver will submit and sign a balance budget – plain and simple,” Price said.

Wednesday's budget gap estimate drew new criticism from legislative Republicans who believe state spending by majority Democrats and Culver continues to be out of control.

“The projections released today reaffirm what House Republicans have been saying for the past two years, the irresponsible spending by legislative Democrats has left Iowans with a $1 billion problem,” said House GOP Leader Kraig Paulsen of Hiawatha.

“The government has spent too much, cut too little and borrowed even more which has caused the budget mess Iowa is currently in,” he added. “Iowa does not have a revenue problem, it is a spending problem. House Republicans will continue to offer sensible cost-saving measures and stand firm against increased government spending and any form of a tax increase.”

Price dismissed the GOP sniping, saying “it's easy for Rep. Paulsen and his dour band of Republicans to criticize from the sidelines, but Gov. Culver has done the hard work and made the difficult decisions to keep our budget balanced.”