Iowa one of nation’s best managed states

Misinformation and accusations around the use of the approximately $900 million surplus the state had in 2013 and the closing of the books on Fiscal Year 2017 have led to questions from constituents, both Democrat and Republican. Unfortunately, through innuendo and demagoguery, some are attempting to slant the numbers to suggest mismanagement. Nothing could be farther from the truth, so let’s clear the air.

The numbers I am using come straight from the Legislative Service Agency, the non-partisan research and accounting office that answers directly to the Legislature and no one else.

The ending fund balance, or surplus as some might call it, was just under $900 million at its peak. Here is how that $900 million was used over the last five years.

In 2015 and 2016 $196.6 million was returned to Iowa taxpayers through the process of coupling with the federal tax code. This came in the form of deductions for accelerated depreciation, education credits, teacher supply credits, and several other credits in federal code that are not currently in Iowa code.

The Taxpayer’s Trust Fund was established in 2013 and returned $112 million of the surplus to Iowans in the form of refund checks in 2014 and 2015. The trust fund was created to prevent the state from carrying over the surplus and adding it to the next year’s spending.

$117.4 million went into the Cash Reserve Fund and the Economic Emergency Fund. By law the cash reserve must be maintained at 7.5% of the total budget and the Economic Emergency Fund must be maintained at 2.5%. As the budget has increased by over $1 billion from 2013 to 2017 the monies required to be dedicated to these two reserves have also increased. These reserve funds allow the state to self-fund our cash flow without borrowing and to provide a cushion for times like now when revenues are not meeting expectations.

Natural disaster relief has consumed $87 million of the surplus. Federal disaster relief generally requires a percentage match from the state, known as Performance of Duty. Performance of Duty payments have come from the Economic Emergency Fund which was then replenished by the surplus.

Early retirement of debt was a priority of the Legislature during the time we had surpluses. Honey Creek bonds, prison infrastructure bonds, a portion of the I-Jobs bonds, and school infrastructure bonds were repaid early to the tune of $113.8 million, saving several million dollars in interest as a result.

The surplus was also used to make strategic one-time investments. These investments included new buildings and infrastructure at the Regents universities and in the prison system, new communications systems for the Department of Public Safety, and one time investments in the mental health systems and Medicaid. These investments totaled $121.5.

Water quality investments were also beneficiaries of spending from the surplus. $20 million went to the Department of Agriculture, the Department of Natural Resources, and Iowa State University to advance water quality research and investment.

The items above represent $768.3 million in spending from the ending fund balance. The last $130 million in expenditures came from the budgeting process. The Legislature is required to budget no more than 99% of projected revenue for the upcoming budget year as estimated by the Revenue Estimating Conference. Over the last four years revenue, while still growing, has not grown as fast as the REC estimated, therefore leaving a gap between the amount budgeted and actual revenue. The Legislature in concert with the Governor has decided over the last four years to cover the revenue shortage from the ending fund balance rather than reduce departmental budgets mid-year.

This year, with the ending fund balance depleted and revenue again falling short of the REC’s estimate, we had to wait until the official closure of the books on FY17 to determine whether the shortage was under $50 million, in which case the Governor has the authority to transfer funds from the Economic Emergency Fund to cover the shortfall or call a special session of the Legislature if the deficit was over $50 million. The actual deficit released in late September was actually $14 million, resulting in accusations that the books had been cooked in order to eliminate the need for a special session. The charge was that the $73 million in accruals after the end of the fiscal year was fabricated because it was so large when, in reality, it was within the norm. Year end accruals over the last 15 years have ranged from a low of $31 million to a high of $83 million. One of the main reasons this year’s accrual was so large was because there were five Fridays in June, the last month of the fiscal year which resulted in either five pay periods for those paid weekly or three pay periods for those paid biweekly resulting in a 25% increase or a 50% increase in tax deposits to the state respectively.

With the numbers and the facts laid out on the table I believe that Iowans can rest assured that while there is always room for improvement your tax dollars are being put to the best use and that Iowa’s ranking as one of the best managed states in the nation is well deserved.


Iowa House District 11

Storm Lake