Culver orders 10 percent budget cut (updated)

Governor Chet Culver announced today that he is cutting spending 10 percent across the board in the 2010 budget. The move follows yesterday’s Revenue Estimating Conference report, which projected that revenue will drop by 8.4 percent this fiscal year, leaving state government with $414 million less to spend. Culver said he doesn’t support any tax hikes or increasing the amount drawn from the state’s cash reserves during the current fiscal year.

Republicans have hammered Democrats for allegedly overspending in the 2010 budget, but Culver rightly noted in a statement on Wednesday,

I proposed and the legislature approved a balanced budget for fiscal year 2010, which began on July 1. This budget was based on the official REC estimates from their March meeting last spring. The budget included a nearly $100 million ending balance, and $373 million in reserves.

During an economic recession, it is not prudent to slash government spending by more than is absolutely necessary. Government cuts themselves can become a drag on the economy, and demand for government social services goes up along with unemployment. The 2010 budget was based on the latest REC estimate during the legislative session, so Republicans are wrong to charge that Democrats overspent.

On the other hand, I agree with Republican critics who say Culver should have convened a special session of the legislature to make targeted cuts. An across-the-board cut is the governor’s only way to reduce spending without legislative approval. It’s faster and cleaner than a special session, but in my opinion an across-the-board cut this large will affect essential services at some agencies.

Culver said he will try to find money in December or January to beef up staffing at Iowa Workforce Development, which helps unemployed Iowans find new jobs. He will also try to backfill money for certain areas of public safety, he said.

This midyear cut is off the charts compared with what any governor in recent history has faced, and it will mean unprecedented turmoil for state employees and state agencies.

Part of the reason the cut is so deep is that Culver said he wants to leave a cushion of around $100 million. The current ending balance for this budget year is $97 million. […]

He will appoint Joni Klaassen, deputy chief of staff for aministration, to help unions to address reduction in the state government workforce.

And he will ask the Legislature to require school districts to spend money from their cash reserves rather than raise property taxes.

After spending 24 hours to think about his options, Culver chose an across-the-board cut option, rather than calling state lawmakers back for a special session.

It would have taken too long to bring the lawmakers back to the Capitol, then to secure 51 votes in the Iowa House and 26 votes in the Iowa Senate.

“We would’ve had 150 different opinions on where to cut. […] But the fact is we need to act. We need to move,” Culver said. I was concerned it would literally take weeks and weeks to reach an agreement.”

I understand the need to move quickly, but it seems unfair to make state employees bear almost all of the pain, instead of imposing a combination of spending cuts and reductions in tax breaks. In that context, I agree with yesterday’s statement from AFSCME Iowa Council 61, which I’ve posted after the jump.

Iowa Republican leaders say Culver’s move will lead to higher property taxes, and I wouldn’t be surprised if they’re right about that. What they don’t tell you is that the Republican-proposed spending cuts of $300 million also would likely lead to higher property taxes.

Share any relevant thoughts in this thread.

UPDATE: I should have emphasized that Culver cut spending by more than the amount needed to take the Revenue Estimating Conference’s projections into account. That means that even though he didn’t call a special legislative session, lawmakers will have some wiggle room during the regular 2010 session to restore funding to certain agencies.

I am tired of reading about the “unsustainable” growth in state government spending (e.g. in Todd Dorman’s latest column) that doesn’t acknowledge the unsustainable growth in tax breaks for business in Iowa. Spending on tax credits has risen far more sharply than spending from the general fund.

Click here and scroll down to view the Iowa Policy Project’s report on Iowa’s real spending problem: “tax expenditures on autopilot.” Excerpt from that pdf file:

State business tax expenditures have been one of the fastest growing parts of the state budget. Business assistance tax credits, a major component of business tax expenditures, increased from $144.3 million in  FY2006 to $242.7 million in FY2008, alone. The Department of Revenue has projected that these credits will grow to $405.9 million in FY2010, a 181 percent growth in just four years.1 Once enacted, these business tax credits are not subject to annual reauthorization and can grow well beyond their intended size and for activities well beyond their intended purpose.

This report doesn’t even include the growth in Tax Increment Financing, which I believe accounted for more than $200 million statewide last year. Tax Increment Financing was intended to spur redevelopment of blighted urban areas but during the last decade was expanded to include lots of suburban sprawl development, including Glen Oaks and Jordan Creek Town Center in West Des Moines. The developers get a big tax break, and city and county governments need to collect more property taxes from individuals. I am hoping to get a guest diary posted here that explains this problem in more detail. My point is that the legislature needs to look beyond simply cutting spending and services to make up for the expected revenue shortfall.

In addition to being unfair, it’s not even wise to slash government spending more than you need to during a recession, because that can prolong and deepen the recession. You’ll never get the party of Hoover to acknowledge that, however.

AFSCME Iowa Council 61 statement of October 7, 2009:

AFSCME Iowa Council 61 Statement on Iowa’s Budget Projections

As we find out that revenue is once again lower than projected, it is time to start looking at both sides of the ledger when examining state finances.  Iowa is not alone in its hardship.  At least 48 states have addressed or still face shortfalls in their budgets for fiscal year 2010.  At least 36 states already anticipate deficits for 2011.  The combined budget gaps for all states in the next two years – state fiscal years 2010 and 2011 – are estimated to total at least $350 billion.

We believe that the state needs to look at the full picture and not only study efficiencies that can be made, but should also examine ways to close corporate tax loopholes and re-examine other tax schemes that have not shown evidence that they are growing the Iowa economy.  It is important to remember that Iowans still rely on the services that state government provides, and those needs only grow during these tough times.  Looking at cuts as the only way to balance budgets is short-sided and will only hurt Iowans during and after this recession.

