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April 3rd, 2010

Is The Democrats’ 2011 Budget Legal?

Capitol DomeWritten by Nathan Tucker

On Tuesday, the Democratic-controlled Iowa legislature passed the standing bill, the final budget bill, shortly before they adjourned for the session. At first glance, the 2011 fiscal budget appears balanced—the state will be able to cover its expenditures. How the Democrats “balanced” the budget, however, will not only lead to increased taxes, but is clearly in violation of Iowa law.

The state’s general operating budget for the next fiscal year, which starts July 1st, is $5.28 billion. But the state will actually spend $5.88 billion, approximately $600 million more than the state has the money for. The Democrats solution–“balancing” the budget by applying a one-time stimulus check from the federal government in the amount of $328.4 million, money which the federal government doesn’t have and had to borrow on our credit.

The Democrats also transferred to the general fund $267.4 million from the state’s cash reserve funds, in addition to the $45.3 million Governor Culver already used last September to balance this current year’s budget. And when that still wasn’t enough to cover the budget, the Democrats “borrowed” $45 million from a number of projects across the state, which will cost taxpayers roughly $90 million over 20 years to pay off.

In short, the only way the budget was “balanced” by Democrats is not by limiting expenditures to revenue, but by using, in essence, a credit card to borrow the money. Unfortunately, the Democrats treat this credit card as if it has no limits on it—the total borrowing by the Democrats for the past two sessions is $810 million, which will cost taxpayers approximately $1.667 billion to repay over 20 years.

Not only is such spending unsustainable, it violates Iowa’s requirement that expenditures must be limited to 99% of revenue. Unfortunately, when the legislature violates the law, it can get away with it. The 99% rule is purely a statutory requirement, which means it is a limitation the legislature placed on itself. It is not a constitutional mandate, nor does it have any enforcement mechanism.

The legislature can simply use its “credit card” to bypass this rule as it did this year and last, or it can suspend this requirement as it desires. For instance, in 2006 the balanced budget requirement was suspended, resulting in an additional $84.2 million in spending. Again, in 2007, the 99% limit was suspended which resulted in another $45.7 million in spending. If the legislature had just followed the law for two years, it would have saved Iowa taxpayers a total of $130 million (not including interest).

This unsustainable and illegal behavior by Democrats only reinforces the need for a constitutional amendment that mandates a balanced budget. If the General Assembly refuses to obey their own rules, the only remaining alternative is a constitutional requirement that reins in their spendthrift ways. The amendment should also provide two enforcement mechanisms—mandatory expenditure cuts to keep the budget in balance, and private suits by taxpayers to enforce spending cuts.

But this amendment alone is not enough. A reoccurring method by which Democrats “balance” the budget is by passing off funding for such things as education to the local level. For the 2011 fiscal year alone, the legislature shifted some K-12 education funding to the local level—all but assuring that local property tax will increase to pay for it. In 2006, over $60 million was transferred from the state level to the local level to be funded.

Such “back door” tax increases were not voted on by the local governments, nor can they afford to pay for them. It is necessary, therefore, to pass a constitutional amendment requiring the vote of the people before a tax increase of more than 1%, whether through the front or the back door, takes effect.

It is only by amending the constitution in these two ways can we bring fiscal discipline to the statehouse.

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About the Author

Nathan W. Tucker
Nathan W. Tucker is a Davenport attorney and author of We The People: The Only Cure to Judicial Activism. He can be contacted at nathanwt@juno.com.




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