The Clinton Herald, Clinton, Iowa

Opinion

February 7, 2014

OLSON: Iowa budgeting practices must be conservative

DES MOINES — While I do not sit on the Appropriations Committee, a fellow legislator passed on information that was presented to that committee last week consisting of a long-range forecast on the state’s budget and it painted a very interesting picture of Iowa’s future.

In an effort to see whether decisionsmade today will be sustainable, the Fiscal Services Division ofthe non-partisan Legislative Services Agency gave two alternative scenarios on whatcould happen to the state’s budget over the next five years. Both projections start out with the state revenue estimate that was made in October, 2013. It estimated that our revenue for the upcoming year would be $6.996 billion. The projections also assume that supplemental state aid for our schools would increase 2 percent each year, Medicaid expenses would grow 4.8 percent and state employee costs would go up 2.5 percent annually.

The two scenarios also allow us to see the impact of the legislation we passed last year on this year’s appropriations and the years to come. Education reform will add increased funding of $50 million annually for the next three years. Commercial property tax relief would add $120 million beginning in fiscal year 2015 and another $150 million in the succeeding year. Medicaid and HAWK-I expenditures will jump $106 million this year because of a reduction of federal funding and growth in enrollment and usage.

Under the base scenario, the LSA forecasts that annual revenue growth between 2016 and 2020 would amount to 3.8 percent. This represents the average adjusted annual growth for the years 2002 to 2013. Their estimate has the state spending more than it takes in during several years, and thus eliminates almost all of the current ending balance.

The recession scenario assumes that a recession would occur in 2016 and 2017, which would impact the General Fund. Looking at past recessions’ impact on revenue they said that we would experience a 2 percent reduction in revenue growth for both of those years. During these years, state spending is significantly more than tax revenue. Their report assumes a recovery in 2018 through 2020, and they estimated growth in those recovery years to be 6.7 percent. That still would not put revenues ahead of expenditures.

Looking at both scenarios, Iowa must approach our budgeting practices in a conservative fashion. The Iowa House believes strongly that we will spend no more than the state annually takes in. Annual obligations passed last year give very little leeway. With the base budget and the commitments already made factored in, it leaves less than 1 percent of estimated ongoing revenue to negotiate with, approximately $65 million, which is not much when you consider we are dealing with a total budget of just under $7 billion.

Last week, a Senate committee passed a proposal that would provide 6 percent supplemental growth to local school districts, amounting to a total of $222.5 million. When combined with education reform spending already in place, that would consume more than the projected revenue growth for all of state government. While appreciating the desire to increase funding to our schools, the LSA report made it very clear this would not be sustainable in the future.

In the coming weeks, we must consider the scenarios put before us by the LSA. The 10 percent across-the-board budget cuts that were so devastating to our schools, universities, prisons and the remainder of the Iowa state government entities during the Culver administration must not occur again. The past radical reductions were the result of a legislature that over-promised but under-delivered. Those actions caused great pain to all Iowans who desire predictable, sustainable government services.

Always feel free to contact me on any issue before the Iowa Legislature. I can be reached at (515) 281-5429 during the week or by e-mail at steven.olson@legis.iowa.gov or visit the web page for information at www.iowahouserepublicans.com/members/steven-olson.

 

Steve Olson of DeWitt represents District 97 in the Iowa House.

 

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