The Iowa House and Senate finally passed a budget and got out of town yesterday with only about eight hours remaining before the end of the fiscal year.

Every legislative session has its own dynamic, and I’ve been thinking about what surprised me most about this year’s maneuvering in the capitol.  

Last week I highlighted the half-truths and misleading arguments that underpin Iowa Senate minority leader Paul McKinley’s case against Democratic governance in Iowa. I wasn’t planning to revisit the Republican leader’s fantasy world until I read the July 16 edition of his weekly e-mail blast. McKinley claims to offer five “big ideas” to “make Iowa again a state where jobs and prosperity can flourish.”

His premise is absurd when you consider that CNBC just ranked Iowa in the top 10 states for doing business (again), and number one in terms of the cost of doing business. Many of McKinley’s specific claims don’t stand up to scrutiny either, so follow me after the jump. There’s also a poll at the end of this post.

When Terry Branstad formally announced his candidacy in January, cutting the size of state government by “at least 15 percent” over five years was one of his central campaign promises. He needed to establish credibility with the Republican Party’s conservative wing after his record of growing the state budget by far more than the rate of inflation during 16 years in office.

Branstad repeated his intention to cut state government by 15 percent in his early television commercials and on the campaign trail all winter and spring. He never provided a road map for keeping that promise, however. The budget cuts Branstad has specifically proposed so far (ending the preschool program, family planning funding, and reducing administrative costs at Area Education Agencies) would not reduce state budget obligations by 3-4 percent in the first year, which would be needed to work toward a 15 percent reduction over five years.

Since the June 8 Republican primary, Branstad has continued to hammer Governor Chet Culver on fiscal issues (using false claims), but to my knowledge he’s avoided mentioning that promise to shrink government by 15 percent over five years. Nor have we seen any details about how Branstad would balance the budget while spending no more than 99 percent of projected state revenues.

While campaigning in Marshalltown this week, Branstad made an extraordinary pledge:

Branstad said that if elected governor again, he would look at moving some of the services that have been pushed onto the local governments, particularly mental health and school funding, and making those more state funded. Along with that, he would put on a caveat that mandates those levies be abolished, which he said would provide instant property tax reductions for all classes of property across the board.

He said he did something very similar when he was governor before, but critics have since tried to distort his record on those issues.

“That was property tax relief and they called it spending,” he said.

Branstad is borrowing one of Bob Vander Plaats’ key economic ideas here: helping counties provide property tax relief by having the state assume responsibility for mental health and some educational services. As a campaign tactic, it makes sense, because Vander Plaats nearly matched Branstad’s vote total in Marshall County and carried several nearby counties (click here to download the GOP primary results by county).

But think about this for a minute. Branstad now proposes to have the state take over some big new funding obligations. How would he pay for that? He supports at least $80 million in corporate tax cuts and appears to reject using federal funds or reserve money to help balance the budget.

Maybe Branstad hopes that Iowans will forget his earlier campaign promises. But it’s past time for Branstad to show how he would make the numbers add up. The final budget for fiscal year 2011 is now in effect. Let’s see a rough budget document for fiscal year 2012, which doesn’t dip into reserve funds, cuts general fund spending by 3-4 percent, and has the state take on more responsibility for funding mental health and education services.

Speaking of state budgets, did anyone else notice the Branstad campaign’s silence last week regarding Iowa’s improving fiscal condition? The Legislative Services Agency and the Department of Management both reported better than expected revenues and a larger surplus than anticipated at the close of FY 2010. The Branstad campaign said absolutely nothing. We know his staff keeps track of such reports, because a few days earlier they jumped all over a draft Legislative Services Agency document on school districts and property taxes.

Branstad has a habit of ignoring inconvenient facts. We’re still waiting for him to say something, anything, about numerous documents showing he and senior staffers did Republican campaign work on the public’s dime.

Terry Branstad’s campaign started running a new television commercial statewide yesterday. The ad repeats the same revisionist history and false claims Branstad’s been pushing for months.

The commercial can be found after the jump, along with some fact-checking.

Later today the three Republican candidates for governor will hold their first debate. When discussing state fiscal issues, they are likely to advance two contradictory arguments. First, they will criticize alleged “overspending” by Iowa Democrats, ignoring the good marks our state has received for fiscal management and the fact that severe state budget cuts would be a big drag on the economy. I will address those points in a future post.

