Culver Comes Up Short In Covering $1 Billion Budget Gap

Every year, the legislature and the Governor must approve a balanced budget by the end of the legislative session. This process is always a tedious and difficult one, and this year, they only have 80 days to do it. Some years the process is easier than others. In fiscal year 2008, legislators had a relatively easy time dealing with the $137.1 million budget gap. This year, Governor Culver and the legislature has their work cut out for them. They must deal with the largest budget gap in the state’s history.

The budget gap for fiscal year 2011, which begins in July, is a record $1.071 billion. Not only is the current budget gap the largest in the state’s history, but it’s also the first time that the budget gap has been over $1 billon. Over the last eight years, the budget gap has averaged $444.8 million.

To balance the budget, Governor Culver has offered the following cost saving initiatives.

• $341.0 million in reorganization savings
• $207.5 million from the Cash Reserve Fund (one-time money)
• $52.5 million from eliminating and / or reducing tax credits
• $170.2 million from under-funding school aid (property tax increase)
• $86.0 million by not funding the negotiated salary increases for state employees
• $214 million by not fully funding certain built-in and anticipated expenditures

The problem with the Governor’s recommendations is that the non-partisan Legislative Services Agency says some of his numbers just don’t add up. The LSA report states, “The Governor’s budget recommendation assumes that all savings will impact the General Fund. This is clearly not the case, as stated specifically by Public Works LLC in the Report and as clarified by the LSA through additional research.”

The LSA estimates that the recommendations from Public Works LLC, Culver’s out-of-state consultant, will reduce the general fund budget by only $84.9 million, far less than the $341 million the Governor is counting on. For example, savings that were found in the Department of Transportation will affect the Road Use Tax Fund, not the state’s general fund. Centralized purchasing was to save $15 million, but half of that savings goes back to the Road Use Tax Fund, because the savings would be recognized by the DOT.

Early retirements will save the state $26.4 million, not the $59.8 million that Culver claims is counting on. The LSA report also notes that Culver’s out-of-state consultant has altered their numbers since the report was issued. The consultants had counted on $29.9 million from the sale of some state assets, but their new estimate is only $13.8 million. Culver’s budget numbers are incredibly fluid.

Culver then relies heavily on one-time money to bridge the budget gap. He has recommended using $207.5 million in reserve funds to balance the budget. Since Culver was elected, Iowa’s reserve balance has dropped from $592 million in FY 2008 to $265.2 million in the FY 2011 budget. LSA reports that this leaves the state’s reserve funds $278.7 million below the statutory maximum balance of $543.9 million or 48.8 percent of the statutory goal.

Some of the other savings that Governor Culver is counting are undefined, meaning the legislature will need to figure out what tax credits to eliminate or reduce. After looking the consultant’s report, State Auditor Dave Vaudt said, “Webster’s dictionary defines ‘savings’ as ‘any reduction in expense’ and ‘revenue’ as ‘an item or source of income,’ and those definitions guided my evaluation. Based upon my review, while the majority of the savings appear to warrant further scrutiny and evaluation, two recommendations are improperly categorized as savings.”

Auditor Vaudt took issue with the “savings” that Governor Culver claims by funding the State Patrol from the Road Use Tax Fund. Vaudt notes, “Taking costs from one pot of taxpayers’ money and moving those costs to another pot of taxpayers’ money does not reduce spending.” Vaudt also takes issue with the proposal to modernize Iowa’s unclaimed property search capabilities. Vaudt states, “These assets belong to the taxpayers and must be returned to them. The only way these assets could provide revenue for the State’s budget is if the assets are not returned to Iowa taxpayers.”

Culver’s and the Democrats’ spending sprees in FY 2008 and FY 2009 have now caught up with them. Culver’s proposed budget comes up far short in covering the $1.071 billion budget gap. If Culver’s budget was graded by any teacher in the state, the best grade he could hope for is incomplete.

Sadly, while Governor Culver may suffer at the ballot box in November, Iowa taxpayers are the one left having to pay the tab for his incompetence. His across the board cuts have already forced some local communities to increase property taxes. Now that he once again under-funds school aid, property taxes could go even higher.

Photo by Dave Davidson