The House Economic Growth Committee concluded its final committee meeting of the session by inviting Iowa businesses to testify on Iowa’s business climate. This idea was included in the House Republicans’ job creation plan rolled out last fall. The meeting marked the first time the Economic Growth committee engaged in an in-depth discussion with the private sector on the struggles facing Iowa businesses as they work to jumpstart the economy and create jobs.

The panelists participating in the meeting were Flora Schmidt of the Home Builders Association of Iowa and Mark Hanawalt of United Equipment Accessories, Inc. Schmidt is the Executive Officer for a state wide trade association comprised of 2200 small, independent business owners representing the construction, development, supplier and subcontractor industries. Hanawalt is the President and CEO of a manufacturing and distribution firm specializing in products utilized by the wind energy industry and various other sectors.

Ms. Schmidt focused her comments on regulatory mandates and the costs associated with complying with regulations adopted by state and local governments. She indicated that whenever a new code or regulation is adopted a substantial investment of time and money is spent in complying with it, and the costs are almost always passed onto the consumer. In the homebuilding industry, this means the cost is passed onto the homebuyer and is realized on the price tag of the house.

Ms. Schmidt also highlighted a number of state legislative issues and government hurdles that will increase the cost of doing business on Iowa’s employers and further exacerbate Iowa’s cloudy business climate including too many regulations versus voluntary compliance programs.

Mr. Hanawalt told a story of how his business started and walked legislators through the expansion process. He also spoke to the issues he believes will enable him to expand further and create additional jobs. A member of the committee asked him about the one thing Iowa can do, or not do, to help his business. His answer? “To put it bluntly, get out of my way. I am going to grow with or without you.”

Mr. Hanawalt spoke about the need to “leave money in the people’s pockets” or in other words, keep taxes low. He suggested that if Iowa truly wants to keep existing businesses here and attract new industries, the state must reorganize its tax code in an effort to reduce taxes across the board. He also emphasized on the importance of predictability in the tax code. Specifically, he said that implementing a long-term business plan is difficult when the state makes a decision to give businesses bonus depreciation in one year and then takes it away in the next.

Other controversial legislative proposals pending in the Iowa House, including labor bills, were discussed. Hanawalt said that every time the state discusses changing Iowa’s Right to Work status or implementing prevailing wage laws, economic development directors in Nebraska and South Dakota contact him asking if he is willing to pick up and move his operations to their state. A stark reality legislators must take into consideration when deciding whether or not to support such proposals.

The message of the meeting is consistent with what I’ve been saying….in order to turn the economy around and put Iowans back to work, the legislature must focus their efforts on policies that foster a positive economic climate. House Democrats must move away from talking about bills that deter business activity such as the bill to repeal Iowa’s right to work law. They must also stop balancing budgets on the backs of Iowa taxpayers.

As always, if you have any questions or concerns, please don’t hesitate to contact me via email at kraig.paulsen@legis.state.ia.us or call my office at (515) 281-3521.

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 Revenue Estimating Conference (REC) met last Wednesday to revise the revenue estimate for FY 2010 and set the revenue estimate for FY 2011. The REC is a panel of three people — Richard Oshlo (Governor’s appointee), Holly Lyons (Legislature’s appointee) and David Underwood (private sector representative, appointed by the other two members).

Recall a fiscal year runs from July 1st through June 30th and we are currently in FY2010.

The previous REC estimate for FY 2010 was $5.843 billion, or negative 1.4 percent compared to actual adjusted FY 2009. The new estimate is $5.438 billion, or negative 8.4 percent compared to FY 09. This is $415 million lower than the estimate used to create the FY 2010 budget.

As a result the Governor ordered a 10% across the board cut. This cut applies to all General Fund expenditures regardless of need or priority. The cut the Governor made is somewhat larger than was necessary in order to hedge against a further reduction in December and possibly provide some backfill next January.

Most Iowans will see the impact of this cut in their property tax bill. Among other things, an across the board cut reduces the state funding for the K-12 education foundation formula. This is the amount the state provides school districts on a per pupil basis. As across the board cut does not reduce the amount of money a school district can spend.

If the state does not provide its statutory share, school districts have three options: cut spending, use reserves or raise property taxes. My expectation is cash reserves will be the first response. However, realize these cash reserves will almost certainly be refilled using the cash reserve tax levy against property.

As a result of the Governor’s actions, Iowans could see their property taxes increase as much as $250 million dollars.

I think this is regrettable. Last spring when this budget was passed we could see all this coming and nothing the REC said or did was a surprise. Even with this information the current year’s spending was the largest in the history of Iowa. We did not have to be in this position.

Additionally, the REC initial estimate for FY 2011 is $5.412 billion, or negative 0.4 percent compared to the new estimate for FY 2010. Because of the promises that have been made, next year is again going to be a very difficult year.