Like all Iowans, AFSCME Iowa Council 61 members have made sacrifices not only during this recession, but have made concessions several times over the past decade.  State workers have faced cuts through the recession of the early 2000s, and once again we have stepped up to the plate taking wage freezes and many have faced layoffs.  Right now, state workers are already doing more with less.  Layoffs and cuts will exacerbate this problem, and those solutions put state workers in dangerous positions when they are understaffed at many facilities.  

Because AFSCME Iowa Council 61 believes that its members who work in state government every day are experts on how to make their workplaces more efficient, AFSCME Iowa members are looking at ways to bring cost savings to government through a wide variety of reforms that they can identify.  AFSCME Iowa Council 61 has formed several working groups to examine how their jobs can be streamlined to save money during lean times.  AFSCME Iowa Council 61 will work with all branches of government to continue to be a constructive part of finding solutions to the current budget problems we all face together.

  • The Regents universities

    This is going to play hell with the Regents.  We’re already halfway through fall semester and the schedule for winter/spring is finalized.  Laying off faculty and canceling classes will cause chaos in Iowa City, Ames, and Cedar Falls.  I have to wonder what dimension of reality an ex-high school football coach like Culver lives in, if he thinks that this won’t produce immense resentment, even outright anger, among the people who are the hardcore base he needs if he wants to get reelected a year from now.  I know that I personally feel dramatically less interest in his political future this afternoon than I felt yesterday, before he pulled this stunt.

    • yeeeah.

      he was obligated to do it. but…. 1. it wasn’t reassuring. 2. its devastating. 3. democratic progress will be gone… sad.

      The GOP stuck around long enough over the last few years and left our economy in ruins and in almost no way to repair it – setting themselves up for a comeback in 2010. how clever, pathetic, and so incredibly sad.  

    • Bingo

      The student body is REALLY going to love those big tuition hikes next fall (if not sooner).

      • someone should look up

        the tuition levels from the 1980s and 1990s. I’ll bet tuition went up quite a bit on Branstad’s watch as well. He was all about cutting taxes for the wealthy when we had the money and cutting services for everyone else when we didn’t.

  • Did you hear that?

    While I was watching the press conference live on KCCI today. I couldn’t help but take in my surroundings. People standing around gasping. People worried in almost a panic – all the while Gov. Culver looked like he was gonna cry the whole time. Then It was people’s clenched fists of rage (AT CULVER).

    Also, I heard something in the background. It was steady and a blunt sounding. Later I realized it was the last nail in Culver’s Re-Election campaign. Sadly, I expect massive losses in the State House and State Senate. Only a sharp uptick in the economy and job numbers could resurrect his Campaign.  

    Sadly, Iowa will be turned over to right wing religious zealots. grrrrreat.  Our fair blue state will turn red. how sad.

    • we have a long way to go

      before next year’s election.

      The economy is in bad shape, and that will cause problems for Culver and many other incumbents. However, there are a limited number of seats the Republicans have a chance to win, even in a big wave.

      • The most damning thing is...

        Even though he asked the Legislature to “backfill” funding for critical areas like health care and public safety…he still cut their budgets, no matter how much gets but back.

        Just wait until next fall: “Gov. Culver cut funding to schools, universities and state patrol by millions of dollars!” I can see the ads now.

        But he wouldn’t call a special session to deal with this. He just kept saying that it wasn’t as bad as the LSA and others said.

        Now he’s made his bed and he has to sleep in it.  

        • by Iowa law

          the budget is based on numbers from the Revenue Estimating Conference. The 2010 budget Culver signed was based on the REC’s numbers from March. I don’t see the value in calling a special session over the summer based on LSA estimates–that would have been a shot in the dark.

          On a different thread IowaVoter pointed out that Democrats are putting themselves in a box by adopting Republican rhetoric against tax increases. The fact is that growth in tax breaks for business has been far more rapid and unsustainable than the slow and steady growth in spending from the general fund. Click here and scroll down to view the Iowa Policy Project’s report on Iowa’s real spending problem: “tax expenditures on autopilot.” Excerpt from that pdf file:

          State business tax expenditures have been one of the fastest growing parts of the state budget. Business assistance tax credits, a major component of business tax expenditures, increased from $144.3 million in  FY2006 to $242.7 million in FY2008, alone. The Department of Revenue has projected that these credits will grow to $405.9 million in FY2010, a 181 percent growth in just four years.1 Once enacted, these business tax credits are not subject to annual reauthorization and can grow well beyond their intended size and for activities well beyond their intended purpose.

  • Culver Cuts

    What about the agencies that have already lost 50% of their staff a year ago?  My department can BARELY function now! Vilsack implemented early retirement incentives for those who qualified and it worked very well a few years ago.  How about cutting out non-essential, lobbyist driven projects ie….bike trails around several DNR state parks! I love state parks but renovating recreation areas seems pretty low on the totem pole right now. Every year we spend an INSANE amount on inmate healthcare, dental reconstruction etc. Nobody pays for my dental!!! The federal government is too busy subsidizing maritime training for after school kids who engage in truancy….think I’m joking, look it up!  Check out a couple of government watchdog sites for wasteful spending and you’ll see how billions of dollars are wasted on frivolous, dead end programs that are spearheaded by congress to pay back campaign contributors.  It’s no wonder you can’t get grant money to keep enough peace officers on the street when you have to spend millions researching manure disposal.  It’s time we take our goverment back and hold politicians accountable.

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