Budgeting in context

The budgeting decisions of last year ought to be viewed in context.

Andrew Cannon
Andrew Cannon

Following last year’s prolonged legislative session, legislators and the governor congratulated themselves for a budget that fully funded programs and reduced reliance on what they called “one-time funds.”

It is true that state services, systems and structures were funded to a large degree through a stable source, the General Fund (where income and sales taxes are pooled). And funding levels increased generally, especially in comparison to the recession-affected budgets of FY10 and FY11, when many state services and programs took severe cuts.

But the budgeting decisions of last year ought to be viewed in context, as we do in a new report.

First, the use of “one-time funds” proved to be the right choice at the time. Because of the recession, state revenues declined precipitously, which led to a 10 percent across-the-board budget cut. One-time funds now derided by some were used precisely as intended. State “rainy day” funds, reserved for economic emergencies, and the federal Recovery Act (ARRA) combined to fill budget gaps and save services. ARRA provided billions of dollars to Iowa to finance K-12 education, higher education, and health care programs for children, the elderly, Iowans with disabilities and low-income Iowans who had no other access to health insurance.

Second, consider how funding for state services and programs compares to pre-recession funding levels. Even as revenues have bounced back, and funding for many services has stabilized, it is unclear if present levels are adequate to met needs. For instance, state funding for community colleges in FY12 will reach about $164 million, up from FY10 and FY11 levels, but still remain below pre-recession levels. At the same time, community colleges are serving more Iowans than ever, with enrollment reaching 106,000 in FY11, up from 88,000 students in FY08.

Iowa’s other public higher education system, the Board of Regents, this year is working under a 3 percent reduction in funding from FY11. Even with the governor’s proposed FY13 increase, Regents funding would still be below recession levels, to say nothing of pre-recession levels. Students pay the price, with continually increasing tuition costs.

Other programs, such as the Early Childhood Iowa initiative, which provides preschool tuition subsidies and parental education; Child Care Assistance, which helps low-income working parents cover the cost of child care; and the Family Investment Program, which helps the lowest-income families meet basic needs and prepare for employment, all have seen large cuts in funding since before the recession. Even into economic recovery, some programs are still being reduced.

Improving upon last year or the year before is good, but the long-term question asks if we are adequately funding programs to meet Iowans’ needs and to adequately invest in Iowa’s future. Judicious use of public funds is not as simple as cutting services to bring down expenses, but taking a balanced approach that assures adequate funding for services that position Iowa for the future.

Posted by Andrew Cannon, Research Associate

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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