The Iowa Supreme Court ruled unanimously today that Governor Terry Branstad impermissibly used his line-item veto to strike language about Iowa Workforce Development field offices without vetoing the money allocated to fund those offices.

UPDATE: Added Branstad’s reaction below as well as statements from Iowa House and Senate Democrats.

Branstad announced the line-item vetoes in July, and Iowa Workforce Development moved forward with closing offices in 36 cities during the second half of 2011. Five plaintiffs filed the lawsuit in August: Danny Homan, head of the largest public employee union in Iowa, Democratic State Senators Bill Dotzler and Daryl Beall, and Democratic State Representatives Bruce Hunter, Dave Jacoby, and Kirsten Running-Marquardt. A district court judge ruled in December that two of the disputed line-item vetoes were unconstitutional. The Iowa Supreme Court heard the governor’s appeal last month.

The full text of today’s ruling is available here. Excerpt from the decision by Justice Thomas Waterman (p.3):

This is not an easy case. The legislature failed to use language in section 15(3) expressly conditioning the $8.66 million appropriation on the restrictions against closing staffed field offices. Nonetheless, we conclude the definition of “field office” in section 15(5) qualifies or restricts the $8.66 million appropriation in section 15(3)(b) “for the operation of field offices.” Accordingly, the Governor could not veto section 15(5) without vetoing the accompanying appropriation in section 15(3). We further conclude the Governor impermissibly item vetoed the restriction in section 20 on use of IWD appropriations for the national certificate program.

Simply stated, the legislature appropriated funds to IWD with strings attached, and our constitution does not permit the Governor to cut the strings and spend the money differently.

The district court upheld one of Branstad’s disputed line-item vetoes, saying the provision to which it applied was a “rider” rather than a budget item. The Supreme Court disagreed, saying the provision barring the use of funds for the National Career Readiness Certificate Program was neither overly broad nor a “rider subject to item veto.” (pages 16 and 17)

The plaintiffs had asked the court to declare the appropriations bill law “as if the Governor had not exercised the item vetoes which were herein determined to be void.” Branstad’s attorneys argued that “the proper remedy for an invalid veto of a condition on an appropriation is to invalidate the entire item containing the appropriation.” The district court judge agreed with the plaintiffs, but the Iowa Supreme Court declared the governor “correct on this point.” The ruling explains the court-ordered remedy on pages 18 through 20.

We hold that, when the Governor impermissibly item vetoes a condition on an appropriation during the pocket veto period, the appropriation item fails to become law. This result is mandated by our constitutional requirement that enactments do not become law without the approval of both elected branches except when a legislative supermajority overrides a vet. Here, the Governor did not approve the IWD appropriations with the conditions. Yet, the legislature did not pass the appropriations without the conditions. Thus, the IWD appropriations without the conditions could not become law because the approval of both elected branches was lacking.

So, the court declared that the disputed sections of Senate File 517 did not become law. In other words, the plaintiffs can’t demand that the $8.66 million be used to reopen the field offices–which wouldn’t be practical anyway, since the funding was designed to last through the current fiscal year, ending on June 30.

The ruling won’t revive the Iowa Workforce Development field offices, but it may deter the governor from trying to veto similar conditions in future appropriations bills without also vetoing the money. Democratic candidates in many competitive legislative districts are likely to keep criticizing the Branstad administration’s decision to replace 36 staffed offices with hundreds of computer terminals. The governor has defended the policy as a success that makes government services more accessible to unemployed Iowans.

Branstad appointed four of the seven Iowa Supreme Court justices: Chief Justice Mark Cady in 1998 and Justices Thomas Waterman, Ed Mansfield, and Bruce Zager in 2011. The author of today’s ruling donated $7,500 to Branstad’s 2010 gubernatorial campaign.

UPDATE: The ruling has been posted on the Iowa Supreme Court’s website.

SECOND UPDATE: Radio Iowa’s O.Kay Henderson reports,

Branstad spoke with reporters a couple of hours after the ruling was issued.

“This decision has far-reaching implications,” Branstad said.

Branstad’s aides say the governor may order more than 200 layoffs in the Workforce Development agency, close the few regional Workforce Development offices that are still operating and shut down the on-line services the agency’s been providing to unemployed Iowans.

“The decision is complex and it has implications that need to be reviewed,” Branstad said during that midday interview in Northwood, Iowa. “We want to do the very best thing in terms of providing the best opportunity for people to have access to job opportunities. We’ve been working very hard to get more access to people.”

