Significant Budget Policies
When Governor Branstad entered office in 2011, he was faced with an unprecedented budget gap. According to the Auditor of State, over $638 million of spending in Fiscal Year 2011 was from one-time funding sources. Governor Branstad was committed to stopping these practices and to bring stability to the budget process, rectifying the damage done to the State’s finances. Starting with his budget recommendations for FY 2012 and FY 2013 and working with the Legislature during the 2011 session, much was accomplished, with the Auditor stating only $53 million of spending in his review is coming from one-time funding sources in the Fiscal Year 2012 budget.
Governor Branstad is committed to strong budget and financial policies, making the budget not only balanced but sustainable for the long term. These policies include:
Maintaining the Reserve Funds and Keeping Them Full
Having reserve funds and keeping them full is crucial in bringing the budget into fiscal sustainability. That does not mean the funds should never be used; they are clearly in place for emergencies. However, a balanced approach in using the reserves is important, because full depletion of reserves in one year without other budget adjustments just re-creates the structural gap that was just rectified this past year.
Using One-Time Funding for One-Time Purposes
As we have seen, using one-time funding for ongoing operations creates a structural gap in the budget. It is important that one-time funds be identified and used only for one-time purposes. A good case for this is in the area of human services, where $43.3 million of carry-forward balances were used in Fiscal Year 2012 and had to be replaced in Fiscal Year 2013.
Governor Branstad believes strongly that biennial budgeting is needed to remove the incremental cost increases that creep into base budgets simply due to the fact that the budget is created annually. Biennial budgeting will also provide additional funding stability to those entities dependent on state resources and will help smooth the highs and lows that can occur with annual budgeting.
A five-year financial plan for state government allows the Governor and Legislature to better track the long-term impacts that taxing and spending decisions in the subsequent year have on the ability of the state to balance its budget, meet critical needs, and avoid budget cliffs for years into the future. Past practices tended to focus on a year-to-year approach to balancing the budget. As a result, little regard was given to how current decisions impacted future budgets, created new burdens for taxpayers, or hindered our ability to meet critical future needs. Governor Branstad is committed to a forward-looking approach to budgeting to prevent the pitfalls of a year-to-year approach.