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2011 Iowa Budget Address: Gov. Terry E. Branstad

posted on January 25, 2011

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Only days removed from taking his fifth oath of office, Governor Terry Branstad begins to tackle one of his biggest obstacles, a balanced budget for the state of Iowa. With a busy legislative session underway, Governor Branstad unveils his budget priorities to a democratically controlled Iowa Senate and a republican led Iowa House. From a joint session of the Iowa General Assembly at the State Capitol in Des Moines, this is the 2011 Budget Address.

Borg: This is the House of Representatives chamber at the Iowa Statehouse where members of the House and Senate are now convened in joint session to hear Governor Terry Branstad outline a fiscal plan for state government. Hello, I'm Dean Borg. The 2011 Budget Address comes as the General Assembly begins crafting a new state budget taking effect July 1st. The Governor has just been announced here at the chamber by the Sergeant at Arms Maynard Boatwright and the President of the Senate Jack Kibbie has invited him to come on down the aisle. I believe that the Governor is now entering the chamber and we'll be seeing him as he greets the people along the aisle and those who are seated in the well.

Borg: Republican waves swept the country and the state nearly three months ago and now the very real job of governing is underway. Some financial estimates peg the coming state budget shortfall anywhere between $300 to $700 million. Even before today's speech Governor Branstad is saying that Iowa schools will not receive additional funding and that various state agencies could lose both appropriations and employees under this new budget. In this address we're expecting the details and the rationale. Now, Governor Branstad is entering the statehouse chamber, a familiar setting for this Forest City, Winnebago County native because he once served in this chamber as a state representative. Governor coming to the lectern. He will be introduced by the Senate President Jack Kibbie of Emmetsburg.

Kibbie: It is my distinct pleasure to introduce Governor Terry Branstad for his budget message for the 2011 session of the 84th General Assembly. Welcome Governor.

Governor Terry Branstad: Thank you very much. I want to begin, first of all, by congratulating Lieutenant Governor Kim Reynolds on becoming a new grandmother again yesterday. Grandson Wyatt was born yesterday afternoon so congratulations. (Applause) Mr. President, Mr. Speaker, leaders, justices and judges, legislators, elected officials, distinguished guests, family, friends and fellow Iowans, I am humbled to stand before you once again as your governor in this, the people's house. It is here that our forefathers set the direction of our state, educating our kids, building our roads, protecting our citizens, caring for the unfortunate and they did so by being careful with our tax dollars and balancing our state's budget.

In this storied chamber I cut my political teeth as a young state representative learning both to advocate my position and respect my adversary, to disagree without being disagreeable, to listen because that is the only way to learn. Because at the end of the day, we are all Iowans working hard to make our special state an even better place. Let us never forget why we're here, to do the people's business as their servants with respect and dignity and good will. Today I stand before you to present the state's budget for the next two years. But at the risk of sounding a bit like the grandfather that I am now I think w need to start with a stern talking to.

When I began preparation of this budget I was handed a list of dozens of programs, 89 to be exact, that had been funded with money that we no longer had. Everything from paying teachers to state troopers had been funded with one-time money, nearly $900 million worth. Now, you wouldn't run your family budget that way. If you did so, you'd soon be visiting the bankruptcy court. And we should not run the people of Iowa's budget that way either and with that budget and with this budget it will come to an end now. (Applause)

I understand that this budget method of borrowing from Peter to pay Paul didn't just happen overnight. I understand that it has been building over at least ten years. But that doesn't make it right and that doesn't mean we can ignore it for another decade. You see, if we don't fix it the very integrity of government is threatened. When we over promise and under deliver time after time we erode, like a corrosive acid, the ties that bind society. And our ability to do those things we desire, to educate our kids, caring for the sick, protecting the vulnerable or improving our ability to create jobs will be lost in a sea of red ink. It is our responsibility as servant leaders to pass a budget as honest, frugal and balanced as the people it serves and the time is now to do it. (Applause)

The rebounding agricultural economy gives us a unique opportunity to bind up Iowa's budget woes quickly and we must not squander that opportunity. It will not be easy. 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. We must restore predictability and stability to our state budget, ensure our decisions are sustainable for the long-term and set the stage for a period of unprecedented economic expansion. It is the taxpayers, not the interest groups that we must protect. (Applause)

