CHICAGO — Iowa Gov. Chet Culver this week unveiled a $5.32 billion fiscal 2011 budget that keeps the state in the black through the use of $254 million in fiscal reserves, $340 million in savings through a government reorganization and other cost-cutting measures, and $52 million from the elimination or reduction of some tax credits.
The budget does not include any major tax increases and provides additional spending for education, health care and public safety.
“My budget is balanced. It does not raise taxes on hardworking Iowans. And it protects some priorities which will continue to strengthen our state, keeping our commitment to children’s health insurance, public safety, and education at all levels,” Culver, a Democrat, said in announcing his budget Wednesday.
The budget fully funds 2% in allowable growth for K-12 education at a total cost of $233 million and includes $60 million to cover the final installment on the state’s four-year commitment to fund Iowa’s voluntary preschool program.
The budget provides $150 million for job creation and infrastructure investment through the $750 million bond-financed capital program approved last year, and it fully funds its ongoing $100 million program to promote renewable energy production.
The governor is asking the Democrat-controlled Legislature to approve recommendations, presented in his government-efficiency review proposal — crafted from legislative suggestions and recommendations from a private consultant — to save $340 million. Republicans have challenged Culver’s savings estimate, saying they believe it would be much lower.
Some of the dozens of proposed measures include work-week changes for some government employees, streamlining purchasing contracts, modernizing the state’s unclaimed property search process, and reorganizing government. The governor also wants to save $52 million by eliminating some tax credits and reducing others, although no specific details were provided.
Iowa would close out fiscal 2011 on June 30, 2011, with an ending balance of $117 million and total reserves of $382 million, according to budget documents. While Culver did cut some program spending, he sought to avoid deep spending cuts, turning instead to the reform measures. He had previously enacted a state hiring freeze, ordered furloughs, and cut the current fiscal 2010 budget to keep it balanced after revenue collections fell short of estimates.
The proposed budget does not authorize any new borrowing. However, officials are planning two previously authorized deals in late spring, according to Treasurer Mike Fitzgerald. The state would sell the second and final installment of bonds to finance the $750 million infrastructure proposal known as the Iowa Jobs Program.
Officials have not yet finalized the structure or security, but it likely would include Build America Bonds and carry a special obligation pledge like the sale last year. The state also is considering an appropriation pledge. The underwriting team has not yet been named, but Fitzgerald said use of a similar structure would give the previous team a “leg up.” Barclays Capital was senior manager and William Blair & Co. and Bank of America Merrill Lynch were co-senior managers on the $600 million issue last summer.
Iowa in late spring would also sell $125 million of revenue bonds to fund a new prison. The team for that negotiated transaction has not been named, Fitzgerald said.
Iowa does not issue stand-alone GOs, but it carries a Aa1 issuer rating from Moody’s Investors Service, an implied GO rating of AA-plus from Fitch Ratings, and a AAA from Standard & Poor’s. Iowa’s ratings are supported by low debt levels and conservative fiscal management that has kept fully funded budget reserves in place, analysts said. The state enjoys reserves of $600 million between its rainy-day account and ending balance, although that would be cut under the proposed fiscal 2011 budget.