Branstad unveils two-year state budget blueprint

Gov. Terry Branstad today proposed a $6.16 billion state spending plan for next fiscal year that seeks to fund priority areas in education, health care and public safety while paring down and streamlining government operations and providing tax relief for corporations and property owners in hopes of spurring economic growth.

Branstad aides said the overall spending plan would represent a decline of more than $185 million for the fiscal year that begins next July 1.

Branstad's two-year budget plan called for cutting the state corporate income tax in half but replacing the $200 million reduction by raising the tax on casino profits to the 36 percent level they previously were assessed. He also said he was attempting to bring $709 million of general-fund programs that currently are funded by one-time sources back in line with existing state revenues to reflect an honest budget picture.

“With this budget, we have a choice. Do we take the bold and difficult steps, make the painful decisions, and honestly align our spending and revenue? Or, do we kick the problem down the road yet again?” Branstad said in his budget address to a joint convention of the 84th General Assembly. “Fellow Iowans, I didn't come here to avoid tough decisions. No more games. No more gimmicks. No more bail-outs.”

Branstad's budget proposes to cut $194 million in existing programs and save $89 million by not funding salary adjustments and directing agencies to fund operations within line items that could range from status quo funding to reductions of 5 percent to 8 percent – a directive that could jeopardize more than 1,000 employees hired in the wake of an early-retirement incentive program and another 500 who were in the process of being hired when Branstad ordered a halt on hiring other than critical positions. Overall, 36 programs will be eliminated that cost $76 million, he said.

“It will not be easy,” Branstad said of his two-year budget blueprint. “It will require difficult and painful choices. But the pain we endure by fixing our budget today, will lead to great opportunities for Iowa in the future. It will require change. No longer can every organized constituency get what it wants. There is a greater good we are seeking.”

To accomplish his goals, Branstad asked the split-control Legislature to move $770 million of general-fund spending that was funded by one-time revenue back into the general fund.

Branstad's plan would restore property tax revenues of nearly $160 million that were used to cover state school aid expenses but would provide no new growth to K-12 schools for the next two fiscal years and would pare back preschool funding from $71 million to $43 million and apply a means test whereby parents who could afford early childhood education would pay those costs while lower-income parents would be subsidized.

The Republican governor said he planned to convene an education summit this summer of reform leaders in hopes of reaching consensus on how best to retool Iowa's education system. He said his plan would be to convene a special legislative session next year to approve a “bold reform agenda and make good on our new covenant promise to provide our children with a globally competitive education.”

Branstad also called for revamping the state's Department of Economic Development into a new public-private partnership to spur job-creation and economic growth. Branstad aides said governor has proposed eliminating the Iowa Power Fund and dedicating about $25 million for business incentives currently offered via the Grow Iowa Values Fund to keep the focus on expanding renewable energy opportunities while shifting the overall job-creation focus to a new approach that includes easing government regulations that impede development.

“The budget I present to you today cleans up the budget mess that has been made. It cleans out the cobwebs in the closets of government. It sets Iowa on a new course with smaller, predictable, sustainable government. That is nimble enough to respond to needs and small enough to stay out of the way of our job creators,” he said.

To accomplish his goals, Branstad asked the split-control Legislature to move $770 million of general-fund spending that was funded by one-time revenue back into the general fund.

Sen. Herman Quirmbach, D-Ames, an Iowa State University economist, called Branstad's spending plan “ideology dressed up as a budget” that attempted to paint a sour state budget situation as a reason for implementing “draconian measures.”

• RELATED: Text of Gov. Branstad's budget speech