So the budget I present to you today cleans up the budget mess that has been made, it cleans out the cobwebs from the closets of government. It sets Iowa on a new course with a smaller, predictable, sustainable government that is nimble enough to respond to the needs and small enough to stay out of the way of job creators. And we do it by, first, $770 million of general funds spending that was funded by one-time revenue is moved back into the general fund where it belongs once and for all. (Applause) This is an honest budget that matches spending with ongoing revenue, it funds our commitments to schools, healthcare for the poor and elderly and troopers with funds that won't evaporate in a year. (Applause)

Second, this budget provides $160 million, nearly $160 million in direct property tax relief to Iowans. It fully funds the state's share of the school funding commitments erasing the need for local school districts to make up the difference by raising property taxes. Iowa property taxpayers have paid a high price for the state's past practices and it's time that we make them whole.

Third, this program and the budget make it clear that Iowa is ready for job creation. We all know that small businesses are the engines of our growth yet our small businesses pay an income tax rate that is the highest in the nation at 12% and our small businesses pay commercial property taxes as high as those in mid-town Manhattan. This budget will make us competitive for new jobs. The small business income tax rate will be cut in half to a flat 6%, commercial property taxes reduced by 40% over the next five years. New investments will immediately be taxed at only 60% of their valuation and existing property will be rolled back 8% a year over five years. My plan includes funding for these tax cuts through the use of new revenue coming into the state due to economic growth, the additional revenue generated by the extension of the Bush tax credit, of the Bush tax cuts and by a restoration of the gaming tax to the level at which it was originally agreed to years ago.

I will be bringing forth legislation also to transform our current Department of Economic Development into a public-private partnership. This will be a partnership that unshackles our economic development efforts from an alphabet soup of bureaucratic programs and brings the best practices of both the public and private sector to recharge our job creation mission. And I intend to give that new partnership new tools to market and sell our state to job creators. I have asked each of our department and agency heads to do a top to bottom review of all administrative rules and regulations to determine how we can best fulfill our responsibilities while eliminating the impedence to job growth.

While tax policy can take us a significant way forward in our efforts to compete for new jobs, much of that work can be undone by a bureaucracy that fails to understand the critical relationship between burdensome regulation and job creation. The rules and regulations identified through this process will be the first subjected to our proposed rolling sunset and I will further order all future proposed rules and regulations to contain a jobs impact statement so we can identify those that cost jobs before they impact Iowa employers. We have wrung our hands over these issues long enough. Now is the time to make Iowa's Main Streets truly open for business with the jobs that we so desperately need. It is only by these actions that we can assure the growth that we need to fund our future state budgets. Many new governors all across America are aggressively moving to reduce tax and regulatory burdens to spur new job growth and I want to position Iowa to be the leader. (Applause) No one will work harder to bring new jobs to Iowa than me, Lieutenant Governor Reynolds, Director Durham and our entire economic development team.

Fourth, we must reduce the size and scope of government. State agencies and local governments must break down the silos that divide them. Services must be shared so that Iowans needs are met. Costs must be reduced. We can no longer afford to pay 46% more for public services. The collective bargaining law must be changed to recognize the rights of the taxpayers and we, the leaders of our government, must do a better job of managing our scarce resources. (Applause) Over the last two months, Lieutenant Governor Reynolds and I have been actively working with our management team reviewing the current budget in excruciating detail. In fact, the Lieutenant Governor and I have taken the time to personally review every line item in the state budget so we can look Iowans squarely in the eye when we tell them we simply have too much government and the status quo is no longer a viable option. With this budget, we have a choice. Do we take the bold and difficult steps, make the painful decisions and honestly align our spending with our revenue? Or do we kick the problem down the road yet again. Fellow Iowans, I didn't come here to avoid the tough decisions. No more games. No more gimmicks. No more bailouts. (Applause)

Fifth, we must have a budget for the long-term. This budget doesn't solve all of our problems overnight. No budget can. But it puts us on a path of sound budgeting principles and we must stay on that path by resisting the temptation to push our obligations to the next generation. I plan to insist on budget discipline. The results of our past budgeting practices have led to across-the-board cuts and a mountain of broken promises. The days of unsustainable commitments are over. (Applause) And it will come as no surprise to any of you that I'm submitting a bi-annual budget that includes my recommendations for fiscal years 2012 and 2013. Also included with this budget is a five-year financial projection that shows how the decisions we make this year impact the bottom line for the next five years. Iowa desperately needs financial planning tools that we have in this budget and I will insist that the legislature join me in this commitment to provide Iowans with an honest, open, transparent approach to spending the public's money. (Applause)

