Branstad - Condition of the State

Iowa Gov. Terry Branstad delivers his annual Condition of the State address before a joint session of the Iowa Legislature at the Statehouse in Des Moines.


DES MOINES — Gov. Terry Branstad proposed a two-year budget plan Tuesday that seeks to boost spending by 3 percent in fiscal 2018 and 2.2 percent the following year.

First, however, he recommends making a cut $110 million from regents, human services, corrections and court programs in the current fiscal year.

Majority Republicans said they were willing to work with Branstad to make government smaller and smarter but expressed disappointment his message did not include mention of tax relief and reform. Minority Democrats liked some of the governor’s ideas but thought his cuts went too deep in some critical budget areas.

“We still have a lot of details to work out,” said Senate President Jack Whitver, R-Ankeny. “We know it’s going to be a tough decision to make. I think he’s in the right ballpark for the amount of money, it’s just figuring out exactly where that’s going to come from.”

Branstad aides distributed documents indicating current-year adjustments will be $25 million at regent institutions, $20 million for the Department of Human Services, $15 million for prisons and community corrections, $8.7 million for community colleges, $7.7 million for the courts, $5.5 million for the Department of Education and $3.8 million for public safety.

“We’ve got real concerns about these major mid-year budget cuts that Gov. Branstad is proposing,” said Senate Democratic Minority Leader Rob Hogg of Cedar Rapids. “We are not in a fiscal crisis. Let’s find a better solution. Let’s not balance the budget on the backs of students at our community colleges and universities. That’s the wrong direction to go.”

Most state agencies had begun making contingencies in October in anticipation of a possible budget shortfall, said David Roederer, director of the state Department of Management. Directors of affected departments are being given flexibility within their budget areas to best manage funding cuts that could include layoffs or employee furloughs in cases where the position eventually will be eliminated permanently.

The adjustments were necessary because of two downward reductions in projected tax collection growth brought on by sluggish farm prices and other economic factors. Along with the cuts, Branstad administration officials are holding back $12 million of economic development incentives until July 1 and revising one-time medical assistance numbers to provide another $47 million in fiscal 2017 budget adjustments.

In proposing the budget cutbacks for consideration by the GOP-led Legislature, Branstad said he did not want to affect K-12 schools, local property tax credits or Medicaid services.

In charting a new two-year budget plan, the governor called for spending $7.457 billion in the fiscal year that begins July 1, which would be a 3 percent increase over his revised spending plan to finish out the current year. The governor proposed state general fund spending of $7.623 billion in the biennium’s second year, a 2.2 percent increase over fiscal 2018.

The two-year budget proposal projected the state general fund would have $208.5 million in net new revenue next fiscal year under the state’s 99 percent spending limitation law and $295.5 million in net new revenue the following fiscal year, according to Branstad aides.

The governor’s spending plan called for 2 percent increases for K-12 school districts and higher education in both fiscal years, with elementary and secondary schools to receive $78.8 million growth in fiscal 2018 and $63.5 million more in fiscal 2019 while public colleges would be in line for increases of $15.7 million in each of the next two fiscal years.

Branstad administration officials projected savings to the state under the switch to privately managed Medicaid care for each of the next two fiscal years but projected state spending growth of $40 million in fiscal 2018 and $60 million the following year to cover expanded enrollment and other factors. The governor’s spending plan also sought more than $6 million annually for education reform initiatives, nearly $8 million for yearly water-quality improvements and $18 million in funding for corrections and public safety to restore money affected by current-year reductions.

House Republicans say moving ahead with the current-year de-appropriations will be one of the first bills they deal with so they can better focus on the fiscal 2018/2019 budget plans.

“I appreciate the governor presenting his budget plan to the Legislature early so that we can get to work resolving the current state budget,” said House Speaker Linda Upmeyer, R-Clear Lake. “His outline and suggestions will help us hit the ground running.”

Sen. Charles Schneider, R-West Des Moines, chairman of the Senate Appropriations Committee, said lawmakers’ job in the coming months will be to find permanent cuts to free up revenue in future years for GOP priorities, such as tax relief. He said Republicans may wait until they receive the March revenue estimates before they move ahead with next year’s budget plan.

Sen. Randy Feenstra, R-Hull, chairman of the Senate Ways and Means Committee, said he was disappointed Branstad made no mention of tax relief or comprehensive tax reform either during his speech or in his budget, although he acknowledged the governor last week said he did not think the state could afford a major income tax cut at this time but would work with Republicans on a multi-year plan.

“We will have a comprehensive tax reform bill this session, and I just hope that we can work with the governor and the House to get something very significant passed,” he said. “It’s going to have to be over multiple years, but you create the framework saying this is what’s going to happen.”

Sen. Rob Hogg, D-Cedar Rapids, the Senate minority leader, said his personal view is that state government has provided significant tax relief in recent years and more cuts are not at the top of the legislative priority list.

“We may need tax reform to make our system better, but we do not need more tax cuts,” Hogg said. “We have to have the ability to support our education, our public safety, our economic development efforts, our environmental programs. Iowans depend on state government to be part of the solution on so many public problems, and cutting taxes is not a way to do that.”