Iowa Democrats are locked in a standoff with Republican Governor Terry Branstad that threatens to extend the legislative session past tomorrow's scheduled adjournment. As in other states, they disagree over the best way to close a budget deficit. But there's another sticking point in Iowa, one that might prove more difficult to resolve: The governor wants the budget to cover two years, while Democrats in the legislature are holding out for budgeting one year at a time.
It's a rather esoteric fight to be having. But it's dominating the session. Already, Branstad has vetoed a transportation budget because it covered only one year. "I want to make it clear by vetoing the very first appropriation bill," he said
, "that we are dead serious about doing a biennial budget."
Branstad is not the only new Republican governor to be pushing for longer-term budgeting. Michigan's Rick Snyder, Florida's Rick Scott and Pennsylvania's Tom Corbett also have endorsed a move from one year to two, reversing a decades-long national trend toward annual budgeting in statehouses. At the federal level, leaders in the GOP-controlled House of Representatives also have proposed moving to biennial budgets.
According to the National Conference of State Legislatures, states have been moving
toward annual budgets for the past 70 years, driven in part by a switch to annual legislative sessions. Last year, only 20 states wrote biennial budgets, down from 44 in 1940. Most of those 20 states have annual sessions that give them an opportunity to correct their numbers in the middle of the biennium.
But the trend has not all been in the same direction. Four states -
Connecticut, Indiana, Nebraska and North Carolina -
have gone back to the biennial system after an experiment with the annual approach. Iowa is an extreme case. It has switched back and forth three times over the past quarter-century, and now may switch again.
One motive that might be driving the governors' new appreciation for biennial budgeting is the possibility of a fiscal windfall from an improving economy over the next two years. Republicans don't want to see a boost in spending if there's more revenue coming in a year from now. "If you adopt a two-year budget," says Peter Fisher, research director of the Iowa Policy Project, "it locks you into a lower level of spending."
According to Fisher, Iowa Democrats, who are seeing many of their priorities cut this year, "want to get those things back in the budget next year, presumably when there's more money available." Beyond single-year fixes
But advocates of biennial budgeting say it isn't a matter of politics. They argue that taking a longer view makes it possible for state officials to grapple with structural problems rather than rely on single-year fixes to patch over deficits. A two-year budget, they say, gives lawmakers and agency heads time to evaluate programs to see which ones work, and avoids the problem of having the legislature argue over the budget every time it meets.
"What Michigan has never done is planned for any more than the current fiscal year," says Michigan state Senator John Proos, who has pushed for two-year budgets. "In other words, we have not applied the basic business principle of planning in preparation for the future." With Michigan struggling through a decade-long recession, Proos says his legislative colleagues have spent too much time dealing with short-term fiscal crises and not enough time looking at sweeping overhauls. He thinks a two-year budget would help solve that problem.
Iowa State Auditor David Vaudt, a Republican, is, if anything, even more steadfast than his governor. Vaudt wants the state to have a five-year financial plan. To Vaudt, a long-term budget would force officials to exercise some fiscal discipline. "We have been so short-term focused in government that we are not making good financial decisions," he says. Too hard to forecast?
Supporters of the annual approach say that drafting a budget every year allows lawmakers to deal with unexpected emergencies. They believe two-year budgets rely on revenue projections that reach out further than analysts can accurately forecast.
In an article
written last year for the Patriot News
of Harrisburg, Dwight Evans, then Democratic chairman of the Pennsylvania House Appropriations Committee, said the state switched from biennial to annual budgeting in 1961 to better react to changing economic conditions. State legislators, Evans said, "could not accurately predict the state's income or its needs for economic relief at least two years in advance."
If legislators address taxes and spending biennially, they also give up some of their power to the executive branch during the off-years. That's what happened in 2010 in Texas, where the legislature holds regular sessions every other year and approves a two-year budget. Last year, when state revenues dropped precipitously, lawmakers did not convene in Austin and left it up to Governor Rick Perry, the lieutenant governor and the speaker of the House of Representatives to call for 5 percent across-the-board cuts to state agencies.
Some of those who prefer an annual budget exercise say there's no reason why governments can't split the difference: approve a yearly spending plan while simultaneously evaluating government programs for the long term. Arkansas is trying to do that. Until last year, lawmakers there would meet every other year and pass a biennial budget. Now, as the result of a constitutional amendment, they must meet every year to address the state's spending. But they are expected to look out two years ahead while they do it.
Annual votes allow legislators to adjust their forecast for unexpected bumps, says state Senator Bill Pritchard, a Republican who pushed for the constitutional amendment in Arkansas. In the past, he says, the legislature would frequently have to be called into special session to deal with fiscal matters. "Budgeting two years out was just a nightmare," he says. "It caused us to not be able to plan as well as we could if we had an annual budget session."