The state has a severe spending problem and it needs to stop. Programs and expenditures need to be reviewed for need and benefit to Iowa. Those that fail the test or are at the bottom of the list need to be eliminated – not reduced by10%.

House Republicans will continue our efforts to offer sensible solutions and reduce spending rather than asking the taxpayers to pick up the tab. Iowans deserve a state government that is effective, efficient and thrifty.

You may recall that during the 2009 legislative session, House Republicans offered over $330 million in cost-saving measures. Nearly all were rejected. Also rejected was a searchable budget database that would allow Iowans to see how the state is spending taxpayer dollars. Targeted and meaningful budget efficiencies are more responsible than resorting to haphazard across the board cuts.

Cuts that potentially could be backfilled through increases in Property tax levies:

Although the 2009 Legislative Session came to an end a few months ago, there is still much that is happening which will affect Iowa taxpayers.

Unless a bill states otherwise all new laws passed this year went into effect on July 1. Some Iowa labor law changes, a few tax provision changes and the implementation of the new sex offender law all took effect on July 1.

June 30th marked the end of the 2009 fiscal year. As I’ve stated in the past, Democrats passed, and Gov. Culver signed, the most spending in the history of our state. So when the books closed on the year yesterday, we shouldn’t have been surprised to find out what a fiscal mess we are in.

The nonpartisan Legislative Services Agency announced that net state revenue came in $161 million below the Revenue Estimating Conference’s (REC) estimate. This news coupled with the historic spending means the 2009 and 2010 budgets are now BOTH out of balance. The 2011 budget (which is the one the Legislature will work on next spring) now has a gap exceeding $1 billion.

My expectation is the Governor will try to transfer what he can and scoop money from where he is allowed, but in the end he will likely be $43 million short. This could result in a special legislative session where legislators are called back to make changes to the budgets.

Be assured, if and when we return to a special session, House Republicans will work to solve this self imposed problem within the money we already have. We will not support raising taxes.

Be further assured that House Republicans will continue to look for ways to rebuild Iowa’s economy through hard-working Iowans not big government as Gov. Culver suggests. It is through Iowans’ efforts not government’s that this economy will rebound.

It was also reported this week by the Des Moines Register that despite taking a pay “freeze,” some state employees will actually see up to a 9 percent increase in salary and benefits. (http://www.desmoinesregister.com/article/20090701/NEWS10/907010357)

In addition to the step raises that state employees will see this new fiscal year, they will also receive an increase in deferred compensation benefits (aka 401K plan) as well as insurance premiums. These benefits add up to an $886,000 and $474,000 increase respectively.

In total these increases will cost $121 million. Only in government does a pay freeze cost the taxpayers over $121 million. House Republicans believe state government should reflect what’s going on in the private sector and this isn’t it.

I will continue to keep you updated on things happening even while we are not in session. While my newsletters will be less frequent during the interim, please check the House Republicans’ website at www.iowahouserepublicans.com or our twitter page @iahouserepubs for constant, daily updates. Also, feel free to contact me at kraig.paulsen@legis.state.ia.us with your questions or concerns.

Tuesday at Midnight was the close of the 2009 session. This is when the Governor had to decide what bills to sign or veto. You have likely already seen some of what was vetoed – especially if it was some piece in which you were interested. But as I told the press … what is more interesting is what he signed.

After all the talk of budget cuts and not raising taxes, the governor just signed what amounts to the most general fund spending in the history of Iowa. I find it truly remarkable that after all the talks of cuts more money was spent than ever before.

I think it was very regrettable that rather than use tough times to make tough decisions this General Assembly used it as an opportunity to grow government.

It is accurate to say Iowa cannot legally spend more than it takes in and House Republicans made sure that law was complied with. So where did this additional money come from? Answer: YOU, of course.

Much of it was “Federal Stimulus Dollars” – or tax payer dollars. Some of it was through increased taxes and fees – or tax payer dollars. And lastly, some of it was diversions allowed because of the Governor’s borrowing proposal, which of course will be repaid with – tax payer dollars.

I have told you this before, but at the risk of sounding redundant, this is not hollow criticism. In addition to not supporting this level of spending, House Republicans offered $337 million worth of what we still believe to be reasonable and responsible cuts in state government spending. Other than a few tokens – the majority party summarily rejected all of them.

The result? Next year your Legislature has to narrow a $1 billion gap between revenues and spending. That’s roughly an additional $333 for every man woman and child in Iowa.

Last week, the State Auditor also pointed out the frightening budget starring lawmakers in the face when we return next year. According to his numbers, this lack of spending restraint created a $1.062 billion spending gap in fiscal year 2011. Even if the remaining federal stimulus dollars are used to fill that gap, the state would need revenue to grow 15 percent to make up the difference. As a point of reference, the most recent revenue growth number the state has is negative 2.8 percent.

