But despite high hopes and big promises, economists and policy analysts say election-year politics make it unlikely lawmakers will make the tough decisions needed to correct the state’s finances.

“The path of least resistance is certainly going to be very appealing to lawmakers,” said David Swenson, an economist at Iowa State University. “Not making a decision is extremely appealing if you can get away with it.”

Lawmakers started the year with a budget gap of about $1 billion. They say that gap has already been shrunk, thanks to $250 million in savings associated with an early-retirement package, government reorganization legislation and a cost-cutting executive order signed by Gov. Chet Culver.

The governor has also requested the state tap more than $250 million from its cash reserves.

But state agencies are sure to see more cuts before the budget is finalized, and state employees could find themselves out of work, as lawmakers search for ways to balance the budget without raising any taxes, something Culver and Democratic legislative leaders have vowed to avoid.

“To rule out any sort of revenue enhancement from the beginning for fear of a backlash at election time is I think nothing short of irresponsible,” Swenson said. “Legislators should not act like they are victims of the budgetary process or victims of the economy. There is an active role for government in this, but unfortunately the idea of getting re-elected prevent them from doing the sort of aggressive administrative and legislative activities during an election year.”

State Sen. Jack Hatch, D-Des Moines, co-chair of the health and Human Services Appropriations Subcommittee, told the Cedar Rapids Gazette that DHS could see 250 to 400 fewer positions in the new budget, thanks to state targets that are $172 million less than the current year and an expected drop in federal Medicaid funds of around $379 million.

So as lawmakers look at the possibility of draconian cuts to state agencies, Swenson said everything should truly be on the table, including an income tax cut passed more than a decade ago.

Ten percent tax cut

In 1997, a Republican-controlled legislature passed, and then-Gov. Terry Branstad signed, a 10 percent across-the-board cut in state income taxes. At the time, the Legislative Fiscal Bureau estimated that the cuts would reduce state revenue by about $200 million annually, meaning Iowa’s economy would have to grow at a nearly 6 percent annual rate to avoid red ink.

By 2001, some lawmakers began questioning whether the tax cuts should be revisited in the wake of growing deficits and a weakening economy. A study of the tax cuts that year by the Iowa Policy Project, a nonpartisan think tank, found that because of an earlier increase in the sales tax, 80 percent of the state actually paid more taxes after the across-the-board tax cut. The top 1 percent of Iowa families, who earned an average of $476,000, saw their income tax drop $2,539 while the poorest 40 percent of Iowa families paid anywhere from $12 more in taxes to $72 more.

“Those tax cuts really locked us in to one heck of a tough couple of years of budget stress during the Vilsack administration,” Swenson said. “I think that state government should rethink those cuts and shift that individual income tax rate back upward.”

A more recent study of Iowa’s tax code found  that Iowa families earning less than $20,000 a year — the poorest fifth of Iowa non-elderly taxpayers — pay 11 percent of their income in state and local taxes. Middle-income families — those earning between $37,000 and $56,000 — pay 10 percent of their income in Iowa state and local taxes.

The richest Iowa taxpayers, with income averaging $989,200, pay 7.4 percent of their income in state and local taxes.

David Osterberg, executive director the Iowa Policy Project and a former Democratic state lawmaker, said a recent poll commissioned by his organization found six in 10 voters favor some increase in taxes and fees rather than cuts alone to balance the state’s budget. Those figures are similar to a recent Des Moines Register poll which found 48 percent of Iowans said lawmakers should consider raising state income taxes by a half percentage point; 51 percent said they believe a 1-cent increase in the state sales tax should be considered or strongly considered.

Brinn Shjegstad, director of the non-partisan Iowa Policy Institute and a former Republican activist, said to think of raising taxes during an economic downturn is fiscally irresponsible.

“I think that if you start putting burden on those that are employing others and those that are putting money into the economy that is going to stifle the economic growth here in Iowa,” she said. “If you start considering raising taxes on anybody when people are already cutting back, you’re not going to see a positive impact on the state economy.”

Osterberg said there is little worry of that taking place, since lawmakers are hesitant to consider any tax increase during an election year. He pointed to an increase on registration fees for vans passed by the legislature in April 1992. By the fall, Republicans had captured control of the state House for the first time in 10 years.