THIRD UPDATE: First press release issued from Branstad’s office:

Homan lawsuit decision risks closure of all Workforce Development Offices; 200+ layoffs now possible; Court’s decision does not erode the scope of the Governor’s item veto power under the Constitution

March 16, 2012

(DES MOINES) – The Branstad-Reynolds administration today responded to the Iowa Supreme Court decision in Homan vs. Branstad.

“We disagree with the Iowa Supreme Court’s ruling from a legal and policy perspective, but we respect their decision and will abide by it,” said Branstad attorney Dick Sapp. “We are pleased the Iowa Supreme Court’s decision did not erode the scope of the governor’s item-veto power under the Constitution to control spending and serve Iowans who need jobs.”

Gov. Branstad’s program for Iowa Workforce Development has proven to be enormously successful. Gov. Branstad’s actions have led to:

• Expanded hours, making Iowa’s workforce development services available in the evenings and on Saturdays, which was previously not available;

• The Virtual Access Sites have increased the services offered to unemployed Iowans searching for work in Iowa;

• Multiple Workforce Development sites now exist in all 99 counties, providing rural Iowans with convenient access that did not previously exist;

• Nearly 100,000 services have been used since the launch of the governor’s Virtual Access Points;

• Iowa Workforce Development is adding 10-20 new sites all across Iowa every week, and currently has 641 sites with more than 2,000 desktops;

• Iowa’s unemployment rate continues to edge lower, and now stands at 5.4% in January, nearly three percentage points lower than the national 8.3% average.

Now, as a result of Danny Homan’s lawsuit, there is no funding to keep open these vital services for Iowa’s unemployed following this decision.

The irony of today’s Supreme Court decision is that it strikes down a number of appropriations within the Workforce Development department – including funding for all Workforce Development offices, the workers compensation division, the labor division, and the unemployment reserve fund.

“What started as an attempt by Danny Homan to prevent the implementation of a new, streamlined service delivery system that has proven to serve Iowans even better has now, as a result of Homan’s lawsuit, put at risk all of the services our state provides to unemployed Iowans and hundreds of state workers’ jobs,” said the governor’s spokesman, Tim Albrecht.

“The governor is very concerned that these services would no longer be available to those Iowans who need it most,” said Albrecht. “Our unemployment rate is going down as a result our successful workforce efforts – Danny Homan’s lawsuit would increase the unemployment rate and put more Iowans out of work. The governor will continue working for Iowa’s unemployed and workers, and will work diligently to deal with the aftermath of Danny Homan’s reckless lawsuit.”

Later, the governor’s office released this statement:

Governor files motion with Supreme Court to prevent layoffs, keep offices open and continue the delivery of critical workforce services

March 16, 2012

(DES MOINES) – Gov. Branstad this afternoon filed a motion with the Iowa Supreme Court to temporarily stay their decision and thus prevent layoffs of all Workforce Development employees and to continue the delivery of critical workforce services to Iowa’s workers and the unemployed.

Today’s Iowa Supreme decision in Homan vs. Branstad has struck down a number of appropriations within the Workforce Development department – including funding for all Workforce Development offices, the workers compensation division, the labor division, and the unemployment reserve fund.

“Those who brought the lawsuit, with this result, eliminated funding for our Workforce Development services,” said Branstad spokesman Tim Albrecht. “The governor’s action today to stay the decision from this reckless lawsuit is intended to prevent layoffs and maintain these needed services for Iowa’s workers and unemployed.”

Further, Gov. Branstad is committed to working with the Legislature to find a solution that restores funding and maintains Iowans’ access to these vital services.

Gov. Branstad’s program for Iowa Workforce Development has proven to be enormously successful. Gov. Branstad’s actions have led to:

• Expanded hours, making Iowa’s workforce development services available in the evenings and on Saturdays, which was previously not available;

• The Virtual Access Points have increased the services offered to unemployed Iowans searching for work in Iowa;

• Multiple Workforce Development sites now exist in all 99 counties, providing rural Iowans with convenient access that did not previously exist;

• Nearly 100,000 services have been used since the launch of the governor’s Virtual Access Points;

• Iowa Workforce Development is adding 10-20 new sites all across Iowa every week, and currently has 641 sites with more than 2,000 desktops;

• Iowa’s unemployment rate continues to edge lower, and now stands at 5.4% in January, nearly three percentage points lower than the national 8.3% average.

I’ve never heard of staying a Supreme Court decision.

Statement from the Iowa House Democrats:

DEMOCRATS: HELP IOWANS GET BACK TO WORK

Des Moines, Iowa – After the Iowa Supreme Court unanimously ruled today that Governor Terry Branstad illegally shut down 36 job workforce centers across Iowa, Democrats said the Legislature and Governor should work together to reopen the offices and help Iowans get back to work.

