Iowa’s declining revenues are at the root of the state’s budget problems, leaving Iowa open to the impact of the recession. In fact, the Iowa Fiscal Partnership released a report today detailing the role of revenue changes in our state’s budget crisis.
Iowa’s general spending grew at the same rate as the economy in the 1990s, but after the 2001 recession, spending never caught up to the levels of the growing economy — even though it has increased slightly over the past three years.
State spending in 2008 was 5.45 percent of the economy, 16 percent lower than it was in the 1990s.
Beth Pearson, an Iowa Policy Project research associate who co-authored the report, said tax reductions between 1996 and 2004 have contributed to Iowa’s budget crisis. These breaks cost the state an estimated $650 million in forgone revenue in 2004 alone.
Iowa policy makers need to keep a long-term focus, and to consider all spending, including spending through the tax code.