“Vans had been called a truck and getting some low registration fee,” he said. “That was changed by a Democratic legislature, and that might have unelected the Democratic Party that year, or at least that’s what everyone said. The van tax did it.”

Tax credits

In the wake of allegations of misconduct involving tax incentives designed to lure filmmakers to the state, a panel of top state officials proposed capping most of the tax credits offered by state government and eliminating several more deemed to be ineffective.

“They need to look at some of these unreasonable tax breaks, and we’ve been saying this year after year after year,” Osterberg said. “And only because of the fiasco surrounding the Iowa Film Office, they are taking a look at this at least.”

Business assistance tax credits increased from $144.3 million in FY2006 to $242.7 million in FY2008.

“Once enacted, these business tax credits are not subject to annual reauthorization and can grow well beyond their intended size and for activities well beyond their intended purpose,” Osterberg said.

While many argue that the tax incentives make the state more inviting to businesses, and thus create jobs, Osterberg said when it comes to economic development, the state must prioritize, and there is no better investment than money for education. State regents universities are budgeted $102 million less than they are receiving this year. Community colleges will get $21 million less.

David Osterberg of Iowa Policy Project

“That has the biggest pay off, whether it is Regent schools, community colleges or K-12, that is what we should be doing,” he said. “But yet they are making cuts in these areas because they won’t rein in some of these tax cuts or tax credits.”

He’s still hopeful that some action will be taken by lawmakers to deal with the state’s ballooning tax credits, but again, election year politics make it difficult.

“Part of their reluctance is that if you did something about tax credits, people would frame that as a tax increase,” Osterberg said. “If you took away a tax credit for Rockwell Collins, for instance, or some big prestigious Iowa company that everyone likes, your opponent is going to make the argument that you raised taxes.”

A corporate-friendly climate

Shjegstad shares the opinion that the reality of an election year will stall meaningful solutions to the state’s budget crisis.

“I think lawmakers work so hard to try to avoid making anyone angry they end up making everyone angry,” she said. “And that’s true today at the state and federal level.”

Cuts and reorganization alone won’t go far enough to fix the state’s budget and economy, Shjegstad said. The legislature should make creating a more friendly business environment its number-one goal, and that includes reducing or eliminating the corporate income tax, lowering overall property taxes and avoiding any tax increases.

As for where government could cut, Shjegstad said lawmakers should do what Iowa families have been doing.

“Assess where your spending is, assess what your priorities are, what your necessities are, and from there you make cuts on what isn’t vital at this time,” she said. She points to the Iowa Power Fund, which gives financial assistance to those conducting business and research in Iowa that promote energy independence, as a good candidate for elimination.

“Is it doing what it is supposed to be doing?” she said. “Is that a worthwhile investment?”

Osterberg, on the other hand, thinks lawmakers must look at programs that benefit lower-income Iowans.

“The easiest thing is you give money to poor people because they spend it,” he said. “It’s not that I like poor people more than I like myself or some rich person, but I know if I get $250, some of it is going in the bank. You give somebody on food stamps money, they are going to spend it.”

Ultimately, Osterberg, Shjegstad and Swenson all agreed that these issues aren’t going away any time soon, and will likely be the focus on next year’s legislative session as well.

“The reality is that revenues are incredibly constrained and the outlook is just simply dismal,” Swenson said. “I don’t see indicators out there that say there is a surprise waiting around the corner. And even after the economy finally starts to recover, the government waits a year before it starts to extend programming again. We’re looking at a lean two years, at least.”

Lonnie Gamble, an assistant professor of sustainable living at Maharishi University of Management, demonstrates how an old satellite dish was converted to provide solar heat for toasting foods. (Photo by Beth Dalbey)

Cypress Villages, a 145-acre subdivision taking shape on organically-certified land north of Fairfield, aims to be Iowa’s first community to be completely LEED-Platinum — the U.S. Green Building Council’s highest designation.

The low-powered radio station KRUU-FM is believed to be the only one in the country to use solar energy to power its broadcast booth and signal.

