DES MOINES — Legislative leaders say Gov. Terry Branstad’s nearly $6.54 billion state budget plan for fiscal 2014 is a good opening point for discussion, but not necessarily where the spending negotiations will end in four months.

Branstad laid out a two-year budget plan Tuesday that calls for a 4.3 percent increase in spending next fiscal year mainly to boost funding for education, human services, local property tax credits, corrections and economic growth initiatives.

The main features of Branstad’s spending package included multi-year commitments to reduce commercial and industrial property taxes while capping growth for agricultural and residential classes at 2 percent. It includes a commitment to draw down surplus funds that would begin at $74 million in fiscal 2015 and grow to $347 million by the time the plan is fully implemented in fiscal 2019.

The governor’s blueprint also calls for spending $207 million to fully fund local property tax credits and having the state pick up 100 percent of funding increases for K-12 schools as part of his effort to provide the largest cut in property taxes in Iowa history. His plan did not include any state income tax cuts or reforms.

“I think it was a responsible budget, and a very realistic one moving forward. We’ll look for opportunities to see if we can tighten it up a little more,” said House Majority Leader Linda Upmeyer, R-Garner.

Sen. Bob Dvorsky,

D-Coralville, chairman of the Senate Appropriations Committee, said the 4.3 percent growth rate looked better than it really is because it would build on “dismal” state spending levels the past two years. He said the briefing he received from Branstad aides was a “very nice PowerPoint with lots of moving features and things,” but he noted that “the devil truly is in the details” so he wanted more information before passing judgment on the governor’s budget proposal.

Sen. Brad Zaun, R-Urbandale, said his quick read of the governor’s plan left him to conclude “We’re spending too much. I’m concerned about that.”

Branstad is proposing to permanently reduce commercial and industrial property tax values by 20 percent over a four-year period and to provide direct funding for local governments to replace 100 percent of the property tax revenue. He called for the effort to reform and reduce property to serve as an investment in Iowa families and small businesses that does not come at the expense of cities, counties and school districts.

“His proposals will get a fair hearing in our chamber,” said Senate president Pam Jochum, D-Dubuque.

The spending proposal that Branstad presented to lawmakers with his Condition of the State address covers increases for Medicaid and mental-health redesign programs and money to open new prisons at Fort Madison and Mitchellville. Additional money also is proposed for community colleges and for regent universities to fund operations, freeze tuitions and work with the school’s foundations to finance tuition set-asides for needy students, according to Branstad aides.

The governor’s budget plan also requests legislators to provide $42 million in supplemental funding for the current year to finance Medicaid programs and aid counties by providing $8 million in transition funds as they convert to a regionalized service delivery system. Branstad also is proposing to increase funding for state parks by $4 million and to provide $500,000 to hire five new people to inspect livestock facilities while redirecting other staff to address water-quality concerns raised by Iowa citizens and the federal environmental regulators.

On Monday, the five-term GOP governor detailed a five-year, $187 million education reform proposal, but signaled that he expects lawmakers to approve the reforms before talks turn to education spending.

That did not sit well with House Democratic Leader Kevin McCarthy, D-Des Moines, who took the governor’s remarks as an ultimatum.

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“Iowa law requires us to fund our schools in the first 30 days of the session,” he said. “What I took away from the speech is we’re going to violate the law. We’re not going to fund our schools. Schools are going to send out layoff notices unless you pass my bill. In other words, it’s my way or the highway. Usually in the day of session we try to start out with a more bipartisan tone, at least on the signature proposals. So that was the low point of the speech for me.

“Another thing that is somewhat concerning is that he put a lot of money on the table in this speech,” McCarthy added. “We want to make sure that we don’t set in motion a train that’s going to go off the track in a few years.”

Branstad budget director David Roederer said the governor did not include any new money in his fiscal 2014 budget plan for what traditionally has been “allowable growth” for K-12 schools. Likewise, no new money was included in the budget proposals for state employees’ wages and benefits — much of which is still the subject of collective bargaining with two unions who represent state workers, he added. For the most part, the remainder of the fiscal 2014 budget represents status quo funding for other governmental agencies and programs.

“This is Terry Branstad’s budget. I don’t believe this is going to be the budget that’s going to be approved when everybody goes home in May,” said Danny Homan, president of the American Federation of State, County and Municipal Employees Council 61 — the largest state employees’ union. “It’s the same old, same old. Tax cuts for people who don’t need it and here we are.”

House Speaker Kraig Paulsen, R-Hiawatha, said he did not consider income tax cuts are “off the table” just because they weren’t included in the governor’s initial budget offer.

“I thought he did an excellent job laying out what I thought was a very detailed plan. It’s wasn’t the rah-rah speech like I’ve seen in times past. I think he’s got some great initiatives, things we can get excited about and work on,” the speaker said. “There are a lot of open doors right now. We’ve got to figure how to get through them.”