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

Get budget rhetoric in line with reality

In Iowa, budget rhetoric is what’s been out of control. Politicians have manufactured a crisis, when we need budget discussions to be based on logic and facts, not scare tactics.

David Osterberg
David Osterberg

Now that we have a new state budget in place that was balanced in a cuts-only approach, we at least can finally all agree that state spending in Iowa is down.

Even before the new budget was passed, the general fund budget was smaller in relation to the Iowa economy than it was when Gov. Terry Branstad was last in office in 1998.

In other words, state spending has not kept pace with the growth in wages and business profits over the past dozen years. This shifts costs to Iowa citizens.

One example is in the Regents universities. In the just-ended fiscal year, the state provided fewer dollars to the University of Iowa than it did in 1998. By not adjusting state funds for inflation, tuitions have been forced higher: 227 percent up since 1998, from $1,333 per semester to $4,357.

In Iowa, budget rhetoric is what’s been out of control. Politicians have manufactured a crisis, when we need budget discussions to be based on logic and facts, not scare tactics.

When we do that, we can see that Iowa can afford to provide preschool for every Iowa 4-year-old, because we know it improves education and economic opportunity across the board. We can hold down the rapid increases in tuition at Kirkwood and the University of Iowa. We can mow the grass in our parks, improve the low salaries of our teachers and nurses, and do much more while keeping spending at or below 1990s levels.

What we can afford to cut are the perks for the profitable. Tax cuts for big corporations that already avoid their fair share of the bill cannot be sustained if we want to provide and maintain superior state services that attract residents and a productive workforce — which, by the way, is how companies make money.

Let’s put the old budget rhetoric on the shelf and invest in Iowans as we once did, for a dynamic economy and services in line with Iowa values.

Posted by David Osterberg, Executive Director

What smaller government looks like

Maybe you won’t notice cuts like those Lande announced Wednesday. Then again, maybe you want to take the kids to the lake this summer.

Mike Owen
Mike Owen

It was a previous Department of Natural Resources director who delivered the warning.

“I have gotten I don’t know how many complaints from legislators and small business owners about, ‘You used to do this and now you don’t any more,’” then-Director Rich Leopold told The Des Moines Register last year. “[Y]ou want smaller government, this is what it looks like.”

Now, for a fresh look.

On Wednesday, the Register’s Perry Beeman reported that current DNR Director Roger Lande informed his staff that the agency would eliminate more than 100 jobs. The excuse? Lack of funds.

This, at the same time Lande’s boss, Governor Terry Branstad, and state lawmakers are haggling over how much in tax breaks can be built not just into the FY2012 budget beginning July 1, but for the year after that, and structurally in the budget for years beyond.

As the Iowa Fiscal Partnership has pointed out, Iowans value many services that would not be available but for the public structures created by our tax dollars — education, law enforcement, safety-net services, and, yes, environmental quality. When Iowa already has substantially cut services and shown almost no restraint in its giveaways to corporations, some of which are subsidized not to pay any tax, should the DNR cuts be a surprise?

Maybe you won’t notice cuts like those Lande announced Wednesday.

Then again, maybe you want to take the kids to the lake this summer.

According to the Register article, the agency’s stream monitoring coordinator said remaining employees “will struggle to monitor lake and river pollution after the cuts.” So, take the kids — but maybe you’ll be jumping in the lake at your own risk.

Not a bad idea, perhaps, for some folks other than your family.

Posted by Mike Owen, Assistant Director


The continued search for balance in Iowa

Any tax policy changes in the final days of the legislative session should improve the revenue side of the ledger after devastating budget cuts of recent years.

IFP Statement on Governor’s Actions, Final Days of Legislature

Iowa Fiscal Partnership

As Iowa lawmakers head into the final stages of this legislative session, Iowans must remember our state’s fundamental fiscal challenges. We need a balanced approach that assures fiscal prudence and adequate revenues to meet our citizens’ needs. This is no time to be cutting taxes. We cannot afford it.

The Governor’s approval last week of a “Taxpayers Trust Fund” only makes our challenges greater. The legislation creates a $60 million pool to pay for tax cuts. We fear it might become a slush fund for big giveaways to corporations and the wealthy.

In the same legislation, the Governor item-vetoed two other tax policy provisions — one, a wasteful business giveaway known as “bonus depreciation,” and the other, a much-needed boost in the Earned Income Tax Credit for low- and moderate-income working families. In any comprehensive tax reform, boosting the EITC would be a good start.