And Fairfiled Mayor Ed Malloy is listed alongside big-city counterparts New York Mayor Michael Bloomberg, San Francisco Mayor Gavin Newsom and Seattle Mayor Greg Nickels on a list of the 15 greenest mayors in the United States compiled by the Grist, a Seattle-based online provider of environmental news.

So, building a sustainable future may not seem like a big leap in a small city where living “off the grid” rates not even a raised eyebrow. But a strategic plan to institutionalize sustainable living is “blazing a trail” for other small Iowa cities, said Brian Crowe, a program manager for the Iowa Power Fund.

Fairfield, population 9,500, received an $80,000 Power Fund grant to develop its Go-Green Strategic Plan, which sets forth a broad vision of sustainability upheld by solid goals, aims and objectives its architects think will significantly lighten the city’s carbon footprint.

Impressed by a cultural predisposition to sustainable living in Fairfield, Crowe and the Power Fund board thought Fairfield could serve as a model for other cities of similar size. “There’s really no roadmap at this point,” Crowe said.

Easily duplicated strengths in Fairfield’s plan include methods to establish both baselines in areas such as carbon impact and criteria to measure success, he said. “It’s hard to manage what you don’t measure, and I was pleased to see they are looking at that.”

Crowe thinks a community-by-community response to climate change offers Iowa its best chance to become a national leader in sustainability. “If progress can be measured and quantified, and there is someone on the ground to make sure the program is implemented, it could mean a great deal for Iowa,” he said. “For the things we’re good in — biofuels development and wind development — we’re certainly among the leaders in the nation, But we’ve certainly got a long way to go when you look at energy efficiency as a whole, because a lot of the low-hanging-fruit work has been done.”

‘Big-time accountability’

The sweeping plan addressing environmental, economic and social needs envisions, among other things, wind projects, a local foods system supplying as much as 40 percent of Fairfield’s produce needs, and an already vibrant entrepreneurial spirit burgeoning with new business growth to support green technologies and services.

Support for the plan is broad and those committing to it do so strongly, said Malloy, the sparkplug behind the initiative and Fairfield’s mayor since 2001. For example, he said, the Dexter Corp., a washing machine factory with a foundry operation, offers a $1,000 cash incentive to employees purchasing hybrid vehicles. But he acknowledges that not everyone in the city believes that human activity is a contributing factor to climate change, or that humans can mitigate their influence, meaning the city’s sustainability council faces an ongoing educational hurdle.

“The focus from the beginning has been on how we can create a culture where we voluntarily do the right thing in terms of managing our resources, capturing their economic benefits and leveraging them in local commerce, in particular, foods, where we’re burning a lot of fuel to get it here, and recycling,” he said. “The bigger vision is how we build and design the community going into the future, whether in designing buildings or managing our natural resources in a way that’s more responsible.”

Scott Timm, Fairfield’s community sustainability director, who was hired in a partnership between the city and Iowa State University Extension Service, said “big-time accountability” makes the difference between a feel-good set of values and a plan with teeth.

Businesses and institutions pledging to implement the plan run the gamut from already sustainable projects like Gamble’s Abundance Eco Village to emissions-belching factories, and include elected councils and boards, schools and health-care institutions, cultural organizations, service industries and retail businesses. They’ve signed off on what they’ll do and when they’ll do it, Timm said.

Plan architects also got creative — and practical, For example, an invitation to join the new Green Business Council, made up of the town’s top CEOs, doesn’t come with an expectation for dues, but rather that the business will invest that money in sustainable practices.

Timm said Fairfield’s methodology — holding community conversations facilitated by the Institute for Decision Making at the University of Northern Iowa and involving every corner of the community — is a valuable lesson for other cities with an eye on sustainability.

“There are common themes almost everyone can agree on,” he said. “We’re not asking everybody to go off the grid, we’re just looking for ways to tighten things up, promote healthier ways of living and conserving resources. It’s not radical New Age hippie stuff, but values everybody can buy into.”

The sustainability council is working with the Iowa Interfaith Power & Light Group (Iowa IPL), which offers a faith-based response to climate change. The three-year-old organization brings together the voices of Christian, Jewish, Muslim and other faith communities arguing that environmental stewardship is a spiritual concern.

It’s a smart bit of strategy, Timm said, because “if the religious communities don’t get behind this movement, we are in serious trouble.”

