Reducing spending to balance the budget
Even though we adjourned the Legislature in April with a $97 million projected state general fund ending balance for the current fiscal year (FY 10), the recession whittled the balance away and earlier this month the state’s Revenue Estimating Conference (REC) reduced the revenue estimate by $415 million, triggering an immediate ten percent across-the-board cut by Governor Culver. The Governor’s cut, which I support, was deep enough to cover the shortfall and leaves us with a $189 million projected ending balance, as a cushion to help fill budget gaps and keep us in the black if revenues continue to decline. As an added cushion, we still have $419 million in the state’s reserve accounts, plus $133 million in unspent federal stimulus funds.
Since the Governor’s cut only applies to general fund spending in the executive branch, I met with Senate leaders last week and we agreed to immediately implement a ten percent reduction in the legislative branch budget. By shortening the 2010 legislative session from 100 days to 80 days, cutting reimbursement to legislators, eliminating travel, and implementing a staff hiring freeze and salary reduction through furloughs, we will save the state about $6 million.
While there may be signs that the national economic downturn is coming to an end, we’re not out of it yet, and I share Governor Culver’s aversion to raising taxes in a recession. Before the across the board cut, we had already made $365 million in reductions over the past year, with no tax increases. While the across-the-board spending reduction will have an impact on local schools, I agree with the Governor that school districts need to first address the cuts by drawing down their reserve funds.
State agencies have submitted preliminary ideas for how they expect to meet the ten percent reduction, including plans to leave most vacant positions unfilled with some additional layoffs in several departments including Human Services, Public Safety and Corrections. The Governor indicated he will review these ideas and he has the authority to revise those plans before implementing the cuts, which he hopes to complete before the end of the month. He has indicated that he will be looking to make sure that public safety, job training, and certain other basic services are not compromised by cuts.
I will continue to visit with constituents to get their ideas for balancing the budget. At the same time, the State Government Reorganization Legislative Committee, as well as several legislative budget subcommittees, are expected to meet yet this fall to look for efficiencies and targeted spending reductions.
When the Legislature reconvenes in January, I will work with the Governor and lawmakers on both sides of the aisle to make any needed adjustments to the current year’s budget, to protect public safety and maintain essential services and priorities, and to make sure we keep the budget in balance without raising taxes. As we proceed, I’ll need help from chairs of the budget subcommittees, particularly Rep. Lisa Heddens of Ames, chair of the Health and Human Services Budget Subcommittee, and Rep. Todd Taylor of Cedar Rapids, chair of the Justice Budget Subcommittee, where public health and public safety programs are particularly vulnerable and will likely receive extra attention.
Some Positive Signs
Even in the midst of reduced revenue projections and deep budget cuts, there are some positive indicators that the recession may be bottoming-out. The state’s unemployment rate appears to be leveling-off, after 18 months of steadily increasing joblessness. (A recent report indicated that 4,400 jobs were created or retained in Iowa as a result of the federal stimulus funds.)
Iowa is one of only a handful of states that has received a “AAA” rating on its bonds over the past several years, and we’ve also retained a “AAA” rating for our honest budgeting practices. Despite tough economic times, Iowa officials reported a $1 million increase in economic impact from tourism. And a new report from CNN Money ranked three Iowa Cities - Ames, Des Moines, and Dubuque - among the best in the nation to launch a small business. Iowa remains second in the nation in wind energy production and a new report from the Federation of Tax Administrators ranks Iowa’s per-person tax burden in the bottom third of states.
Pat Murphy is the Speaker of the Iowa House of Representatives. He is serving his ninth term representing Dubuque. Before serving as Speaker, Rep. Murphy spent three years as Democratic Leader and nine years as the top-ranking Democrat on the House Appropriations Committee.
For more information and news from the Iowa House of Representatives, visit our website at www.iowahouse.org
Reducing spending to balance the budget
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