Difference over whether to spend surplus money delays adjournment of Iowa Legislature

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DES MOINES, Iowa — At the center of the unresolved Iowa budget is a simple disagreement about how to count the money.

On one side are Senate Democrats and Gov. Terry Branstad, who support using some surplus money to balance the budget. On the other side are House Republicans, who say the state should not spend more than the projected revenue for the fiscal year that starts July 1.

The fiscal clash is part of the reason lawmakers are at odds over how much to spend on individual departments, differing on key areas like education. While Friday marked the final day for lawmakers to receive daily expense payments, they cannot adjourn until they craft a budget deal.

"I'm confident as both sides get budgets in play that we will work to find new ground. I'm confident we can get through this," said Senate Majority Leader Mike Gronstal, D-Council Bluffs.

With the Senate and Branstad proposing overall general fund budgets of about $7.34 billion and House Republicans seeking to spend $7.17 billion, the numbers are not far apart. But resolving the differences will likely take some political skill and creative budget dealmaking.

Gronstal said Republicans had "drawn a line in the concrete" over spending and encouraged them to compromise. His counterpart, House Speaker Kraig Paulsen, R-Hiawatha, said Republicans are happy to have a conversation but likely won't shift their overall spending goal.

"The House Republican caucus is very committed to balancing ongoing revenue with ongoing expenses. It's the one thing that we've said we're absolutely firm on and I don't expect it to change," Paulsen said.

The real budget deadline is June 30, before the new fiscal year begins. In 2011, lawmakers went right up to that brink, squabbling over spending and social issues, making it the one of the longest sessions in Iowa history. Most hope this year won't be a repeat. Branstad said he hopes everyone can reach a resolution in May.

"These are differences that need to be worked out," Branstad said.

The key issue is whether to use a portion of the state's surplus budget dollars. As of the end of this fiscal year, the state will have over $400 million remaining in the general fund — in addition to about $700 million in designated rainy day funds. Under the proposals from Branstad and Senate Democrats, about $160 million in surplus dollars would be used to balance the budget.

Department of Management Director David Roederer said spending some of this money was expected. Two years ago the governor and lawmakers agreed to a substantial commercial property tax cut, as well as new education spending.

"When the governor and the Legislature decided to reform our property tax system which hadn't been changed in 50 years or more and also to reform our education system, it was laid out that for a three-year period of time that additional revenue was going to be needed," Roederer said. "That is why I believe that the Legislature and the governor set that money aside, by putting that in the ending balance."

Under state law, surplus dollars are available for use if the rainy day funds are at a certain level. Democrats have made that argument, as they push for more spending than Republicans. But Paulsen said that doesn't make it a good idea.

"This is the whole debate between what's legal and what's wise," he said.

Guidelines for how much should be held in reserve and when surplus money should be spent varies by state, said Jeffrey Esser, chief executive officer of the Government Finance Officers Association. He said that state governments should have reserve funds to protect against emergencies, but each government is different.

"There is no right answer. The answer that the policy makers in Iowa may come up with might be a different answer than people might come up with in Florida or other states," he said.

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