DES MOINES, Iowa (AP) — State auditor David Vaudt warned Monday that Iowa Gov. Terry Branstad's proposed budget doesn't include funding to cover pay and benefit increases for state workers, nor does it do enough to help an estimated $5.7 billion shortfall in the state's pension system.
Vaudt said state agencies would have to cover the costs with unpaid leaves, layoffs or by leaving vacancies unfilled. Vaudt also noted that Iowa could lose up to $175 million in federal money as Congress is forced to reduce spending to deal with the federal deficit.
The auditor said the governor, a fellow Republican, shouldn't be specifying funding increases without providing extra money or requiring cuts elsewhere.
"If this practice continues without offsetting agency efficiencies, these unfunded salary and benefit cost increases will significantly impact the level of services agencies can provide," Vaudt said during his annual meeting with reporters to analyze the governor's budget proposal.
Branstad unveiled his budget proposal last week for the 2013 fiscal year, which begins in July. The plan calls for $6 billion in spending, with no tax increases. The governor has said that the Legislature would be responsible for deciding where to make specific spending cuts.
The governor has targeted $25 million in new economic development spending targeting high-paying jobs, and wants to spend another $25 million bolstering schools.
Vaudt did give Branstad credit for cutting back on the practice of paying for ongoing programs with one-time revenue sources.
"The practice of shifting general fund costs to lone-time or limited-time sources has been nearly eliminated in this budget proposal," Vaudt said. "We've come a long way in a short period of time."
But he warned that the federal health care overhaul could add up to 150,000 Iowa residents to the Medicaid program, driving up costs significantly. He also warned that the state's pension system is about 80 percent funded, and said the state should make improving that system a priority.
In his analysis, Vaudt noted that federal income tax cuts are set to expire, as are alternative fuel tax credits. He said the total impact on state revenues could be as high as $175 million.
The state receives about $6 billion a year in federal funding, but that's certain to decline, Vaudt said.
"As the federal government addresses its fiscal imbalance, Iowa can expect a decline in federal support," Vaudt said.
One of the biggest long-term problems Vaudt found was in the state's giant retirement system, the Iowa Public Employee Retirement System. That system had a shortfall of $327 million in 2000, but that had grown to $5.7 billion by 2011.
"IPERS is only 80 percent funded today, versus 98 percent funded in 2000," Vaudt said. "Improving the funded status of IPERS has to be a priority in our long-term financial planning."
He warned that the only solution to dealing with the retirement system's shortfall would be increasing the state's contribution, or boosting the share that workers put into the system, and probably a combination of both.
Vaudt said he couldn't estimate how many people would not get pensions because of the shortfall, arguing that the balance fluctuates with the market.
Vaudt, an accountant, has generally been less critical of Branstad than the governor's Democratic predecessors.
"While, there are still areas for improvement, this budget proposal continues to build on the progress made last year in the area of fiscal sustainability, transparency and long-term planning," Vaudt said.
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