DES MOINES — Gov. Kim Reynolds heard a range of appeals Tuesday for putting more focus on expanding Iowa’s workforce for businesses and boosting wages for front line care workers, but also for using part of the state’s budget surplus to reduce income and property tax burdens.
The governor heard from nearly 20 presenters — some paid lobbyists, some association representatives but no Iowans speaking on their own behalf — during an hourlong meeting to solicit ideas as she assembles a new two-year spending plan for state agencies and programs beginning July 1.
“We’re putting a budget together right now. It’s kind of a puzzle. We’re looking at what our priorities are. My budget should reflect the priorities of this administration and they will,” Reynolds told reporters.
This year, Reynolds introduced a modified process that replaces a long-standing tradition of holding open pre-legislative session discussions with state agency leaders in favor of private consultations instead.
Reynolds said her focus will be on keeping a competitive business climate that is pro-growth and pro-family, while keeping workforce issues “top of mind” in areas such as career development, child care, housing and criminal justice reform. She said she also appreciated calls to reform mental-health services for adults and children with a sustainable funding source.
“We have a lot of commonality of what the priorities will be moving into the next legislative session,” she said.
Representatives from the Iowa Taxpayers Association, Americans for Prosperity and the Iowa Farm Bureau Federation urged the Republican governor to use the state’s surplus position to speed up tax-cut “triggers” that would lower state income tax rates, or have the state take over county mental health funding from local property taxpayers.
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“I would encourage restraint in spending,” said Drew Klein of Americans for Prosperity. “ ... Don’t spend the additional revenue that we have coming in or those surpluses, but instead let’s use those to continue to reduce taxes on Iowans.”
During its December meeting, the three-member Revenue Estimating Conference projected the state would collect an extra $234.4 million in fiscal 2021 — a 2.9 percent increase over the $8.015 billion expected to be generated for the general fund by state taxes this fiscal year that ends June 30.
According to the Legislative Services Agency, the general fund ended fiscal 2019 with a $289.3 million surplus, and the better-than-expected growth created a carry-over effect that increased this year’s projected balance to $470.5 million.
However, it is also projected the state will need a Medicaid supplemental appropriation of $106.6 million that the Iowa Department of Human Services is requesting to cover increased costs of the program not covered by its last appropriation.
State budget analysts project there will be a $237.3 million carry-over balance from the revised fiscal 2020 general-fund surplus to be added to the $8.249 billion the revenue estimating panel expects in fiscal 2021 — meaning the amount available for the governor and legislators to budget next year will be $8.404 billion.
Of that, Reynolds and the GOP-run Legislature will have to contend with about $336.7 million of net built-in and anticipated changes in fiscal 2021, based upon past actions, and a projected $211 million increased Medicaid need. That total does not include any increase in supplemental state aid for K-12 schools, but does call for a $44.1 million salary bump.
The Legislative Service Agency projects total appropriations for fiscal 2021 to be $7.980 billion — or $423.4 million below the estimated expenditure limit. And the general fund surplus by June 30, 2021, is projected to be $510.9 million.
Majority Republicans who hold advantages of 32-18 in the Iowa Senate and 53-47 in the Iowa House say the state is in a strong financial position due to their prudent budget decisions.
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Minority Democrats say that the surplus comes of the expense of needed investments in education, health care, public safety and workforce programs that are starting to show strain.
Many executive-branch agencies submitted status-quo budget requests again for fiscal 2021, but Reynolds has acknowledged that some have gone too long without some infusion of increased resources.
Overall, agency leaders are seeking a 2.6 percent boost of nearly $200 million next fiscal year.
Iowa Judicial Branch officials are proposing a 3.9 percent boost (or $7.2 million) in state funding for fiscal 2021 — a $191.8 million general fund request that seeks to increase salaries and hire additional staff at clerk of court offices.
Reynolds is slated to issue her two-year budget plan for fiscal years 2021 and 2022 when she makes her Jan. 14 Condition of the State address to legislators.
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