By following the plan relating to energy audits of government-owned buildings and schools, Timm said it’s realistic to expect Fairfield can not only offset a proposed 7 percent utility increase, but also achieve deep. Gas and electricity costs for city-owned facilities run about $500,000 annually, and saving just 30 percent of that — a realistic goal, the plan’s architects say — amounts to at least one salary for a city employee, an all important consideration during a sour economy.

“That’s the low-hanging fruit,” Timm said.

Another thing Fairfield did correctly was tap into funding streams, like the Iowa Power Fund, a state program supporting energy innovation and independence.

“If you can really work with your local city government and the utility companies and look into where there are funding options — state or federal — you can get some amazing projects moving,” Timm said. “There is some serious funding out there.”

Changing behaviors

Dubuque Sustainability Coordinator Cori Burbach said Fairfield’s strides help guide similar efforts in hers and other Iowa cities. She took part in a sustainable communities workshop Timm hosted last fall and was impressed by intricacies in Fairfield’s plan. “I was really impressed with the local foods program, and the involvement of the local school district and university,” Burbach said. “Getting local foods into the schools is really exciting.”

Both the Fairfield Community School District and Maharishi University of Management also have developed educational curricula around the principles of sustainability. The university offers what officials say is the country’s first four-year bachelor of science degree in sustainable living with some four dozen courses. Energy independence pioneer Gamble, an assistant professor for the new department, said the breadth of courses epitomize the overarching goals of Fairfield’s sustainability goals.

“The sustainable department has morphed from a biology department with six students to a sustainable living department with 90 fulltime students,” he said. “Students are involved in innovative enterprises, like a 1,000-gallon-per-day capacity biodiesel cooperative, and wind generator and solar projects.”

The building housing the department was slated for demolition, but students convinced university higher-ups to leave it standing and allow them to refurbish it using green technology.

Timm said the schools’ efforts go a long way toward institutionalizing sustainable living in Fairfield.

“My impression is that Fairfield is a community of people who want to do good things,” said Timm, whose first full day as a Fairfield resident coincided with a Labor Day concert by the Beach Boys, where Mayor Malloy proclaimed bandleader and sometime Fairfield resident Mike Love “energy czar for a day.”

“We’re finding that people want to get plugged in, and that they aren’t afraid to try something new and to find ways to change their behavior,” he said. “That’s the real key, looking at ways to change behavior.”

Beth Dalbey edited the Fairfield Ledger from 1996 to 2001. An award-winning journalist, she has also edited newspapers in Adel and Des Moines.

Republican lawmakers held true to their promise to oppose Culver’s nomination of Gene Gessow to continue to serve as director of the Iowa Department of Human Services, causing the appointment to fail on a 31-19 vote. The re-appointment of Carrie La Seur to the Iowa Power Fund Board was also denied by a vote of 30-20.

On Tuesday, Republicans blocked the nomination of Shearon Elderkin to the Iowa Environmental Protection Commission.

“Though the governor is entitled to appoint who he wants to serve in his administration, members of the Iowa Senate have a serious and very distinct ‘advise and consent’ role to ensure Iowa taxpayers that the individuals selected are of the highest character and are capable of carrying out the important duties that are asked of them,” Senate Minority Leader Paul McKinley, R-Chariton, said in a statement.

Republicans said they felt Gessow deliberately failed to reveal information to lawmakers in the wake of the Atalissa scandal. They also cited frustrations with how the Democrats have crafted budget bills without their input and continue to block a vote on an amendment banning same-sex marriage. So while the Democratic majority of 32-18 means little help is needed from the GOP in most matters, it takes 34 votes to confirm the governor’s nominees.

In denying La Seur’s nomination, McKinley said her role as president of Plains Justice, a Cedar Rapids-based environmental law center, as well as her role in fighting a proposed coal plant in Marshalltown, have caused her to push “the power fund to become a policy making institution instead of its original intent to expand energy production in Iowa.”

Debate grew heated at times, especially during debate of Gessow’s nomination, with Democrats attempting to make the case that with eminent budget cuts the department needed a leader. They said Gessow was willing to work with Republicans to discuss their complaints.

