10% Across the Board Cuts
The Revenue Estimating Conference (REC)
met last Wednesday to revise the revenue estimate for FY 2010 and set the revenue estimate for FY 2011. The REC is a panel of three people — Richard Oshlo (Governor’s appointee), Holly Lyons (Legislature’s appointee) and David Underwood (private sector representative, appointed by the other two members).
Recall a fiscal year runs from July 1st through June 30th and we are currently in FY2010.
The previous REC estimate for FY 2010 was $5.843 billion, or negative 1.4 percent compared to actual adjusted FY 2009. The new estimate is $5.438 billion, or negative 8.4 percent compared to FY 09. This is $415 million lower than the estimate used to create the FY 2010 budget.
As a result the Governor ordered a 10% across the board cut. This cut applies to all General Fund expenditures regardless of need or priority. The cut the Governor made is somewhat larger than was necessary in order to hedge against a further reduction in December and possibly provide some backfill next January.
Most Iowans will see the impact of this cut in their property tax bill. Among other things, an across the board cut reduces the state funding for the K-12 education foundation formula. This is the amount the state provides school districts on a per pupil basis. As across the board cut does not reduce the amount of money a school district can spend.
If the state does not provide its statutory share, school districts have three options: cut spending, use reserves or raise property taxes. My expectation is cash reserves will be the first response. However, realize these cash reserves will almost certainly be refilled using the cash reserve tax levy against property.
As a result of the Governor’s actions, Iowans could see their property taxes increase as much as $250 million dollars.
Last spring when this budget was passed we could see all this coming and nothing the REC said or did was a surprise. Even with this information the current year’s spending was the largest in the history of Iowa. We did not have to be in this position.
Additionally, the REC initial estimate for FY 2011 is $5.412 billion, or negative 0.4 percent compared to the new estimate for FY 2010. Because of the promises that have been made, next year is again going to be a very difficult year.
The state has a severe spending problem and it needs to stop. Programs and expenditures need to be reviewed for need and benefit to Iowa. Those that fail the test or are at the bottom of the list need to be eliminated – not reduced by10%.
You may recall that during the 2009 legislative session, House Republicans offered over $330 million in cost-saving measures. Nearly all were rejected. Also rejected was a searchable budget database that would allow Iowans to see how the state is spending taxpayer dollars. Targeted and meaningful budget efficiencies are more responsible than resorting to haphazard across the board cuts.
We cannot continue down the path we are on we need bold leadership from our elected officials. The Governor should of called a special session so we could better evaluate the cuts. Every program the State has is not of equal importance. So we should of prioritized the cuts accordingly. Rest assured that my colleagues and I will address this when given the opportunity.
More Budget Woes
The Revenue Estimating Conference met today to revise the revenue estimate for FY 2010 and set the revenue estimate for FY 2011.
The previous estimate for FY 2010 was $5.843, or -1.4 percent compared to actual adjusted FY 2009. The new estimate is $5.438 billion, or -8.4 percent compared to FY 09. This is $415 million lower than the estimate used to create the FY 2010 budget.
When the ending balance is taken into account, the budget is $315 million short for FY 2010. Also by law the Governor is required to refill the $45.3 million taken from the EEF to balance the FY 09 budget. In order to balance the budget he would need to order a 6.2 percent ATB cut. If he not withstands the EEF language, he would need a 5.4 percent ATB cut. However, it will have to be bigger than that because he has to leave a cushion in case the December or March estimates are lowered.
The initial estimate for FY 2011 is $5.412 billion, or -0.4 percent compared to the new estimate for FY 2010. The spending gap is at least $1 billion for FY 2011 but we will have more accurate numbers once Fiscal Services updates the general fund balance sheet.
It is expected the Governor will enact an across the board cut within the next few days. The Governor’s spokesman suggested it will be larger than 5.4 percent. Stimulus funds will not be impacted by the ATB cut.
While the national economy is partially to blame, the spending and borrowing of the Democrats has contributed to the problem. And now our children will be carrying the burden of the current administration mismanagement.
114,000 Iowans Are Jobless – 6.8% Of Population
August marks another month in a long list in which Iowa’s pool of unemployed individuals grew, despite claims from Governor Culver and legislative Democrats that summer construction projects, created by federal stimulus and “I-JOBS” dollars, would put people back to work. In fact, Iowa’s unemployment rate increased during every month this summer. On September 18, 2009, Iowa Workforce Development announced Iowa’s unemployment rate jumped to 6.8%, its highest level since July 1986. The jobless rate in Iowa last month stood at 6.5% and this month last year it the rate was down more than 2 points at 4.2%. Currently, over 114,000 Iowans are out of work, nearly 6,000 more than last month and 44,000 more than a year ago. Iowa’s construction sector lost 900 jobs in August, 9,300 eliminated throughout the past year. Iowa’s unemployment situation is a disturbing trend that has become the norm. House Republicans remain committed to working with their colleagues to reform Iowa’s tax code to reduce the tax burden on individuals and businesses responsible for creating the jobs needed to reverse the current unemployment trend.