Governor Terry Branstad presents his draft budget to members of the Iowa House and Senate this morning. His staff have indicated he will outline about $700 million in budget cuts, including layoffs of hundreds of workers. Branstad and Republican legislators say Iowa needs to reduce spending by $700 million to make up for the projected budget gap for fiscal year 2012, which begins on July 1.
The facts tell a different story: Iowa has a projected gap of around $263 million for the coming fiscal year. That figure was the Legislative Services Agency’s best guess as of December 2010, but it probably overstates the gap. Congress extended the Bush tax cuts for all income levels, which means higher-income Iowans will not be forced to pay more federal taxes and therefore will not have more to deduct from their state tax returns. With the Bush tax cuts in place, Iowa can expect to collect about $140 million more in state tax receipts for the 2012 fiscal year. That would be enough to cover the estimated cost of the new AFSCME contract Branstad has declared unaffordable.
The $700 million figure Branstad uses assumes Iowa will use more than $300 million from the current-year budget surplus to pay for corporate and other tax cuts. He also wants to reduce commercial property taxes, which will cost the state more money to reimburse local governments. Those are Branstad’s preferences, not policies state government is obliged to implement. It’s not that Iowa can’t afford to continue the preschool program that costs about $70 million per year, or can’t afford any allowable growth in K-12 education budgets. Republicans simply want to do other things with the public’s money.
I am curious to hear what Branstad says about transportation funding today, since he came out this week against passenger rail subsidies but for a future gas tax hike to build more roads. I also wonder whether he will propose any specific reform to tax-increment financing in Iowa. TIF was originally intended to spur redevelopment in “slum and blighted” urban areas but has become increasingly costly for state government and has created inequities in commercial property taxes.
I’ll update this post with details from Branstad’s speech and political reaction after the jump. Meanwhile, share any thoughts about the state budget in this thread.
UPDATE: IowaPolitics.com posted the prepared text of Branstad’s speech. Big surprise: he’s not planning to eliminate appropriations for preschool, just to reduce them to $43 million per year. Further thoughts are below.
FRIDAY UPDATE: At the end of this post I’ve added Senator Rob Hogg’s assessment of Branstad’s draft budget. He notes that zero percent allowable growth for K-12 schools for two years is “unprecedented in the history of Iowa’s school financing formula which was created in 1973.”
Lack of funding for various flood mitigation and watershed management programs also concerns Hogg, a Democrat representing Cedar Rapids and a leading advocate of improved flood prevention efforts in Iowa.
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