“The Legislature cannot use this slight increase in revenue as an excuse to spend more taxpayer money. As we’ve learned over the past three years, excessive spending for short term goals is not the answer.

“House Republicans offered $290 million in savings this session and over $600 million in savings in the last two sessions. Spending less, saving more and enacting reasonable savings is the path House Republicans prefer.”

• HSB 728 (Federal Block Grants),
• HSB 733 (Economic Development budget bill),
• HF 2502 (Pension bill) and
• SF 2366 (the second FY 2010 supplemental appropriations bill).

On Tuesday, the Committee approved:

• HSB 731 (Justice System budget bill),
• HSB 732 (Judicial branch budget bill) and
• HSB 733 (Ag and DNR budget bill).

These bills collectively appropriate $712 million for general fund expenditures. This is only 13 percent of the expected general fund appropriations for FY 2011.

The Committee is expected to debate the Health and Human Services budget bill and the Administration and Regulation budget bill on Thursday. Those two bills will appropriate roughly $1 billion Even when that is added to the total, it will mean the Committee has approved $1.7 billion, or just over 30 percent.

Unfortunately, the Democrats continue to refuse to allow Iowans to see the entire budget picture. While some details have come out – including under-funding K-12 education by $170 million, under-funding Medicaid by $200 million, and using $187 million from the Cash Reserve Fund for ongoing spending.

By not disclosing the full picture, the Democrats are depriving Iowans the opportunity to give legislators their opinions on what should be budget priorities. They are also hiding the amount of one-time money being used to balance the budget, which simply pushes off the problems until next year.

House Republicans will continue to demand that the Democrats be transparent with the budget process and explain to Iowans how they intend to close the $1.1 billion general fund spending gap.

House Republicans will continue to review the Democrats’ budget plan to if it does the following:

• The budget does not spend more than the state takes in
• Does not raise taxes, including property taxes
• Proposes real government efficiency and reorganization

In addition, House Republicans will continue to offer budget savings ideas, including the $290 million in reductions offered on Senate File 2088, the State Government Reorganization bill.

This only shows roughly $2.5 billion of the general fund budget. The release shows that the Democrats are $475 million below the Governor in the subcommittee areas and will approve a general fund budget that spends the same amount as FY 2010.

Most of the reduction is in HHS, which would likely be an underfunding of Medicaid. This simply pushes the problem off until January because Medicaid is an entitlement and must be funded.

The release of partial targets does not give a sense of how much K-12 education will be underfunded, how much money will be shifted from the Cash Reserve Fund, or how much tax credits will be reduced.

Because the lack of detail makes it impossible to compare apples to apples, there is no way to know how much of the spending gap is being reduced by due to the budget subcommittee targets.

House Republicans will be reviewing the Democrats’ budget plan to if it does the following:

• The budget does not spend more than the state takes in
• Does not raise taxes, including property taxes
• Proposes real government efficiency and reorganization

In addition, House Republicans will continue to offer budget savings ideas, including the $290 million in reductions offered on Senate File 2088, the State Government Reorganization bill.

“These targets give the public an incomplete picture of the Democrats’ spending plan. However, based on what I’ve seen, it appears that legislative Democrats plan to carry forward Gov. Culver’s property tax increases.

“House Republicans will not support a budget that spends more money than the state takes in. Republicans have outlined over $600 million in cost-savings during the last two years. We will continue to fight for limited government and responsible budgeting as the bills move through the process.”

The Governor assumed $341 million in general fund savings from state government reorganization and efficiencies. This included three parts: Executive Order 20, the early retirement package for Executive branch employees and a package of savings that requires legislative approval.

Senate File 2088 (state government reorganization) reduces general fund spending and raising general fund revenue by $61 million, Senate File 2062 (the early retirement bill) reduces general fund spending by $26 million and Executive Order 20 by the Governor combines general reductions and general fund revenue increases to achieve $88 million in savings. The total savings is $175 million.

That means the Democrats are currently $166 million short of the Governor’s goal for general fund savings on those three items. That has to be made up with additional spending cuts or revenue increases.

The Governor used five other tactics to close the spending gap:

• Appropriating $207.5 million from the Cash Reserve Fund.
• Making revenue adjustments, including reducing tax credit redemptions by $52.5 million.
• Not fully funding the built-in and anticipated expenditures and shifting programs typically funded from the General Fund to other funding sources. ($214 million)
• Reducing the General Fund School Aid appropriation by $170.2 million.
• Not funding the increase for the collective bargaining costs. ($86 million)

There has not been any public comment by the Democrats on whether they will take funds from the Cash Reserve Fund or only underfund K-12 education by $170.2 million. One way to close the $166 million gap would be to underfund K-12 spending by $336 million. Of course, since the spending authority remains, that would mean many schools would have no choice but to raise property taxes.

House Republicans will be reviewing the Democrats’ budget plan to determine if it does the following:

• The budget does not spend more than the state takes in
• Does not raise taxes, including property taxes
• Proposes real government efficiency and reorganization

In addition, House Republicans will continue to offer budget savings ideas, including the $290 million in reductions offered on Senate File 2088, the State Government Reorganization bill.