We will make our government as good, as dependable, as well managed as the people that it serves. How do we accomplish our goals? We cut unnecessary spending, programs that have passed their time are eliminated and others are modified to make sure that those in need are those that receive government help. Every area of state government will be asked to share in this sacrifice. I have appointed a collection of very talented leaders for our state departments and agencies and I have charged them with re-making government at all levels define more efficient and less costly ways to deliver services of our, to deliver state services to our citizens. While school systems across the country are reeling with massive budget cuts, this budget for the next two years holds school spending authority at the current level. No increase, no decrease but with an assurance that we can deliver on this promise and allow our creative school leaders more flexibility and an opportunity to make things work. And let's not forget even while holding school spending authority at the current level, last year the state underfunded its commitment by $156 million. Local school districts were left holding the bag with little choice but to levee additional property taxes to make up the difference. This budget funds that commitment with state dollars and provides direct property tax relief to Iowans. (Applause)

But education isn't all about dollars and cents, it is about our children and our willingness to take the steps necessary to reform our schools and make them the best in the world. To that end, I will convene an education summit this summer to bring together the nation's most dynamic education reform leaders. These national leaders will work with our new education policy team and strive to reach a consensus on what changes are needed to give our children the nation's highest quality schools. Should we reach that critical consensus, and I have no reason to believe that we won't, I will convene a special session of the Iowa legislature in the fall of this year to approve our bold reform agenda and to make good on our new covenant promise to provide our children with a globally competitive education. (Applause)

In addition, I can not leave the education discussion without renewing my commitment to ensure that every Iowa child has access to quality preschool. This budget proposes a $43 million dollar ... (Applause) ... this budget proposes a $43 million annual investment in providing preschool assistance to those families in greatest need. Research shows preschool investments have the most long-lasting impact on children who come from homes with financial need. As such, our program will be targeted to those families and will give parents flexibility to choose the preschool environment that best meets the needs of their children. But we can not do it alone. All across this state parents, private donors and caring organizations have, for years, partnered with preschool providers to ensure access. I am happy to have the state of Iowa join them as a partner, not as a sole provider. (Applause)

My fellow Iowans, what I have brought forward today will not be easy but it is all necessary. We must put an end to the budget practices that failed our people and brought unprecedented instability to the delivery of critical state services. We must adopt a long-term budgeting practice that provides decision makers with an early warning system of coming budget cliffs and time to make adjustments and prevent service disruptions. We must cut real spending out of the state budget and challenge our department leaders to re-make state government in a manner that provides services more efficiently and at less cost. We must provide financial stability to our schools while we engage in a historic effort to reform our schools and restore our pre-eminence in educational performance. We must fund more of our property tax credits and obligations and provide Iowa taxpayers with nearly $160 million in much needed property tax relief. We must reduce small business income and property taxes and eliminate rules and regulations that cost us jobs. If we have the courage to do these things and do them now I am confident Iowa will be the leader in America's economic recovery. (Applause)

The more than 100,000 Iowans that are unemployed deserve nothing less than our best efforts and we have an obligation to take the bold and decisive actions necessary to dramatically improve Iowa's ability to compete for new jobs. When God made his covenant with Abraham and his people many years ago it was a covenant that required immediate and significant sacrifice in return for a promise of incredible abundance. However, that abundance was to be years and even decades in the making. Our new covenant between this state and its people does indeed require significant, immediate, shared sacrifice. But as with Abraham and his people, the people of Iowa can expect that our efforts will lead to tremendous abundance which we, our children, grandchildren and future generations of Iowans will enjoy. I stand before you today older and wiser than when I first set foot in these chambers. But I am no less passionate about our state's future. If we make the right choices the days before us will be ones of abundant growth and new jobs, enough abundance to bring back our sons and daughters and those who wish to join us, enough abundance to meet the needs of our kids, our elderly and the sick and the vulnerable, enough abundance to make the future the golden years in our state's history.

