Iowa Gov. Branstad Proposes 41% Boost to Education in Annual Address

January 14, 2014

Read text and highlights of every governor's State of the State.

By Rod Boshart

Gov. Terry Branstad proposed a fiscal 2015 budget plan that would increase state general fund spending by $525.4 million -- an amount inflated by commitments to tax relief and education reforms made last session.

The governor proposes to spend slightly more than $7 billion in the fiscal year that begins next July 1. That's an overall increase of 7.8 percent from current funding levels, but shrinks to 5.7 percent when the money to "backfill" local governments for potentially lost revenue is taken into account, said David Roederer, director of the state Department of Management.

It would mark the first time ever that spending from the state's general fund would top $7 billion.

Overall, the governor includes $471 million in adjustments for fiscal 2015 that include $120 million for property tax replacement, $170 million to provide a 4 percent boost in state aid to K-12 public schools, $54 million to implement education reforms approved last session, and $86 million to pick up a greater share of the state's Medicaid obligation not covered by the federal government, Roederer said.

Another $31 million will be needed to fund an increase in the earned income tax credit for working families and $10 million to finance Branstad's proposal to exempt military pensions from state income taxes.

The governor's proposed spending plan would leave the state with a $723 million surplus by the end of June 2015. Roederer said that projected ending balance is expected to decline incrementally in coming fiscal years until settling at about $87 million in fiscal 2019 once the property tax and education reforms are fully implemented.

Education gets the largest share of the proposed spending increase at 41 percent -- including a $19 million increase for the three regent universities that will enable them to freeze instate resident tuition at the University of Iowa, Iowa State University and the University of Northern Iowa for a second straight year.

The commercial property tax replacement represents about a fourth of the recommended spending increases while human services will get a 21 percent boost with the remaining 14 percent spread across state government. Most departments will have status quo funding while the Iowa Civil Rights Commission will see a slight decline that was requested by the agency, Roederer said.

The major budget drivers in fiscal 2015 will be $2.7 billion to cover state foundation aid to K-12 schools, $2.1 billion for wages and benefits and $1.5 billion for Medicaid, according to budget documents issued by the governor's office.

Roederer said overall wages and benefits for state employees are down slightly due to reductions in the workforce. He said the court system has requested a second straight year of 4.5 percent salary increases for state judges and by law the governor is required to forward that request to lawmakers for their consideration.

The governor's budget proposes to spend about 91 percent of the general fund spending capacity of nearly $7.72 billion.

The program areas that Branstad highlighted for funding increases during the 2014 legislative session include efforts to expand the "digital highway" to bring high-speed Internet access to all Iowans, expand skilled workforce services, incentives to keep doctors practicing medicine in Iowa, agriculture initiatives to improve the environment, and nearly $5 million to encourage veterans leaving military service to locate in Iowa.

When all revenue sources that finance general-fund programs are taken into account, Roederer said overall spending in fiscal 2015 would total about $7.496 billion, Roederer said.

That would be a 5.2 percent compared to the current $7.123 billion spending level.

(c)2014 The Gazette (Cedar Rapids, Iowa)