Culver orders 10 percent budget cut; hundreds of layoffs likely

Gov. Chet Culver has ordered an across-the-board cut of the state’s budget of 10 percent, or about $600 million.

Gov. Chet Culver

The cuts will likely result in “hundreds of state employees” losing their jobs, Culver said. The cuts could also result in the wholesale elimination of some state programs, although no specific programs were named.

No department or program will be spared.

All tax increases are “off the table.”

In making the across-the-board cuts, Culver dismissed the idea of calling a special session of the legislature in order to make targeted cuts, a move advocated by Republicans. But because action was needed now, a special session would not be plausible, Culver said.

Culver was only mandated to cut the budget by 7.1 percent in order to make up an estimated $415 million budget deficit in the 2010 fiscal year announced Wednesday by the Revenue Estimating Conference.

“We have no certainty that this situation will not get worse before it gets better,” he said. “We are preparing for the future. I did not want to have to come back and address the 2010 budget again if at all possible.”

Culver said after the December REC meeting the legislature may be able to “backfill” $30 million to the budgets of three key areas – basic health care services, public safety and workforce development.

House Republican Leader Kraig Paulsen of Hiawatha called the across-the-board cut a guaranteed property tax increase.

“Among other things, an across the board cut reduces the state funding for the K-12 foundation formula,” he said. “This is the amount the state provides school districts on a per pupil basis. If the state does not provide its statutory share, school districts have three options: cut spending, use reserves or raise property taxes. As a result of his actions, hard-working Iowans could see their property taxes increase as much as $245 million.”

Culver said he will ask that the first bill passed by the General Assembly when it returns in January be to mandate that Iowa’s school districts spend their cash reserves before raising property taxes.

“Right now there is roughly $400 million in cash reserves in our 362 school districts,” he said. “So as we tighten our belt, we’re asking those local school districts to do the same.”

Culver said he believes the state can get through fiscal year 2010, which ends in July, without raising any taxes.

“We’re going to have to change the way that we look at budgeting, given this worldwide recession,” Culver said, adding that the legislature will look at changes to the state’s budget and efficiencies that can be implemented in order to ease the financial strain going into fiscal year 2011.

“The across the board cut today coupled with a lean effective budget in 2011, that will include additional cuts in all likelihood, will allow us to move forward without raising taxes.”

Culver decided against dipping into the state’s cash reserves because “2011 is going to be more difficult than 2010, so we need a significant amount of those reserves to apply for 2011.”

The Iowa Fiscal Partnership, a nonpartisan budget and tax policy watchdog, said Wednesday that the state can’t fix the $415 million deficit with spending cuts alone without seriously damaging critical public services — and further damaging the economy.

“Those services are most needed right now, during the recession, and keeping people at work to provide them helps the economy when it needs a boost,” the group said in a statement. “Iowa’s revenue problem does require immediate action, but that action must be strategic.”

AFSCME Iowa Council 61 joined in the call for more strategic cuts, saying the state should examine ways to close corporate tax loopholes and re-examine other tax schemes that have not shown evidence that they are growing the Iowa economy.