Second, the Republican candidates for governor will criticize spending reductions Democrats included in next year’s budget, on the grounds that those cuts will force corresponding increases in property taxes statewide. It’s true that many Iowans will pay more in property taxes because of changes related to the “rollback” calculation, which “determines the percentage of a property’s actual value that will be taxable” in a given year. Former GOP gubernatorial candidate Chris Rants explained here why the rollback figure is on the rise. It has nothing to do with the tough choices Democrats made on the 2011 budget.

Rants and other Republicans are wrong to suggest that any cut in state spending will automatically lead to further property tax hikes. (They’ve been making that claim since Governor Chet Culver’s across-the-board budget cut last October.) Here’s just one example of why their assumptions are flawed. The Des Moines Register reported Tuesday on how Des Moines area school districts are coping with budget shortages. All of the districts will receive less from the state in the next fiscal year. Thankfully, the cuts are smaller than the worst-case scenarios floated in February, because Iowa House and Senate Democrats sought to protect K-12 education from severe budget cuts.

Anyway, all Iowa school districts are adapting to the reduction in state funding. But contrary to what Iowa Republicans are telling you, many districts, including the state’s largest in Des Moines, have ruled out property tax increases. Of the 10 central Iowa school districts mentioned in this article, only three are raising property taxes, and one more is considering that step. The others are cutting expenses and in some cases using money from cash reserves to cover the shortfalls in the coming fiscal year.

Some local governments in Iowa will raise property tax rates, but as with school districts, many will get by with spending or service cuts instead. I support additional federal fiscal aid to local and state governments, because the collapse in revenues is the most severe in six decades, and spending cuts could hamper the economic recovery. But naturally, the same Republicans who scream about property tax hikes are against using “one-time federal money” to help balance budgets.

Share any relevant thoughts in this thread.

Last night the Iowa Senate passed Senate File 2088, which would reorganize state government, after four hours of debate. All 32 Democrats in the chamber voted for the bill, along with three Republicans: Shawn Hamerlinck, Larry Noble and Pat Ward.

Click here for the full text of the bill. According to analysis by the Legislative Services Agency, Senate File 2088 would reduce state spending from the general fund by $74 million in fiscal year 2011 and $36 million the following year (here’s the link to the fiscal note on the bill). In addition, “Other funds, including local government pots of money, would save $44 million next budget year and just under $14 million the following year.” Jennifer Jacobs posted some of the key provisions and amendments at the Des Moines Register’s blog.

Unlike the 1985 state government reorganization, the current bill does not merge any state agencies. It doesn’t close any of Iowa’s four mental health institutes, but downsizes the one at Clarinda. That switch outraged legislators from southwest Iowa, because the Iowa Department of Human Services had recommended closing the Mount Pleasant Mental Health Institute in southeast Iowa instead.

Senate File 2088 requires bulk purchasing and centralized payroll and technology systems for most state agencies but exempts the three state universities from those provisions.

Rod Boshart recapped one of the more contentious episodes during last night’s debate:

The debate stalled when 11 majority Democrats joined the 18-member GOP minority in supporting an amendment to block a proposal to move the community empowerment program for early childhood education from the neutral state Department of Management to the Department of Education.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, switched his vote to be on the prevailing side then called a closed-door caucus after which senators voted 31-19 to reconsider the issue and approve the move of empowerment to the education agency by a 27-23 margin.

I wasn’t familiar with the Iowa Community Empowerment program, which is geared toward families with children under age six. Since early education programs are part of the Iowa Empowerment Board’s mission, it seems logical to bring the program to the Department of Education.

The original bill had eliminated the Property Assessment Appeal Board, but an amendment to keep that body intact passed by 46 to 4. Politically, that was a smart vote for the senators. Many Iowans are likely to see property tax increases this year, so it’s not a good time to make it more difficult for citizens to challenge their assessments.

Several Republicans have expressed doubt that the bill would guarantee the promised savings. Democrats rejected a number of Republican amendments, including one that would have increased health insurance costs for state employees and one that would have required a two-thirds vote in the legislature to approve any state bonding. (Such a threshold would have prevented last year’s passage of the I-JOBS infrastructure bonding initiative.) A complete bill history, including all amendments considered, is here.

Earlier in this session, the Iowa Senate approved Senate File 2062, a separate bill on early retirement incentives. That measure is expected to save about $57.4 million in fiscal year 2011, “including a $26.4 million savings to the state’s general fund.” That bill passed on a bipartisan 41-7 vote. The full text is here, and the bill history is here.

