State budgeting better, relies on surplus

DES MOINES – Iowa’s political leaders have improved spending practices but the state still spends more than it takes in, the annual state auditor’s review said Monday.

Auditor Mary Mosiman’s state budgeting review was largely positive, but she pointed out some lingering concerns over spending, among them the practice of passing laws that commit the state to spending billions of dollars in the future.

Iowa Gov. Terry Branstad signed two major laws in 2013 that do just that. The largest commitment, a tax cut for business property, costs the state $3.1 billion over 10 years beginning this year. Another is education reform, which includes a teacher leadership program that will cost the state more than $130 million between now and 2022.

“Since our state leaders determined that property tax reform and education reform were high priorities for Iowa and they enacted laws with multi-year accelerated financial commitments to future budgets, it is paramount that they plan accordingly,” said Mosiman, a Republican.

She complimented lawmakers with closing the gap between state spending and revenue, which she said was accomplished through spending discipline and strong revenue growth. In the past four years, Iowa’s average revenue growth in Iowa was 7.7 percent annually and spending was held to an average of 4.4 percent a year.

In 2011, the state spent $764 million more than it generated through tax receipts. Overspending has been reduced to $171 million this year, spending $1.02 for every dollar it brings in, meaning the state will still have a $575 million budget surplus after this year.

The surplus is tax revenue that remains after general fund spending and after the state’s emergency fund and cash reserve funds are full. Iowa has $174 million in its emergency fund and $523 million in cash reserves.

Branstad, also a Republican, said he vetoed some spending measures approved by the Legislature this year to keep spending in line.

He’s concerned state revenue is dropping in part because farm income is likely to be lower due to falling corn prices. Iowa is the nation’s leading corn producer and gets more than half its revenue – 52 percent – from personal income taxes. Another third comes from sales and use taxes.

“I believe that although I think we need to recognize that farm income is probably not going to be as robust as it has been in the last few years, still cattle prices and hog prices are relatively good, so we are not foreseeing a traumatic reduction but I think we have to be very careful,” he said.

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