We stand at the crossroads of history. Which path will we take? I know that this institution is fueled by compromise but we can not compromise on the future of Iowa. (Applause) Our state will be driven by the right policy choices and I will fight with all of my political might to make sure we make the right choices. We are the fortunate few. We have been chosen by the people to do that is right. Let us be motivated by the better angels of our nature for the good of all Iowans. Together we will accomplish great things. Thank you. God bless you and God bless the people of Iowa. (Applause)

Borg: With that, Governor Branstad concludes a very stern address. In fact, he warned the General Assembly as he opened he was going to deliver a talking to and what he was referring to there is that the state of Iowa has been spending in the last budget year federal stimulus funds and the Governor is saying that 89 programs were funded with one-time money, $900 million and that has left a big budget hole for this General Assembly to fill. It was a very austere budget that he outlined. He said no more games, no more gimmicks, no more bailouts. He said we must restore predictability and stability to state budgeting. One of the things that he did also, in addition to the very austere budget that he is outlining here, he is proposing some major changes in Iowa's competitive advantage for new industries and businesses to locate in Iowa, cutting the corporate tax rate to a flat 6% like 32 other states have a flat 6%. That is cutting the corporate tax rate about in half.

Borg: Senator Bob Dvorsky of Coralville is the chairman of the democratic controlled Senate appropriations committee and he joins us now. Senator Dvorsky, what did you like about it?

Senator Bob Dvorsky: Well, I like the -- early on he was talking about bringing all Iowans together and treating everyone with respect, dignity and goodwill and I think that is a good way to start off the speech.

Borg: But that was just the beginning. If that is the thing you liked the most, the real meat of the speech you didn't like then?

Senator Bob Dvorsky: The end he also called for all of us working together also.

Borg: Well, then tell me what you didn't like.

Senator Bob Dvorsky: Well, I think it's really kind of an irresponsible speech in that we're coming out of this recession, our revenues have now stabilized and they are moving upward. I think it's time to go back and reinvest in education. I think this budget really shortchanges this in a lot of areas. He is underfunding the preschool by about half, he is not putting money, zero growth in K-12. That hasn't happened since 1973 when Chuck Grassley and Al Stromer started the school aid, republicans. We haven't had a zero ever so I think that is really underfunding K-12. I think he is underfunding the Regents, private schools and community colleges. So, I think we need to reinvest in our education system, not take money away from it.

Borg: Senator Dvorsky, you must not be subscribing to the fact that Iowa doesn't have the money to do that.

Senator Bob Dvorsky: We do have the money. We don't have the political will. As I said before, the revenues have been coming in better than before, we're in pretty good shape, we just need to have the political will to do that.

Borg: Well, then what about the cutting of corporate tax rates?

Senator Bob Dvorsky: Well, that is one, if you don't cut corporate tax rates and you use that money you can invest that in education. That is the trade off.

Borg: So, you would not, you don't think that Iowa is operating right now as a disadvantage in attracting business and industry to the state with higher than other state's corporate tax rates?

Senator Bob Dvorsky: We can always look at tax rates but if it is a trade off between education and lowering corporate tax rates I think we lose.

Borg: The other thing that I would ask you about is that it was a very strong statement, he didn't say much about it but he said in order to protect taxpayer's interests, Chapter 20, which is the collective bargaining law in Iowa, needs to be changed. I would guess that's something that you didn't like too.

Senator Bob Dvorsky: The collective bargaining law was passed under republican Governor Bob Ray and republicans from control of the legislature at the time so it has worked since 1973 really well across the state so I don't see needs for change.

Borg: Thank you, Senator Dvorsky.

Senator Bob Dvorsky: Thank you.

Borg: Well, that concludes the 2011 Budget Address. You can watch Governor Branstad's message to this joint session of the Iowa General Assembly online. It is at our Web site, iptv.org. And then stay with Iowa Public Television for more political programming ... tomorrow on Iowa Press we'll be questioning Iowa Senate Democratic Majority Leader Mike Gronstal of Council Bluffs. You'll see Senator Gronstal on Iowa Press at the usual times, that is 7:30 Friday night and 11:30 Sunday morning. From the Iowa Statehouse in Des Moines, I'm Dean Borg, thanks for joining us today.


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