Branstad, Vaudt visit Spencer

Former Iowa Gov. Terry Branstad listens to a question and waits to respond during a "Truth in Budgeting Tour" stop with Auditor David Vaudt at the Spencer Public Library Friday afternoon. Branstad spent 40 minutes of his hour taking questions and suggestions. (Photo by Gabe Licht) [Order this photo]

"Time magazine has a percentage estimated shortfall of the budget for the next fiscal year. The number for Iowa is 18.6 percent," he said, quickly comparing it to percentages of 9.1, 8.5 and 15.5 in California, Massachusetts and New York, respectively before mentioning Illinois and Nevada have worse numbers.

"Today we want to know and identify the problem, propose some solutions and seek your input," Branstad said, opening his "Truth in Budgeting Tour" stop with Auditor David Vaudt.

The veteran auditor compared expenditures and revenues for governors Robert Ray, Branstad, Tom Vilsack and Chet Culver.

"What you'll notice very quickly in this chart is under the Branstad administration, revenues and spending stayed pretty much in tune with each other," Vaudt said.

Branstad added the state "reduced our dependency on property tax" during his 16-year tenure as governor, referencing a school-aid formula change from 80 percent property tax revenue to 40 percent.

In 2007, Iowa spent $1.01 for every incoming dollar compared to $1.14 in 2010, according to Vaudt, who said the gap has been filled by using one-time funds to pay for ongoing expenses, such as half of the $1 billion Medicaid cost.

One-time funds include federal stimulus dollars, I-JOBS, rainy day fund, Rebuild Iowa's Infrastructure Fund, Senior Living Trust Fund and other state funds.

Such practices have left Iowa with a projected $1 billion deficit, Vaudt claims.

Higher property taxes have also been a result, according to Branstad.

"We've pushed higher property taxes, which makes Iowa less competitive in attracting businesses and jobs," he said. "Right now we have the highest unemployment we've had in 23 years at 6.8 percent."

Indirectly responding to Culver's claims of a bias, Vaudt said, "There is no such thing as Republican numbers or Democrat numbers; these are Iowa numbers."

Branstad shared a condensed history of his time in office, the situations that followed his departure and how he plans to restore the state's budget.

Highlights included the Fisher Commission, which created a 99 percent spending limit and other cost-cutting measures, in response to the farm crisis of the 1980s.

"In fact, I called back the legislation for two special sessions before we finally got all those things done," he said. We took spending off autopilot."

Those reforms allowed him to eliminate the inheritance tax for children and grandchildren, cut income tax by 4 percent and leave a $900 million surplus.

"Unfortunately, that surplus is now gone and part of the reason for that is the governor and legislators learned they could circumvent the spending limitation by putting not-withstanding language in the bills... I would strictly enforce the spending limits and I would veto any appropriation bill that exceeds the 99 percent spending limitation."

In addition to that strong stance, he promoted the use of a biannual budget and five-year plan, which Vaudt would help pen.

"It is relatively simple to have a truly balanced budget if you follow rule number one which is don't spend more than you take in," Vaudt concluded before Branstad began taking questions.

One patron cited a CNBC survey showing Iowa as "sixth or seventh best for corporations for financial stability" and asked, "How do we justify a 50 percent tax break for corporations?"

"First of all, we have the highest corp income tax in the nation... That is a disincentive for business," Branstad responded. "We do have some things going for us, such as the single-factor formula based only on sales, which is an advantage over some other states."

Other surveys have Iowa ranked as low as 44th and 49th, he added before pointing to the elimination of equipment taxes, which he believes created jobs and encouraged companies such as ethanol businesses to build in Iowa.

Mike Mingus suggested a constitutional amendment similar to California's Proposition 13, which Ronald Reagan passed in 1965 to freeze the property tax and eliminate county assessors.

While opposed to eliminating county assessors, Branstad said he hopes to reduce property taxes.

Mingus also suggested eliminating income tax for overtime hours, but Branstad would not commit to that idea.

Tim Frank said one business -- casinos -- should be taxed 5 percent more, resulting in additional revenues of $65 million.

"I guess I don't have a big problem with that," Branstad responded, resulting in laughter. "At this point in time, I'm not looking at raising any taxes but we're still looking at reducing the size and scope of government."

In contrast, Branstad voiced his problem with claims that he kept two sets of books as governor.

He responded that Iowa has never used generally accepted accounting principles when balancing the budget and also took issue with the Democratic Governors Association's group Iowans for Responsible Government, which called him liberal during the Republican primaries.

Harry Rasdal asked Branstad why he decided to put his reputation on the line to run for a fifth term.

"I love a challenge," he responded.