Iowa state budget

Iowa operates on an annual budget cycle. Its fiscal year starts on July 1.

On June 7, 2012, Gov. Branstad finalized the a $6.244 billion FY2013 budget.^[1]

Iowa has a total state debt of approximately $25,248,915,000, when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap.^[2] The debt is only slightly less than the prior year's total of $25,989,741,000.^[3]

Iowa's total state debt per capita is $8,245.06.^[4]

According to a 2012 study by 24/7 Wall Street, Iowa is the fifth best run state taking into account debt per capita, budget deficits, unemployment, median household income, and the percentage of the percentage of the population below the poverty line. The best run state is North Dakota and the worst run state is California. ^[5]

See also: The Iowa State Budget on State Budget Solutions or see sample transparency legislation at the Sunshine Standard

Economic Freedom

A new Fraser Institute report on economic freedom ranks Iowa 14th in economic Freedom. Delaware ranks 1st and New Mexico ranks 50th. The study examines the impact of economic freedom on both the level of economic activity and the growth of economic activity. According to the study, the freest economies operate with minimal government interference, relying upon personal choice and markets to answer basic economic questions. More governmental restrictions on those choices curbs economic freedom. The study looks at three major categories per state – size of government, taxes and regulations. ^[6]

Federal Aid to State Budget

The chart below represents how much of the state’s budget comes from the federal government. The number is the corresponding ranking in relation to the rest of the nation (if #1, the state receives the highest percentage of federal funding in the nation):

Figures are calculated by dividing each state’s intergovernmental revenue into its general revenue. Data is available at in U.S. Census.

Fiscal Year 2013 State Budget

Because Iowa took a two year approach to the state budget in FY2012, legislators had already allocated 86 percent of the funds for FY2013. ^[7] On June 7, 2012, Gov. Branstad finalized the a $6.244 billion FY2013 budget.^[8]

State Auditor David Vaudt said in July 2012 that the state faces a $161 million “spending gap” compared to available state revenues.^[9]

Budget drafted relied on $71 million in one-time sources.^[9]

Legislative Proposed Budgets

The House and Senate proposed budgets differed dramatically on several issues.

• Education The Senate proposed spending $890.6 million, an increase of $79.4 million over FY2012, The House proposed spending $774.3 million, a $37 million cut and the differences are in Regents and community college spending;

• Infrastructure While both budgets increase infrastructure funding, the House proposes spending $80.7 million, whereas the Senate would spend $56.5 million;

• Corrections The House budget cuts $1.6 million from corrections compared with FY2012; the Senate's budget would increase corrections funding by $15.4 million;

• Economic Development Both houses increase funding for economic development and labor programs, but the Senate would do so by $61.2 million and the House would do so by $28.9.^[10]

Governor's Proposed Budget

Gov. Terry Branstad proposed a $6.2 billion budget for FY2013, which includes those prior allocations and increasing spending by 3.8%, or $230 million, over FY2012. The increase is based on projections call for state tax collections to grow 4.2 percent in FY2013. Half of state revenues will come from income taxes, and the sales tax will generate about 34 percent of revenue. ^[11] The governor's proposed budget can be found here.

The Governor's proposed budget break down:^[11]

K-12 Education

Gov. Branstad and top education officials have said they plan to increase the amount spent on school funding, which in FY2012 accounted for 58% of the state budget. His education reform plan would raise the pay of first-year teachers, require third-graders to pass a literacy test and reward innovative schools with extra money.^[12] The governor said he did not have a specific number in mind, but he would have a target prior to lawmakers returning in January 2012.^[13] Some in the state question whether the plan will be fiscally possible.^[12]

Higher Education

The governor's proposed budget includes $23 million increase to the budget for the state’s three public universities. House Republicans, however, called for a $31 million decrease from FY2012.^[14]

Revenue

The governor proposed reducing commercial and industrial property taxes by 40 percent over eight years, saying the levies are the second- highest in the U.S. and are costing the state jobs.^[15]

Fiscal Year 2012 State Budget

• See past state budgets

On June 30, 2011, the last day of the fiscal year, Iowa lawmakers negotiated a $5.99 billion budget deal after Republican legislators backed down from proposed abortion restrictions. The compromise continues abortion funding, while requiring hospital staff to inform pregnant women of other options such as adoption and give them an opportunity to see an ultrasound. With the agreement in place, the legislature completed a $5.99 billion state budget within hours of the start of fiscal year 2012.^[16] The budget includes more than $2.3 billion in federal funds for Medicaid.^[17]

In August 2011, Auditor David Vaudt said that despite the $5.99 billion cap, the state spending actually totals $6.4 billion when factoring in spending that was shifted to accounts other than the state general fund. Vaudt added that the use of one-time money declined 92 percent.^[17]

