Pella Chronicle


July 16, 2009

McKinley’s Memos

Iowans have learned quite a bit about our economy and the state’s budget in the last few weeks. On a national level, a debate rages on concerning the future of health care, a new national energy tax and the possible passage of another massive spending package. Closer to home, Iowans are talking about the state’s unbalanced budgets, out-of-control spending, the poor job climate as a result of high taxes and burdensome regulations and increasing unemployment.

Last Wednesday, the state started a new fiscal year which means Governor Culver and legislative Democrats’ $6.3 billion dollar budget, the largest budget in the history of the state, took effect. Yet, the more immediate concern is the state’s old budget that concluded on June 30. The nonpartisan and highly reputable Legislative Services Agency (LSA) found that Governor Culver and legislative Democrats left a deficit of $161 million dollars. Since the Iowa Constitution requires the state to have a balanced budget, that deficit cannot be ignored. While the governor has the authority to dip into the state’s savings to pay some of the bills, his transfer authority does not extend far enough to pay off the entire deficit. As a result, legislators could be headed back to Des Moines for a special session.

Unfortunately, the state’s new budget, which started July 1, also faces substantial deficits. For the past three years, Senate and House Republicans, Auditor Dave Vaudt and many independent expert economists have been warning the governor and his Democrat allies in the Legislature about the dangers of overspending. The governor and legislative Democrats chose to ignore those warnings and instead opted to increase spending and then put $1.7 billion on the state’s credit card. Now, the LSA predicts that at a minimum, the state will be facing over a $900 million dollar deficit by next spring and that number could easily grow to exceed $1 billion dollars if the economy does not begin to pick up steam.

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