The legislative budget process took a step forward this week with release of general fund spending targets for the 2010 fiscal year that begins July 1, as well as House passage of legislation affirming last fall's budget cuts and disaster relief allocations. Reflecting the current economic outlook, the budget targets call for next year's general fund spending to be $75 million below the Legislature's original spending level for the current fiscal year (2009). With little or no fiscal wiggle room, we're going to focus largely on disaster recovery, job creation, and balancing the budget, emphasizing programs that help middle-class working families.
In a typical year, state spending would increase by a few percent, compared to the previous year. But this is not a typical year. When the General Assembly adjourned last April, the state had a projected $82 million ending balance, a $620 million reserve account, and a fairly strong economy due partly to high grain prices. Then we were hit with storms, floods and a national recession. Much of the projected ending balance was spent on flood relief or whittled away by declining revenue collections.
Last fall Governor Culver responded with several rounds of cuts to keep the state budget in balance and to expedite relief to businesses and homeowners in flood-ravaged communities. When the Governor delivered his 2010 budget recommendation last month, he proposed a 6.5 percent cut to most state programs, with certain exemptions for prisons and public safety, teacher salaries, disaster relief, and a few other programs.
This week's legislative targets set spending levels even lower than the Governor.
Now the seven joint appropriation subcommittees will review state programs and look to cut wasteful spending in order to stay within spending targets. In less than a month, the state's Revenue Estimating Conference (REC) will re-convene. If the REC determines that state revenue collections will be lower than the current projection, then lawmakers will likely need to cut further. On the bright side, the federal stimulus package is expected to provide Iowa with $1.9 billion spread over two or three fiscal years, with funding for education, health care, infrastructure, and other areas. We should be able to use some stimulus money to back-fill some of the state's hardest-hit budget areas. At the same time, it appears the recession will last several years so we know we've got to use it wisely and put our economy back on solid ground by creating good-paying jobs.
Though the economic picture is pretty grim all across the country, Iowa is faring better than most. Even after withdrawing $56 million for flood relief, Iowa still has over $560 million in its reserve accounts.
We have a "AAA" bond rating and a lower debt load than almost every other state. Our 4.6% unemployment rate is substantially better than the 7.2% national average. And we're continuing to see some economic growth in a number of areas including high-tech jobs (Google, IBM) and the alternative energy industry sector.
INCREASED FUNDING FOR EDUCATION
This week we passed legislation providing a 2% increase in state aid to schools for the 2010-2011 school year, which equates to an additional
$55.8 million in state aid. Under Iowa's school finance laws, school districts receive a defined budget that is a combination of state aid and local property tax revenues. The school aid formula distributes funding on a per pupil basis. Schools receive an annual adjustment in their per pupil allocation, which is referred to as "allowable growth."
This legislation, managed by Rep. Roger Wendt of Sioux City, chair of the House Education Committee, provides school districts with a 2% increase in per pupil funding for Fiscal Year 2011 (the 2010-2011 school year), which is an increase of $115 per pupil over Fiscal Year 2010. In addition to increasing per pupil funds to local school districts, a second bill increases funding by a total of $7.8 million for teacher quality, professional development and class-size reduction by two percent beginning with the 2010-11 school year. These bills specify funding levels for the 2010-11 school year because state law requires allowable growth to be set more than a year in advance, so school districts can plan their budgets.