Despite the session being the third longest legislative session in state history, lawmakers did not approve a property tax overhaul that all agreed is needed because commercial property taxes in Iowa are out of line with neighboring states.^[18]

Spending on K-12 education accounts for 58% of the state budget.^[19] Medicaid accounts for nearly 24% of the state budget.^[20]

Negotiations

Gov. Terry Branstad insisted on limiting state spending to $5.9 billion and, after initially resisting, Democrats agreed to that spending limit on June 13, 2011. The governor then announced that he would not agree to any budget that did not include a large property tax cut.^[21]

Annual v. Biennial Budgeting

Gov. Terry Branstad said that he would veto any one-year budget bills that came from the legislature and did so on April 12, 2011, when he vetoed a bill providing transportation funding. In his veto message, the governor said that he has submitted legislation to require lawmakers and the governor to adopt a biennial budget instead of the annual budget the state has used since 1983.^[22]Gov. Branstad said he would accept nothing less than a fully funded, two-year state budget. The Governor has noted that State officials already have a two-year contract with public employees under an agreement between former Democratic Gov. Chet Culver.^[23]

Senate Majority Leader Michael Gronstal offered a compromise under which the legislature would approve a full budget for FY2012 and a 50 percent state budget for the second fiscal year, FY2013, with the Iowa Legislature assessing during the 2012 session what the funding level for FY2013 should be. On April 20, 2011, the governor's office issued a statement that neither approved nor rejected the compromise.^[24]

Legislative Proposed Budget

On June 21, 2011, Senate Democrats passed six spending measures paying for programs ranging from transportation to economic development. Most passed with 26 votes in favor. Democrats control the Senate by a 26-24 margin. The bills were passed as part of a compromise spending plan that satisfies that Republican desire to cap overall state spending at $5.9 billion. Democrats also agreed to no increase in the next fiscal year in basic state education spending. Gov. Branstad was not pleased with the plan, which now moves to the House.^[25]

The Iowa House of Representative approved a state spending plan of $5.9 billion on June 8, 2011. The budget decreases commercial property taxes and increases the state's share of local school budgets, effectively using state dollars to replace local property taxes that make up the bulk of school budgets, and will cost $347 million a year when fully implemented. The budget raises education funding for local schools by 2 percent in the second year of the biennial budget and it includes $35 million to continue preschool programs, which had been a point of much debate. Republicans initially wanted parents to pay for preschool based on need and pushed for no increase in state spending on local schools.^[26]

Governor's Proposed Budget

Gov. Branstad's approximately $5 billion proposed budget eliminates at least $700 million in spending and includes the firing hundreds of state workers.^[27] The governor's spokesperson said that the budget would not rely on one-time funding as the prior year's budget did, and would instead be an "honest budget."^[27]

The budget he proposed was a biennial budget for FY2012-13.

Proposed Spending Cuts

Branstad's budget would reduce funding for preschool assistance for needy families from $74 million to $43 million. It would also reduce payroll costs at state agencies by $89 million.^[28]

Branstad proposed a 6 percent cut to higher education for fiscal 2012, despite the fact the state Board of Regents asked for an $18 million increase in funding. ^[29] In Iowa, funding from the state has dropped almost 38 percent, while funding from tuition has grown over 33 percent, according to the Iowa Board of Regents. ^[30]

Proposed Tax Cuts

Branstad wants to cut the state's corporate income tax -- which currently has the nation's highest top tier at 12% -- in half. And he wants to lower commercial property taxes by 8% a year for five years, with new investment being taxed at only 60% of its valuation immediately.^[28]

Growing Jobs

Gov. Branstad is unveiling a plan to combat the state's 6.3 percent unemployment rate. He claims his plan of raising the state's gaming tax to 36 percent will have the casinos contribute more to the state's economy By doing so Branstad says the lawmakers can reduce the tax burden on other businesses in the state, which will allow them to hire more staff. Casino managers though say a 14 percent increase from their current tax rate of 22 percent would force them to lay off employees. ^[31]

Another aspect of Branstad's plan to increase jobs in the state is too reduce commercial property taxes by 40 percent. ^[32]

Criticisms

Branstad is being criticized for double dipping in state funds. As governor Branstad earns a $130,000 salary. He also draws a $50,000 annual pension from a previous positions in the government, including a previous stint as governor. Branstad campaign manager Jeff Boeyink, who is now the governor's chief of staff, told Radio Iowa last April that Branstad was willing to forgo his pension for four years if elected to another term as governor. ^[33] Democrats called the governor a hypocrite because he's receiving two paychecks from the state and calling for state layoffs.

