Mark Twain once said, “No man's life, liberty, or property is safe while the legislature is in session.” Although there is truth in Twain’s observation every year, I fear this year’s legislative session will prove it truer than ever.
In last week’s article I wrote about Governor Culver’s proposed budget, which totals approximately $6.4 billion. The spending increases passed during the 2007 legislative session combined with those proposed for 2008 result in a $1 billion, or 20 percent increase, in the budget over a two-year period. Last week’s article also pointed out that such a spending increase equals the amount of the combined spending increases of the budgets over the last eight years with Governor Vilsack serving as Governor and Republicans in the majority in the House and Senate.
During the last half of 2007, revenues to the state’s general fund grew at an annual rate of 10.3 percent compared to the last half of 2006. All sources of revenue to the state of Iowa seem to remain strong, despite national economic news being reported to the contrary. The cigarette tax increase enacted in Iowa last year is contributing significantly to the strong revenue stream, at $73 million so far this fiscal year. At least for the present it appears the increase in the cigarette tax has not significantly decreased the number of people who smoke.
However, even with increased tax revenues and the bright economic future predicted in Iowa, the Governor’s 2008 budget proposal calls for distinct actions that demonstrate bad budget policy being used to pay for last year’s spending spree.
The Governor has proposed several “Revenue Adjustments” to the tune of an additional $332.6 million. These adjustments are outlined on the General Assembly webpage at www.legis.state.ia.us (click on “Fiscal” on the left side of the home page, then “Analysis of the Governor’s 2009 Budget Recommendations”, page 17). The tax increases include a $70 million corporate tax increase, as well as a $20 million tax increase on beer, pop, juice and water containers.
Another sizable “Revenue Adjustment” is referred to as “Reallocate Wagering Tax Receipts.” The Governor is proposing to take $90 million from the Rebuild Iowa Infrastructure Fund (RIIF), which is primarily generated from gambling proceeds and has historically been used for one-time infrastructure projects in the state. Shifting this money to the general fund means projects previously funded by the RIIF will now be forced to compete with all other line items in the general fund, drastically decreasing their likelihood for receiving funding.
I do not always disagree with taking money that is currently spent “off-line” and placing it into the general fund. However, in this case I believe doing so forces the state to become more dependent upon gambling dollars for its regular budgetary items. Also, a significant infrastructure project currently in need of RIIF funding is a new prison in Ft. Madison. Rather than using the RIIF and a pay-as-you-go strategy, the governor has proposed $500 million in bonded debt for the state. The proposal also uses a “sub-prime” funding method by issuing “interest only” bonds where the state is not required to pay any principal during the first four to five years.
Other proposed “Revenue Adjustments”, such as shifts from other funds and the securitization of tobacco bond revenues, are one-time allocations, not ongoing sources of revenue. This creates artificial revenue sources that will not be present for the next year’s budget. Unfortunately, the government program funded by that revenue source is dependant upon and will expect continued funding.
The bottom line is last year’s spending spree by the Governor and the Democrat majority has left a huge hole in the budget that even the tax increases of last year and record revenues cannot staunch. The Governor’s attempt to patch the budget hole in this year’s budget proposal with additional tax increases, shifts from other funds and the use of one-time revenue sources is short-sighted. If any of these proposals are not enacted, the Democrat majority will be left with two options — cut spending or dip into the state’s reserve funds. However, although our reserve (“rainy day”) funds are full at present, they were designed to be used when the state’s revenues dipped. This is certainly not descriptive of Iowa’s current revenue picture or future revenue estimates.
As in 2007, I will not vote for a budget that includes such irresponsible use of your tax dollars. I welcome your comments and questions and can be reached in any of the following ways:
E-mail: carmine.boal@legis.state.ia.us
www.voteboal.com
Home Address: 3301 SW Timber Green Road, Ankeny 50023
Home Phone: 964-3335