What is Kim Reynolds' plan to prevent teacher layoffs?

Now that State Senator Kim Reynolds is officially the Republican candidate for lieutenant governor, it’s time for her political views to receive more scrutiny. On the day Terry Branstad announced he had picked Reynolds, she said this:

We have a projected state budget gap of nearly $1 billion dollars.  And we have seen a dramatic slide in student test scores and teacher layoffs in school districts across the state. We can do better.  We must do better.  And, as Terry Branstad’s running mate, I will dedicate my every waking minute to sharing with Iowans his ambitious goals for our future.

She repeated those talking points in her speech to the GOP state convention on June 26. Republicans never tire of the “projected state budget gap” ruse. Reynolds is talking about projections for the budget year that begins in July 2011. Maybe she forgot that the Democratic-controlled legislature passed a balanced budget for the fiscal year beginning on July 1 despite a projected $1 billion shortfall last November. Reynolds also asserted that Governor Chet Culver has “spent too much, taxed too much, borrowed too much” and dismissed Iowa’s AAA bond rating as irrelevant: “That’s like my husband telling me, our checkbook and savings are empty, but we’ve got $15,000 we can still spend on the credit card.” Not really, Senator Reynolds: Iowa has money left in our state reserve funds (equivalent to a family’s savings account), and independent analysts affirm that our fiscal health is strong coming out of the worst recession since World War II. Many states fully depleted their rainy day accounts in response to an unprecedented drop in state revenues, but Iowa did not.

Like Branstad, Reynolds laments teacher layoffs across the state, and like Branstad, she fails to acknowledge that those education cuts would have been much deeper without the federal stimulus money Iowa has received.

Branstad’s not a numbers guy and hated tough budget meetings when he was governor. Having served four terms as Clarke County treasurer, Reynolds should feel more comfortable talking specifics on state spending. Friends have said she was able to save money as a county treasurer without cutting services. She’s campaigning with a guy who promises to veto any bill that calls for spending more than 99 percent of state revenues collected. Let’s see Reynolds produce an alternative budget for the current year that protects K-12 education without “spending too much.”

Details on the budget for fiscal year 2011 can be found here. All Reynolds needs to do is figure out how to spend no more than 99 percent of state revenues projected for the year. In other words, balance the budget without using the $328 million in federal stimulus money (American Recovery and Reinvestment Act funds) and the $267 million in reserve funds that Democrats included in the budget Culver signed into law.

If Reynolds is prepared to criss-cross the state bashing Democrats over teacher layoffs, she should be prepared to show us the education budget Iowans could expect under a Branstad administration.

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Show us your balanced budget, Terry Branstad

Republican candidate Terry Branstad claims he learned from his mistakes in handling the state budget and says he will “put the focus back on restoring fiscal responsibility and jobs and education” if elected to a fifth term as governor. Not only will he abide by generally accepted accounting principles, he promises, he will veto any bill that calls for spending more than 99 percent of state revenues collected.

Independent analysts have vouched for Iowa’s strong fiscal condition, but Branstad and other Republicans cry “overspending” because the balanced 2010 and 2011 budgets relied on some money from the federal government and from Iowa’s reserve funds. Never mind that supporting state budgets, thereby reducing the need for big service cuts, was one of the primary goals of the American Recovery and Reinvestment Act (2009 stimulus bill). Never mind that unprecedented flood damage in Iowa coincided with the sharpest drop in state revenues in 60 years because of the longest recession since World War II. Branstad claims Iowa should not spend more than 99 percent of state revenues collected in any fiscal year.

Last Friday Branstad used a story on teacher layoffs in Des Moines to score political points, ignoring the fact that education cuts would have claimed far more teachers’ jobs if not for the federal stimulus bill. Click here for more information on ARRA funds allocated to Iowa education programs for the 2010 and 2011 fiscal years.

It’s time for Branstad to put up or shut up. He has a well-staffed campaign and a policy director who served in the Iowa House for ten years. Taking the 2011 budget Governor Chet Culver signed as a starting point, Branstad’s team should figure out how to do without the $328 million in federal fiscal aid (ARRA funds) and the $267 million in reserve funds that budget incorporates.

Then Branstad should produce the budget he would have demanded for fiscal year 2011, which would spend no more than 99 percent of state revenues projected for the year. Let’s see how K-12 education, Medicaid, public safety and other services would fare under Branstad’s “responsible” Iowa budget.

Hint: the spending cuts Branstad endorsed during the primary campaign (ending the preschool program, family planning funding, and reducing administrative costs at Area Education Agencies) would not come close to bringing the budget into balance for 2011.

Also keep in mind that the spending cuts Iowa Republican legislators proposed during the 2010 session were padded with wildly inaccurate estimates of how much could be saved on services to undocumented immigrants.

Voters deserve more than platitudes about fiscal responsibility. Let us compare the 2011 budget Iowa Democrats adopted with the one Branstad would have demanded.

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Bring on the clash of the auditors

Was anyone else disappointed that the “major endorsement” Terry Branstad’s campaign hyped yesterday turned out to be State Auditor David Vaudt? He’s not exactly a celebrity, and his stamp of approval only reinforces that Branstad is the Republican establishment candidate. I guess the big deal is that Vaudt normally does not endorse in competitive Republican primaries, but when I think “major endorsement,” I think game-changer, and Vaudt doesn’t fit the bill.