Iowa legislators are seeking to limit the governor's power to transfer funds within the state budget. Other than governors in Alabama and Michigan, Iowa's governor can move millions of dollars around the budget as they see fit. Legislators fear this thwarts legislative intentions. Legislation introduced in the Iowa legislature would limit the governor's power to shift money to no more than ½ of 1 percent of department transfers, which would be about $6 million on an individual transfer and around a $30 million maximum in the current budget. ^[34]

Public Employee Unions

The House Labor Committee passed a bill curbing collective bargaining rights and exclude health insurance from the scope of collective bargaining for public workers on Feb. 25, 2011 and it will now go to the full House of Representatives for a vote.^[35]

Budget transparency

Recently, Gov. Branstad signed into law a bill that will create a searchable, online state budget database.^[36]

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
Iowa Purchasing	N	N	Y	N	N	N

• Procurement Services website provides a PDF document of all current contracts.^[37]

Limitations and Suggestions

Support for creation of the database

Although State Representative Jamie Van Fossen supported transparency legislation this spring, House File 2439 failed to pass, according to the Public Interest Institute's October edition of the "Iowa Transparency Newsletter."

Independent transparency sites

Although there is currently no state spending database in Iowa, there are several links (provided below) related to Iowa's level of transparency:

• Public Interest Institute
• www.iowatransparency.org

Multi-Measure Budget Transparency Profile

The Institute of Government and Public Affairs at the University of Illinois has created a multi-measure transparency profile for Iowa, which measures state transparency as of September 2011 using indicators from a range of organizations, including Sunshine Review. These indicators measure both website transparency and other recognized facets of governmental transparency. In addition, IGPA presents four unique indicators of non-transparency based on the observation that transfers or reassignments between general and special funds can obscure the true fiscal condition of a state.

In addition to the individual state profile, IGPA offers a 50-state comparison and profiles for other states.

Budget Background

In Iowa state agencies prepare and submit requests by October 1st for the following fiscal year. On December 15 the Revenue Estimating Conference, comprised of the Governor, the director of legislative services agency, and a third member agreed to by the other two, meet to estimate the revenue for the upcoming fiscal year. The Governor then reviews the budget requests by state agencies, conducts public hearings and submits recommendations to the General Assembly in January. From January through February the legislature hosts a variety of joint meetings. Once the budget bill is approved the bill is submitted to the Governor, who has line-item veto authority in appropriations bills.^[38]
Iowa's fiscal year begins July 1 and ends June 30.

Section 8.31, Code of Iowa, states that if the Governor determines that the estimated budget resources during the fiscal year are insufficient to pay all appropriations in full, the reductions shall be uniform and prorated between all departments, agencies, and establishments upon the basis of their respective appropriations. Gov. Culver ordered a 1.5% reduction of $89.1 million for FY 2009. The FY 2009 budget was reduced in total cuts from $6.13 billion to $5.95 billion. The latest round of cuts for the current fiscal year reduces the FY 2010 General Fund budget to $5.18 billion, $5.77 billion with federal funds.^[39]

Budget figures

The following table provides a history of Iowa's general fund ending balances for the past decade^[40]:

The following table provides a history of Iowa's expenditures and gross domestic product (GDP).

• NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year

Accounting Principles

The Iowa State Auditor is David A. Vaudt. The Auditor of State is a constitutional official, elected every four years. The Auditor is required to annually make a complete audit of the books, records and accounts of every department of state government. Iowa’s audit reports are published online.^[42]

The Iowa Department of Administrative Services (DAS) was created on July 1, 2003. Ray Walton became Chief Operating Officer of the Department of Administrative Services in 2007. DAS Core consists of^[43]:

• Finance and Operations
• Legal Counsel
• Legislative Liaison
• Marketing and Communications

Stimulus

Iowa has received $1.5 billion in federal funding.^[44]

Public Employees

According to 2008 Census data, the state of Iowa and local governments in the state employed a total of 232,004 people.^[45] Of those employees, 152,320 were full-time employees receiving a net pay of $605,192,000 per month and 79,684 were part-time employees paid $78,652,186 per month.^[45] More than 59% of those employees, or 136,897 employees, were in education or higher education.^[45]

The typical state employee earning an annual $40,000 salary costs taxpayers another 35 percent - or about $14,000 - in benefits.^[46]

See Also

• Iowa government sector lobbying
• Iowa public pensions

External links

• State Budget Solutions, Iowa
• Model transparency legislation from the American Legislative Exchange Council is available at this link.
• Public Interest Institute
• Iowa Department of Management
• Public Employee Salary Database

Additional Links

• Business Week,"Iowa lawmakers debate gov't efficiency effort," February 1, 2010
• Governor Chet Culver,"2010 State of the State Address," January 12, 2010
• The Iowa Independent,"Gas tax showdown on the horizon," February 9,2009

References

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