Last week in the House, the State Government committee worked on the reorganization bill (SF 2088). The bill in its current form saves a little over $70 million.

In order for the Governor’s budget to balance, he needs a minimum $391 million in “general fund” spending reductions. About $30 million of that is expected to come through early retirements. Another $90 million will be achieved through the Governor’s savings that he achieved internally for a total $120 million in savings.

This leaves $271 million that needs to be saved through additional legislative decisions.

While Republicans and Democrats in the House have been able to come together and work on an initial bill in a bi-partisan manner, I believe we have the ability to go further and find even more savings and waste in government.

The following 14 proposals were offered by House Republicans this last week. These ideas totaled an additional $290 million but were defeated on a straight party line vote in the State Government committee.

1. End all state benefits to illegal immigrant adults (savings $92.3 million)
2. Combine administrative functions at the Regents universities (savings $62 million)
3. Shift voluntary preschool responsibilities to Empowerment (savings $45 million)
4. Eliminate the Power Fund and the Office of Energy Independence, reassign responsibilities (savings $25 million)
5. Sell and completely privatize the state general purpose vehicle fleet (savings $18 million)
6. Sell or lease the Iowa Communications Network (savings $15 million)
7. Delay the implementation of K-12 core curriculum for one year (savings $10.5 million)
8. Cancel all Regents sabbaticals for Fiscal Year 2011 (savings $6 million)
9. Cut funding for office supplies, service contracts, equipment purchases (savings $5 million)
10. Eliminate taxpayer-funded lobbyists (savings $4 million)
11. Eliminate the Just Eliminate Lies (JEL) program (savings $2.25 million)
12. Eliminate funding for empty shelter care beds (savings $2 million)
13. Eliminate the family planning waiver (savings $2 million)
14. Eliminate the Rebuild Iowa Office, give responsibilities to Homeland Security (savings $1 million)

Last year, House Republicans offered amendments which totaled over $330 million in government savings which means, with the help of Iowans and their ideas, we dove into the budgets to find over $600 million in efficiencies over the past two years. Not only are Republicans serious about government reorganization, we are serious about a more efficient state government that costs taxpayers less.

Repeal of Right to Work

One additional thing I wanted to make you aware of – late last Thursday in the Labor committee, House Democrats assigned a bill which would gut Iowa’s right to work law (House Study Bill 702). This is yet another attempt by House Democrats to take away Iowans’ choice to join a union.

As many of you know, Iowa’s right to work law guarantees that no person can be compelled, as a condition of employment, to join, not join or pay any fees to a labor union. Iowa’s right to work law has been in place since 1947. This bill is a direct attack on hard-working Iowans’ liberties.

It is simply wrong to tell someone they must give their hard-earned dollars to an organization they have chosen not to be a member of. A union is not forced to represent non-members. Unions chose forced monopoly bargaining. Now they also want payment for providing those sometimes unwanted services.

Under the Democrats’ plan, public employees who are non-union would be forced to pay a fee to the union as a condition of their employment, thus completely gutting Iowa’s right to work law.

The assigned sub-committee members for this bill are:
Rep. Geri Huser (geri.huser@legis.state.ia.us), D-Altoona
Rep. Bruce Hunter (bruce.hunter@legis.state.ia.us), D-Des Moines
and Rep. Lance Horbach (lance.horbach@legis.state.ia.us), R-Tama

Feel free to contact me if you have any additional questions or concerns. You can call my office at (515) 281-3521 or email me at kraig.paulsen@legis.state.ia.us.

The report states that while the Governor says he will close the spending gap by reducing state spending and not raising taxes, he proposes some questionable tactics that leave a mess for the next Governor and the new Legislature.

According to Fiscal Services, the Governor closes the gap using the following tactics:

• Assuming $341.0 million in savings from reorganization and efficiencies. The Governor does not specifically delineate what appropriations will be reduced due to the savings.
• Appropriating $207.5 million from the Cash Reserve Fund.
• Making revenue adjustments, including reducing tax credit redemptions by $52.5 million.
• Not fully funding the built-in and anticipated expenditures and shifting programs typically funded from the General Fund to other funding sources. ($214 million)
• Reducing the General Fund School Aid appropriation by $170.2 million.
• Not funding the increase for the collective bargaining costs. ($86 million)

Here are the concerns that Fiscal Services has with each of the above items:

• “The Governor’s budget recommendation assumes that all savings will impact the General Fund. This is clearly not the case, as stated specifically by Public Works LLC in the Report and as clarified by the LSA through additional research.” (Summary of the FY 2011 Budget and Governor’s Recommendations, Page 50)
• “Under the Governor’s recommendation, the combined reserve fund balance for FY 2010 is reduced to $265.2 million. This is $278.7 million below the statutory maximum balance of $543.9 million or 48.8 percent of the statutory goal.” (Summary of the FY 2011 Budget and Governor’s Recommendations, Page 23)
• “The Governor is recommending unspecified action to reduce tax credit redemptions impacting FY 2011 General Fund net receipts by $52.5 million. The Governor’s recommendation does not target any specific tax credit for reduction or elimination.” (Summary of the FY 2011 Budget and Governor’s Recommendations, Page 15)
• “The FY 2011 General Fund built-in increase based on the Governor’s recommendation totals $199.7 million, while the amount of State aid (including ARRA and Cash Reserve Fund) is $170.2 million less than the estimated amount needed to fully fund the State’s portion of the 2.0 percent allowable growth rate. With no reduction in the FY 2011 allowable growth rate or State cost per pupil, school districts will maintain the budget authority on their portion of the unfunded State school aid. School districts may address the State aid shortfall by reducing costs, borrowing funds, or using cash reserves (which increases property taxes) to replace the State aid shortfall.” (Summary of the FY 2011 Budget and Governor’s Recommendations, Page 63)
• “The Governor does not include a recommendation to fund collective bargaining in FY 2011. In FY 2010, the General Assembly did not appropriate additional funds for salary expenditures. State agencies used existing funds to pay the cost of salaries, including the cost to fund negotiated contracts with various bargaining units, and similar increases for noncontract employees. The total estimated need to fund salary increases for FY 2011 is $143.5 million, including $85.7 million from the General Fund. The estimate includes $60.3 million for the Board of Regents, including $36.4 million from the General Fund.” (Summary of the FY 2011 Budget and Governor’s Recommendations, Page 26)

Prior to the release of the Governor’s budget recommendations, House Republicans said it would review it to see if it does the following:

• The budget does not spend more than the state takes in
• Does not raise taxes, including property taxes
• Proposes real government efficiency and reorganization

Since the Governor’s budget violates all three of these items, House Republicans will now turn the focus to the budget working its way through the Legislature to ensure it follows the three principles.

“I’ve appreciated the bipartisan manner in which we’ve worked on the reorganization bill. I believe we have the ability to go further than the original bill and find even more savings and waste in government,” said State Government Ranking Member Doug Struyk (R-Council Bluffs). “I look forward to continued bipartisan work as we move this bill through the process.”

The following areas are outlined in the Republican amendment:

• Eliminate the Power Fund and the Office of Energy Independence, reassign responsibilities (savings $25 million)
• Eliminate the Rebuild Iowa Office, give responsibilities to Homeland Security (savings $1 million)
• Eliminate taxpayer-funded lobbyists (savings $4 million)
• Cancel all Regents sabbaticals for Fiscal Year 2011 (savings $6 million)
• End all state benefits to illegal immigrant adults (savings $92.3 million)
• Shift voluntary preschool responsibilities to Empowerment (savings $45 million)
• Combine administrative functions at the Regents universities (savings $62 million)
• Eliminate funding for empty shelter care beds (savings $2 million)
• Delay the implementation of K-12 core curriculum for one year (savings $10.5 million)
• Eliminate the family planning waiver (savings $2 million)
• Sell and completely privatize the state general purpose vehicle fleet (savings $18 million)
• Sell or lease the Iowa Communications Network (savings $15 million)
• Cut funding for office supplies, service contracts, equipment purchases (savings $5 million)
• Eliminate the Just Eliminate Lies (JEL) program (savings $2.25 million )

“The Democrats are $263 million short of the Governor’s target to balance the budget.” said Rep. Christopher Rants (R-Sioux City). “It’s ironic to be the one offering the amendment helping Culver reach his goal, but Republicans are here to work in a bi-partisan way to get Iowa’s fiscal house in order.”

“If adopted, these new additions, paired with the original bill, would amount to a total savings of $365 million which is more than what the governor has called for,” said Rep. Christopher Rants (R-Sioux City). “Legislative Democrats are obviously not taking the governor’s budget seriously so today we’re offering $290 million in additional savings. This majority needs to acknowledge the fiscal mess they’ve created.”

No. In addition to general fund appropriations of $5.32 billion, the Governor uses $387 million in one-time money to increase spending:

• $207.5 million from the Cash Reserve Fund
• $37.7 million from the Senior Living Trust Fund for Medicaid
• $48 million in stimulus money for education and general purpose
• $94.2 million in stimulus for Medicaid expenditures

Total spending on general fund items is $5.707 billion

Does the Governor’s Budget Raise Taxes?

Yes. The Governor claims to fund 2 percent allowable growth for K-12 education at $333 million. This is $233 million from the general fund and $100 million from the Cash Reserve Fund. LSA estimates that 2 percent will cost $514 million in FY 2011. Therefore, he underfunds the 2 percent by $170 million. Since the spending authority remains, the $170 million can be made up with in property tax increases. The Governor also proposes other property tax increases by funding the property tax credits below last year’s level and funding the State Patrol out of the Road Use Tax Fund. Both will increase property taxes.

How much is the reorganization savings and is it real?

Unclear. The Governor plugs in $341 million in reorganization savings. Some of the things (IT consolidation, reducing the fleet, eliminating phantom employees) were House Republican ideas from last year. Some of the ideas like increasing unclaimed property and federal grants appear to be dubious at best. Also, $50 million of the savings is for shifting the State Patrol into the RUTF and that is unlikely to happen.

FY11 Iowa Budget Recommendations