The budget woes created by Democrats were even highlighted in a recent article of the Des Moines Register where former state auditor, Richard Johnson said, “There’s only two options: One is to increase taxes, and the other is to reduce spending.”

Republicans will not support increasing taxes. House Republicans contend that just as our families back home are tightening their belts and cutting back, so too should the state government. Over the interim we will continue talking to Iowans about their ideas for budget savings and we’ll be prepared to reach across party lines and work with Democrats to continue to offer reasonable cuts to big budgets.

To read the auditor’s findings, click here:
http://auditor.iowa.gov/press/Briefing_05-18-09.pdf

Also, you may view the auditor’s presentation here:
http://www.youtube.com/watch?v=qvmsvW6fbuY

As we move closer to adjournment for the year, we’ve been hearing that the Democrats may try to make one last go at some big-labor bills that will hurt Iowa taxpayers and our economy.

One issue that seems to be gaining steam is instituting changes to Iowa’s collective bargaining law. The unions want to take away a school board’s authority to get rid of bad teachers. Under the proposal we’re hearing about, current school board rights are at risk. In 2008, the Democrats tried to gut school boards’ rights and this proposal would be similar. They would:

• change the right to let a bad teacher go after the first year of employment with no questions asked. Today, bad teachers who don’t fit in the district don’t have to be re-hired and the school district doesn’t have to go through a long termination process. Legislation last year got rid of this right.
• change the right for the school board to participate in the termination of a teacher. Legislation last year removed the school board as a party to a teacher termination procedure.
• change the right for the school board to appeal the reversal of a termination. Legislation last year said that the government’s administrative law judge was the final decision-maker and the school bard can’t appeal that decision.

It’s time to engage and make your voice heard. Please call your representative at (515) 281-3221 or email them http://www3.legis.state.ia.us/ga/legislators.do?ch=h&ga=83 and tell them not to gut Chapter 20 and protect the rights of our elected school boards.

Last week two significant issues became somewhat clearer. First, the Governor’s bonding proposal was partially revealed. Second, the final budget numbers are starting to take shape. Although there are still significant pieces we have yet to see, it appears the Democrat Leaders want to complete our work this week and adjourn for the year – but at this point I think that will be very difficult.

Bonding

Last week, we were able to see the beginnings of the legislation which will send our state into debt, borrowing between $700 million and $750 million.

It is my understanding that the Bonding Plan includes three separate bills. At this point, we have only seen one complete bonding bill. This is frustrating because as you may recall this was a proposal the Governor proposed 14 weeks ago in his State of the Union address.

Senate File 376 is Part 1 and currently has $175 million in bonding in it. This bill will cost taxpayers $141 million in interest over 20 years. The $175 million is to correct a flaw in the borrowing proposal the Democrats passed last year.

Senate File 474 is Part 2 and has $100 million in bonding in it and will cost the taxpayers $80 million in interest. This is exclusively focused on rebuilding parts of the University of Iowa campus damaged from the floods last summer. These bonds will be backed by tuition.

The last bill is SF 477. We have not seen this legislation but is my understanding that it will total an additional $125 million in borrowing. $100 million of this is for vertical infrastructure that will be determined next year and $25 million for broadband (aka the ICN network).

Over the last two years, Democrats in the Legislature have used well over $200 million in infrastructure dollars for non-infrastructure spending. If the infrastructure fund was used for what it was intended instead of spending it on various non-infrastructure priorities, this borrowing discussion wouldn’t be happening. That means we could be using a pay-as-we-go approach instead of borrowing.

Regardless, plunging our state into debt and borrowing just because we can is not being responsible with taxpayers’ dollars. The Legislature should not saddle our children and grandchildren with debt when we are perfectly capable of paying for the projects on a pay-as-you-go basis.

Budgets

We all know we are facing uncertain economic times. At home, Iowans are cutting back on big expenses, trying to find savings in their own family budgets and living within their means. In Des Moines, things are quite the opposite. Despite hearing about the tough budget cuts the governor has been making, this year the Legislature will pass the LARGEST amount of general fund spending in the history of Iowa … $6.3 billion.

Just to show you how much it has grown, in Fiscal Year 2008 the general fund budget was $5.9 billion. In FY 2009, $6.2 billion and in FY 2010 the budget will top $6.338 billion, an amount of money that has never been spent in our state’s 162 years of existence. I find this remarkable for several reasons, not the least of which is all we have heard from the Governor and the Legislative Democrats is about all the “cuts”.

Now is not the time to be breaking the bank with historic spending levels. Now is the time to conserve. To cut waste. To reinvent government as a more streamlined and efficient entity. When it’s all said and done, House Republicans will have offered up more than $350 million worth of savings. To view some of our savings suggestions, visit the House Republicans’ website at www.iowahouserepublicans.com

Record-setting budgets and a debt plan. These are the solutions that Legislative Democrats have come up with to help our state in this unstable time. Instead of helping the 80,000 Iowans who are out of work find jobs, the plan is to increase government spending.