“Iowans win with the court decision today. We’re ready to move forward to help underemployed and unemployed Iowans find work.  While we’re disappointed the Governor took this route, it’s time for us to work together to help businesses find skilled workers and Iowans find a good-paying job,” said Rep. Dave Jacoby, D-Coralville, who was a plaintiff in the lawsuit challenging the veto.

“Our system of checks and balances with co-equal branches of government are central to our democracy and the Governor clearly overstepped his authority.  What’s important now is to work together to make sure Iowans who need to upgrade their skills or find a job can get the support they need,” said Rep. Kirsten Running-Marquardt, D-Cedar Rapids.

“The future of our state is dependent on a highly skilled workforce because the jobs of tomorrow require some training or education beyond high school.  The ruling today is an opportunity for Governor Branstad to work with us and redouble our efforts to build a skilled workforce,” said Rep. Bruce Hunter, D-Des Moines.

During the 2011 legislative session, Republicans and Democrats in the Legislature worked together to ensure workforce development field offices were adequately funded and language was included in Senate File 517 directing Iowa Workforce Development to keep their current offices open.  Governor Branstad ignored the bi-partisan work of the Legislature and vetoed funding for the centers and requirements that they remain open.  The Iowa Supreme Court ruled the veto was unconstitutional today.

Statement from the Iowa Senate Democrats:

‘This is a huge victory for Iowans hoping to find a job’

Senators pledge to work with Governor to reopen all offices

DES MOINES – The unanimous decision by the Iowa Supreme Court to overturn Governor Branstad’s veto of a bipartisan effort to keep dozens of local workforce offices is a victory for tens of thousands of Iowans looking for a job, two key legislators said today.

Senator Bill Dotzler of Waterloo and Senator Daryl Beall of Fort Dodge, both plaintiffs on the lawsuit, pledged to work with the Governor to immediately reopen all workforce offices that were illegally closed.

“This is a huge victory for Iowans hoping to find a job,” said Dotzler, the chair of the Senate Economic Development Budget Subcommittee.

“It was a mistake to close dozens of local workforce offices during a severe economic recession and when returning soldiers are looking for work,” said Beall, chair of the Senate Veterans Committee. “Let’s work together to fix that mistake.”

Senate File 517 included specific funding to keep open dozens of local workforce offices that help unemployed Iowans find work. The legislation was approved with overwhelming, bipartisan support during the 2011 regular session.  The state workforce offices help Iowans search for jobs, prepare for interviews, improve their skills and help businesses find qualified employees.

It’s not going to be a “huge victory” if more Workforce Development services shut down. But key members of the House Appropriations Committee said they are willing to help find the funding needed (presumably through a supplemental appropriation).

“I’m ready to meet anytime, anywhere to make sure underemployed and unemployed Iowans have the resources they need to find a good-paying job,” state Rep. Tyler Olson, D-Cedar Rapids, ranking member of the House Appropriations Committee, said in a statement. “Since the governor’s illegal actions have invalidated $20 million we approved for our skilled work force needs last year, we should work together to take quick action on behalf of the 90,000 Iowans still looking for work.”

Rep. Scott Raecker, R-Urbandale, chairman of the House Appropriations Committee, issued a statement through the House Republicans.

“With the announcement of the Supreme Court decision today, we will carefully review the opinion and work with the governor’s office and our colleagues in the Senate to identify necessary next steps as it relates to the appropriations process and work force development,” he said.

FINAL UPDATE: Branstad discussed supplemental funding for Iowa Workforce Development during his March 19 press conference:

“You can’t recreate the past and it doesn’t make any sense to try to recreate the past,” Branstad said. “Many of these leases have, you know, expired and, in fact, we have a better system which is more efficient and providing better services and more access points.”

Workforce Development officials set up an on-line system with “access points” in public libraries, community colleges, National Guard armories and other public sites. Workforce Development counselors are also available by phone on nights and on Saturdays to help out-of-work Iowans who’re searching for a job. Still, some Democrats have said they want to reopen at least some of the 36 regional Workforce Development offices. Branstad’s not ready to indicate whether that’s something he’d approve as part of the emergency fix-it package for the agency.

“I’m not going to try to go into the details of that,” Branstad told reporters this morning. “I’m just saying that the present system that we put in place is better and more efficient, has more access points, and it’s available evenings and weekends and I don’t want to see us go backwards, but I do want to work with the legislature to make sure that we have something that’s more efficient and economical and that administratively can be managed with the resources provided.”