In many ways, Governor Terry Branstad’s speech to a joint session of the legislature yesterday was what you would expect when you meet with your financial planner for the first time. After looking over your income and expenditure statements, the financial planner then tells you it’s time to get serious and commit to using a practical budget.
Branstad set a strong tone early when he said, “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 I am now, I think we need to start with a stern talking to.”
For days, Branstad and his team have used the phrase, “austere and somewhat painful” to describe his proposed budget. After seeing the Governor’s proposal, it’s easy to understand why he has used that term. Just like a meeting with a financial planner, there isn’t a lot of fun stuff to get excited about.
Here are some of the highlights.
Branstad’s budget isn’t full of the gimmicks that hide spending from the public. There were 89 programs that were funded by one-time dollars totaling $770 million of spending. Branstad put those expenditures back into the state’s general fund even though Governor Culver didn’t include those dollars in his budgets.
Branstad’s budget holds school spending at the current levels, with no decreases, and puts an end to underfunding the state’s commitment to schools, which has lead to property tax increases. Schools and Democrats are going to howl about not getting an allowable growth increase, but Branstad is smart to make them live with what they have for the next couple years.
All told, Branstad’s proposed budget makes the tough decisions today, so that expenditures can get into line with state revenues in future years. For the past 12 years, Governor Vilsack and Governor Culver would always came into the chamber to deliver promises of state resources, Obviously, those days are over.
Branstad also proposed cutting corporate taxes to a flat six percent, while also maintaining federal deductibility. The plan would not only make Iowa competitive with its neighboring states, but it also might give the state an edge in attracting new businesses.
The only problem is that there is just one catch. To fund the $200 million price tag of the corporate tax cuts, Branstad has to find the money from another source. To fund the proposal, Branstad proposed restoring the gaming tax to the level at which it was originally contemplated years ago.
That’s a nice way to say that he is going to increase the taxes on casinos by a whopping 63 percent. Any industry would be severely crippled by a tax increase of that magnitude. The Republican legislators, who ran on reduced spending, not tax increases, are going to be a tough sell for the administration.
Governor Branstad set the right tone in his budget address, but his reliance on a tax increase could sink his corporate tax overhaul.
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