“This is no time to leave the largest department of 5,700 employees and a $4.6 billion budget without a leader,” said Sen. Jack Hatch, D-Des Moines, adding: “The Gessow appointment is not the right place to take a shot at the governor or to play political games.”

Democrats now have until midnight to convince two Republicans to switch their vote, as Senate Majority Leader Mike Gronstal, D-Council Bluffs, in a procedural move voted “no” so the matter could be brought up again later today.

In a statement, Culver said partisan politics is “hurting people in need,” and called for the Senate to quickly confirm Gessow.

“We’ve made a good name for ourselves across the nation and around the world in terms of being very serious about job creation and leading the way in terms of renewable energy,” Culver said.

Culver’s remarks came as he presented first applications to the Iowa Power Fund board, a group charged with deciding how to distribute $25 million in grants to businesses and organizations interested in finding ways to grow the state’s alternative energy industry and decreasing the state’s dependence on fossil fuels.

The Legislature last year agreed to fund a Culver initiative that will award $100 million in grants over the next four years.The grant requests that Culver presented to the board on Wednesday represented applications for nearly $190 million. The grant program, overseen by the newly created Iowa Office of Energy Independence, is charged with reducing the state’s use of foreign oil by 2025.

Culver told the board that the applications were made by groups from all corners of the state, representing universities and colleges, utilities, for-profits, non-profits, associations, and school districts.

“I look forward to seeing which organizations are awarded the very first Power Fund dollars as Iowa moves quickly to become the renewable energy capital of the United States,” Culver said.

The first grants are expected to be awarded in April or May.

Grant requests ran the gamut from high-tech wind turbines that operate regardless of wind speed, the development of technology that would improve the environmental aspects of coal use and the installation of solar panels to convert sunlight into electricity.

The state hopes to leverage the $100 million in aid to a half-billion dollars in spending by requiring investments by the groups interested in receiving the funds.

Iowa’s bio-fuels industry is one of the fastest-growing segments of the state’s economy, with ethanol and soy-diesel plants springing up across the state. In addition, the state has emerged as a major source of wind energy in recent years, and Culver has worked to leverage that by recruiting wind-turbine manufacturers to add factories in the state.

The Power Fund and the Office of Energy Independence were created by the Iowa Legislature earlier this year to spur development of new energy technologies in Iowa and to develop and implement a plan for Iowa’s independence from foreign sources of energy by 2025.

Stanley has been active for 25 years in the field of renewable energy and energy efficiency. For the past seven years she has been employed by the National Renewable Energy Laboratory in Golden, Co., as a liaison working with officials and agricultural leaders across the country. Before going to the NREL she spent 18 years in Des Moines, working for the Iowa Department of Natural Resources and as the state Energy Bureau chief. During that time she led the development of state energy efficiency initiatives. She also worked to lay the groundwork for the development of a switchgrass research project.

In her new job Stanley’s duties will be to coordinate administration of the $100 million Iowa Power Fund, coordinate existing state and federal energy policy programs, pursue new research investment funding from public and private sources and develop the plan for energy independence.

Stanley will work directly with the Iowa Power Fund Board of Directors. Public board members include chairman Fred S. Hubbell, of Des Moines; Lucy Norton, of Clive; Glenn Cannon, of Waverly; Peter Hemken, of Des Moines; Carrie LaSeur, of Mt. Vernon; Patricia Higby, of Cedar Falls; and Thomas Wind, of Fairfield. Also on the board will be Iowa Department of Economic Development director Mike Tramontina, Iowa Department of Natural Resources Director Rich Leopold, and Iowa Secretary of Agriculture Bill Northey.

Ex-officio non-voting members of the board include Sen. Roger Stewart, D-Preston; Sen. Hubert Houser, R-Carson; Rep. Nathan Reichert, D-Muscatine; Rep. Chuck Soderburg, R-LeMars; and representing Iowa’s colleges and universities, Gregory Geoffroy, Kent Henning and Mary Jo Dolan.

Hubbell and Higby will also serve on a separate due-diligence committee that will monitor and review the projects. Other members of the due-diligence committee will be Franklin Codell, of West Des Moines; Vern Gebhart, of Marion; Floyd Barwig, of Ames; Ted Crosbie, of Ames; and William C. Hunter, of Coralville.