If taking more taxpayer dollars and having the government spend it were the answer to our struggling economy, then why after increasing spending by a billion dollars over the past two years is our economy still struggling? If government spending was the answer to a strong economy then why are things so tough?

Last week was eventful in the Legislature. It was the second “funnel” deadline and if a non-Appropriations or non-Ways and Means bill that did not make it through a committee in the other Chamber it is no longer eligible for debate as a standalone bill.

I expect this week to be rather eventful also. We seem to be moving towards adjournment for the year but several significant items remain. I continue to be disappointed by the Legislature’s lack of effort towards any bills that help put Iowans back to work. I also have some significant concerns about the budget.

Below is a list of some of the proposals that seem to have some life in them.

Budget
Budget bills are beginning to move. It is unclear what the final budget will look like. What I do know is this: the current budget year is out of balance by $70+ million and next year’s proposed budget does not match with projected revenues and therefore is currently out of balance. My expectation is that both of these will be brought into balance with some combination of federal stimulus dollars, other one time sources, and tax or fee increases. Regardless, it appears there will be significant gaps to fill when the “one time” dollars go away.

Republicans have offered over $215 million in budgetary cost savings. Click here http://iowahouserepublicans.com/republicans-offer-budget-reductions-to-the-fy-2010-budget for the complete list.

Federal Deductibility
Regarding the repeal of Iowans’ ability to deduct their federal income taxes from their state income a new version has been introduced. It is slightly improved, but continues to be a massive tax increase on Iowans.

Based on the information we received from the Department of Revenue the total tax increase on Iowans over the next five tax years equals $460 million.

Tax Year 2009: -$20 million
Tax Year 2010: -$35 million
Tax Year 2011: $154 million
Tax Year 2012: $157 million
Tax Year 2013: $149 million

Further, the plan continues to have “winners” and “losers” in every income tax bracket. Winners are those who will receive a tax cut – winners are those who will see a tax increase.

Individual Filers/ Winners vs. Losers and No Change

Tax Year | Winners | Losers/No Change | % of Winners vs. Losers/No Changes
2009 | 818,921 | 541,108 | 60%winners vs. 40%losers/no change
2010 | 825,496 | 541,506 | 60%winners vs. 40%losers/no change
2011 | 595,650 | 777,322 | 43%winners vs. 57%losers/no change
2012 | 598,747 | 778,738 | 43%winners vs. 57%losers/no change
2013 | 616,275 | 764,954 | 44%winners vs. 56%losers/no change

If we want to get serious about cutting taxes, Republicans are more than willing to work side by side with Democrats to offer REAL tax relief including the lowering of tax rates. However, we are not interested in removing one of Iowans’ largest tax deduction so that state government has more money to spend.

Marriage
In 1998, the Legislature overwhelmingly passed bipartisan legislation protecting marriage as between a man and a woman. On April 3rd the Iowa Supreme Court ruled that this provision is unconstitutional and therefore same-sex marriage is legal in Iowa.

There is now a divide between the legislative and judicial branches and Iowans should be permitted to weigh in and have the final say on this question. Two attempts were made last week to debate this question and both were rebuffed by the majority party leadership. I believe marriage is between one man and one woman and this is an appropriate question for the voters of Iowa to decide.

Repeal of Iowa’s Right-to Work law (aka “Fair Share”)
This proposal did not make it out of a committee and therefore should be dead for the year. I’ll continue to keep my eyes open so that it is not slipped in somewhere. However, it appears the votes are not there to pass it.

Prevailing Wage
This bill remains debatable in the House. However, the vote count appears to continue to be one vote short of passage. There is some talk of it being added into the Governor’s Bonding Proposal. Again, we’ll keep our eyes open and be ready to work against this proposal and the significant property tax increases that would result from its passage.

Doctor Shopping / Employee Choice of Doctor
This bill also continues to remain debatable in the House. But like prevailing wage appears to not have the number of votes necessary for final passage. It is my understanding that a working group continues to work on a compromise proposal. However, some of the differences appear irreconcilable at this point.

Collective Bargaining (Chapter 20) changes
There is no specific proposal before the Legislature similar to the Chapter 20 bill that was passed last year and then subsequently vetoed by the governor. Recall though that there wasn’t last year either until a Chapter 20 “cleanup bill” was brought to the House floor. That very same cleanup bill continues to be eligible for debate this year.

As always, please feel free to contact me if you have any questions or concerns. For a full list of legislators see http://www.legis.state.ia.us/aspx/Legislators/LegislatorInfo.aspx. My contact information is kraig.paulsen@legis.state.ia.us or 515-281-3521.