UPDATE: Over at Iowa Independent, Lynda Waddington reports,

Mental health advocates haven’t gotten everything they wanted in relation to new state policies governing psychiatric medications for individuals receiving state assistance. But they scored a big win Monday night when the Iowa Senate approved new language that ensures existing patients’ medications won’t be automatically switched in order to save the state money.

Read her whole story for more details and background.

State Representative Chris Rants will “debate” former Des Moines School Board member Jonathan Narcisse on various issues during the first half of December. The Iowa Republican blog has the preliminary schedule for the debates in Bettendorf, Ankeny, Council Bluffs, Cedar Rapids, Dubuque and Waterloo, as well as footage from yesterday’s joint press conference by Rants and Narcisse.

Scheduling the “debates” is a clever move by Rants, who is running the best gubernatorial campaign in the GOP field so far. These events will not be good news for Governor Chet Culver.

While you’re waiting for tonight’s election returns, check out the television commercial Governor Chet Culver’s campaign launched today:

Like the commercial Culver ran last month, this ad emphasizes that the governor cut spending and his own salary in order to balance the state budget during this recession without raising taxes. I think the ad is well-crafted in terms of script and visuals, but like Bleeding Heartland users IowaVoter and dricey, I am concerned when Democrats rely heavily on Republican anti-tax messaging. Culver may be reinforcing conservative frames and limiting his future policy options if he does win re-election.

Kathie Obradovich highlighted another potential problem not long ago:

Gov. Chet Culver vowed to balance the state budget without raising taxes. And yet a third or more of Iowa school districts might end up raising property taxes as a direct result of the cut to state school aid ordered by Culver.

Is the governor breaking his promise? Well, no. And yes.

When Culver talks about avoiding a tax increase, he really means income and sales taxes – the two major revenue streams for the state. He’s referring to tax increases that he would have to sign into law. In that sense, he hasn’t raised taxes.

But he acknowledges that property taxes are a concern. Culver says he’ll ask the Legislature next year to require school districts to use their cash reserves before raising taxes.

Republicans are already blaming Democrats for the property tax increases many Iowans will experience next year. Their outrage is hypocritical, because the state cuts affecting education and local governments would have been far more severe if not for the federal stimulus bill, which included aid to state governments. Of course, Republicans denounced the stimulus package and bashed Culver for using these federal funds for their intended purpose: to help backfill the 2009 budget.

In any event, Democrats should be wary about staking next year’s campaign on “we didn’t raise your taxes during this recession.” That won’t be a comforting message to Iowans who have to pay a larger property tax bill in September 2010.

UPDATE: The Iowa Republican (citing Steve King’s office) says the D.C. Property Tax Office admitted they made a mistake in this case. I didn’t see a link to any official notice of the correction from the D.C. tax office and will be looking for confirmation of that.

I’m glad to hear that Congressman King will pay the full amount of property taxes he owes to the District of Columbia.

Iowa Independent noticed an article in Roll Call about four members of Congress (all House Republicans) who “appear to be improperly receiving the Washington, D.C., homestead tax deduction, reducing their annual property tax bills by hundreds of dollars and potentially much more over the long term.” Wouldn’t you know, Iowa’s own Congressman Steve King is one of the apparent tax cheats.

Roll Call is available by subscription only, but Iowa Independent has the relevant details:

The exemption allows people who own homes in Washington, D.C., to receive a $67,500 reduction on the assessed value of their home. The deduction also caps increases on the assessed value of homes at 10 percent above the previous year’s tax assessment. It is not supposed to be available to those who claim residency in another state even if they have a home in the District.

If Congressman King wants to change his official residence from Kiron to the District of Columbia, that’s fine with me. But more likely he’ll keep trying to have it both ways, paying less than his fair share of D.C. property taxes, unless the local media in Iowa’s fifth district pick up on this story.

Former Senator Rick Santorum of Pennsylvania got caught a few years back claiming a homestead exclusion for a house he did not occupy. Some conservative heroes have a funny sense of “personal responsibility.”

All this presidential stuff is okay, I guess.  But really people, even as a hard-core politics geek there is no way in heck I’m going to maintain interest and enthusiasm for 330-odd days until the caucuses, let alone the more than 20 months until the general.  We need something else to focus on as well or we will all go starkers, our friends and family will shun us.

Lately, my gaze has drifted lower towards local governance, especially local governement finance and economic development issues.  When we talk about economic development and growth in Iowa (as in most states now) the word, TIF enters the conversation pretty quickly.  More on TIFs and their uses and overuses on the flip.