In his veto letter, the Governor acknowledged that a state bonus depreciation break has little or no stimulative effect on the economy. This is a welcome perspective from the Governor — and lawmakers should recognize as well that many proposed tax giveaways for business suffer from the same deficiency.

At the same time, they should recognize the state EITC does have a stimulative effect on the economy. Working families who earn little in their jobs would see their taxes cut. Their spending churns over in local stores and activities and also helps the economy.

Any tax policy changes in the final days of the legislative session should improve the revenue side of the ledger after devastating budget cuts of recent years. Tax changes should improve tax fairness while helping the economy. All proposals on the table to slash corporate income taxes and individual taxes for the very wealthy are unwise.

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit Iowa-based organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines.

What? Services attract businesses?

What is clear is that you cannot have tax cuts and have the services, too.

Mike Owen
Mike Owen

Why is it that the mantra in real estate is “location, location, location,” and the political mantra in economic growth is “taxes, taxes, taxes”?

The political mantra, which crumbles regularly when put to serious analysis, also takes hits when the benefits of Iowa’s “location, location, location” are seriously put in jeopardy. Case in point: the drive to gut Iowa’s universal voluntary preschool program.

On Monday in the Iowa Senate Education Committee, Elliott Smith of the Iowa Business Council told lawmakers that the preschool program helps attract companies and employees, and will pay off in increased productivity by students.

Now, no one is under any illusions here. The business lobby will also keep pushing for tax cuts. Its influence is the fundamental reason corporate tax giveaways are out of control. The Legislature has not cracked down on them, and has rejected serious attempts to do so, cheered on by the business lobby. This fiscal negligence is costing Iowa tens of millions of dollars every year, shaking the foundations of  critical public structures such as education that support economic growth and opportunity for all Iowans.

What is clear, however, is that you cannot have tax cuts and have the services, too. And if research, and common sense — as illustrated by Mr. Smith’s support of Iowa’s preschool program — make a clear case for services, then tax cuts should simply be off the table. We cannot afford new tax cuts, let alone the gigantic giveaways already in place, and they don’t really improve the Iowa economy even if we could.

Posted by Mike Owen, Assistant Director

‘Shared sacrifice’ — for real?

Will “shared sacrifice” include the kind of balance we need in sustainable budget decisions that reflect Iowa values?

Mike Owen
Mike Owen

Our incoming governor is talking about “shared sacrifice.” It’s an interesting choice of words, because it implies “balance” in the tough choices, disappointing people across the board, or more positively, expecting much from all.

But will that happen? As we saw with 10 percent state budget cuts back in 2009, “across the board” is not always as advertised. Spending on clearly stated priorities, such as education, law enforcement and environmental quality, is cut, while spending in the shadows is not.

Too easily left out of the equation is the spending Iowa does through the tax code. This kind of spending is in the form of tax credits, and also money lost through tax loopholes, the loose seams in the tax code through which big corporations shield profits from rightful taxation in our state. It is spending on autopilot, often behind a veil of secrecy, with little or no oversight — let alone review and approval — by our elected lawmakers.

So, will “shared sacrifice” in 2011 include that kind of spending — the kind of spending that actually reduces resources before elected officials get a chance to make decisions on whether, or how, to spend the funds?

This is one of the most critical decisions to be made as a new General Assembly convenes and the new governor is inaugurated.

Posted by Mike Owen, Assistant Director

Tough choices look at total budget

Iowans rely on many publicly funded services.

Andrew Cannon, research associate
Andrew Cannon

It’s easy to forget all the publicly funded services on which Iowa businesses, health and personal lives rely.

Funding for education — our public universities, community colleges, and state aid to local schools — consumes more than 60 percent of Iowa’s budget. Realistically, there simply is no way to reduce General Fund spending without touching education.

We expect and rely on safe, well-maintained roads and highways. We need water that is clean and drinkable. We enjoy parks that are kept neat and safe by public funds.

Budgeting requires tough choices, even when the economy is thriving. Balancing a budget in tough times — when needs are greater than usual — is even more difficult.

Iowa has cut quite a bit already. Further reductions would come at a price that might not be so apparent on a sheet of paper. But they would become clear as Iowans move about their daily lives.

Posted by Andrew Cannon, Research Associate