At yesterday’s press conference, Vaudt cited several of Branstad’s accomplishments as well as his proposals for the future. For example, he praised the 1985 government reorganization. It takes guts for Branstad to keep bragging about “cutting out half the state agencies” when Iowa’s general fund budget increased by 166 percent during his tenure, and the number of state employees increased by about 15 percent (from 53,342 in 1983 to 61,400 in 1999).

Vaudt also credited Branstad with implementing budget reforms to use generally accepted accounting principles, establishing the rainy day fund, spending no more than 99 percent of expected revenues, and leaving Iowa with a $900 million surplus in 1999 (which happened to be near the peak of an economic cycle). As State Representative Chris Rants has noted, Governor Branstad wanted to spend more:

Republicans were unwilling to go along with Branstad’s desire to spend more money – a fact he forgets when he talks about how much money was left in the reserves when he left office as it was only there because the legislature wouldn’t agree to his spending plans.

Vaudt praised Branstad for promising to reduce the cost of state government by 15 percent. We still haven’t seen specifics about how Branstad will achieve that. The 2011 budget was adopted in March; it’s past time for Branstad to tell us which services or programs he would eliminate to put us on track to reduce the size of government by 15 percent. Cutting funds for preschool programs, family-planning services and Area Education Agencies administrators won’t be nearly enough to keep his promises on spending.

Vaudt’s endorsement invites questions about Richard Johnson, who was state auditor during most of Branstad’s time as governor. Johnson famously endorsed Fred Grandy during the 1994 Republican primary and now co-chairs Bob Vander Plaats’ gubernatorial campaign. Asked about Johnson yesterday, Branstad said,

“First of all let me say, I’ve learned a lot.  Dick Johnson made some valid criticisms back in the 80’s when the Democrats were in control of both houses of the legislature.  As a result we put together the Committee to Reform State Spending in 1991 and passed the spending reforms.  I didn’t just accept the legislature saying, ‘That’s all we can do.’  I brought them back twice in 1992 until we got all the spending reforms.”

Branstad went on to say that, after Republicans got control of the Iowa House in the 1992 elections, they passed the 99% spending limitation, and he strictly enforced that limit the rest of the time he was in office.

Whatever reforms Branstad enacted in 1992 weren’t enough to satisfy Johnson two years later. Johnson also called out Branstad for misleading claims about reducing the size of government. Chet Culver’s campaign released several news clips yesterday about Johnson and Branstad, including this one:

The Cedar Rapids Gazette reported that “Where Branstad claims a 16 percent reduction in the number of management employees in state government, for example, Johnson contends the reality is that jobs weren’t eliminated. Titles were changed. ‘The people and the payroll are still there.’” (Cedar Rapids Gazette, 6/4/1994)

I posted the Culver campaign’s release after the jump for those who want to stroll down memory lane about Branstad’s record on fiscal issues.

Speaking of Branstad’s accountability problem, the Des Moines Register reports today that he spoke out publicly for a racetrack in Cedar Rapids in 1984. Branstad recently criticized Governor Chet Culver for advocating approval of four new applications for casino licenses. He claims that unlike Culver, he never directly contacted members of the Racing and Gaming Commission to urge approval of the Cedar Rapids racetrack. I highly doubt that the commissioners were unaware of then-Governor Branstad’s opinion. Most governors make their views known to state commissions via backdoor channels.  

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More grim economic news

Sorry to bring you down on a Friday afternoon, but the Iowa Revenue Estimating Conference released new estimates today, and it ain’t pretty:

The conference estimated that the current year’s revenues will sink by $129.7 million compared to its December estimate. Revenue for the budget year that begins July 1 will drop by $269.9 million.

The drop is in addition to December’s estimates, which cut $99.5 million in the current year and $132.6 million in the fiscal year that begins July 1.

Charlie Krogmeier, Gov. Chet Culver’s chief of staff and a member of the conference, said federal stimulus money may help offset the blow but that the dramatically lower estimates will leave lawmakers with tough options.

It would be difficult to find enough job cuts and furloughs in the current fiscal year to fill the gap. The fiscal year ends June 30, in roughly 10 weeks. […]

House Majority Leader Kevin McCarthy […] and other Democratic leaders noted on Thursday that they were already planning a budget that was $130 million less than Culver’s in the upcoming fiscal year. It’s unclear how they will make up the additional $270 million loss for the current and upcoming year.

Clearly difficult choices lie ahead. I urge Iowa leaders not to implement spending cuts alone, because cutting government spending too much during a recession can make things worse.

I was encouraged to read recently that legislators are looking carefully at all of the tax incentives Iowa provides. The combined effect of all these tax incentives is larger than all state spending:

There are at least 191 tax breaks for income and sales taxes that cost or prevent Iowa from collecting almost $7.2 billion, according to a 2005 review by the Iowa Department of Revenue and Finance.

That’s more than total state spending, which is projected to be $7.1 billion next year.

Not all of these tax breaks provide good value for the lost revenue, and not all of them can be preserved with the budget shortfall we’re facing.

In other unpleasant news this Friday, the Principal Financial Group, one of Iowa’s largest employers, announced pay cuts between 2 and 10 percent, which will affect all employees, management and the board of directors. Some benefits will also be reduced.

Principal already imposed a large layoff in December, and I think they are doing the right thing by reducing pay rather than cutting more jobs now. Labor market specialists differ on whether it’s better for companies to cut pay or lay off more workers in lean times. Click here to read some arguments for reducing pay, or click here for the pro-layoff argument.

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