ITA Principles for Sound Budgeting - FY2004 Review of Governor Vilsacks Budget Recommendations
Prelude
This is a budgeting process review of Governor Vilsack's Fiscal Year 2004 budget recommendations. The goal of this review is to encourage the key fiscal policy developers and lawmakers of Iowa to consider these criteria as the budgeting process moves forward in 2003 and each year thereafter. To be clear, it is not the purpose or intent of this effort to render subjective judgment or declaratory comment on the merits of individual programs sanctioned by the various legislative or executive department actions.
Each of the Iowa Taxpayers Association's seven "Principles for Sound Budgeting" is listed below. Each principle is accompanied with examples, if applicable, from the Governor's FY 2004 proposed budget recommendations. A plus sign (+) indicates the Governor abided by the principle and a negative sign (-) indicates the Governor deviated from the principle. ITA recognizes that in certain areas of the budget such as with Medicaid and entitlement programs it is difficult to determine the projected expense because of federal factors. ITA also recognizes the historical declines in the economy and budget difficulties of states nationwide; however, we maintain that adhering to these budgeting principles will ensure a sound budget in years to come.
ITA applauds Governor Vilsack for utilizing the "principles for sound budgeting" in developing his proposed budget recommendations.
Avoid the use of one-time or time-limited sources for ongoing expenses.
+ Replaces a portion of the one-time funding utilized last year with general funds this year.
+ Replaces $45 million from non-general fund sources used in funding school aid in FY 03 with general funds.
+ Replaces $27.9 million from non-general fund sources used to fund the Student Achievement and Teacher Quality Program in FY03 with general funds.
- $64 million of one-time revenue sources which is comprised of $34 million from the Endowment for Iowa 's Health (tobacco), $20 million from the Rebuild Iowa Infrastructure Fund, and $10 million from the Underground Storage Tank Fund is transferred into the general funds.
- $47.3 million from the cash reserve fund is transferred to the general fund. The cash reserve fund is a time-limited source with dwindling resources.
- $65 million in additional Senior Living Trust Funds are transferred for Medicaid. Moneys in this fund are projected to deplete within the next few years. Using this time-limited source perpetuates the Medicaid problem in the future. A plan is being developed to lessen the reliance on this funding source.
Avoid implementing new programs for a partial fiscal year.
+ The budget recommendations do not reflect implementation of new programs for a partial fiscal year.
Avoid multi-year accelerating commitments.
- Collective bargaining units provide for multi-year negotiated pay increases.
Avoid new automatic, or "standing," appropriations.
+ No new standing appropriations are recommended.
+ Standing appropriations for various property tax credits are reviewed by the Governor.
- The standing limited appropriation for the early intervention block grant is due to sunset this year. A recommendation is made to extend the sunset which continues this standing appropriation.
Accurately determine revenue and expenses.
+ The Revenue Estimating Conference (REC) is watching refunds more closely so that projections become more accurate
- Medicaid projected expenses ($78-110m) do not align with the proposed revenue of $57 million. However, a proposal for Medicaid reform is being crafted.
- Various revenue increases are dependent upon legislative action. Furthermore, the projected increases resulting from legislation such as the streamlined sales tax project are built largely upon assumptions. No assurances can be given that the projected revenues will be realized.
- The increase in Rebuild Iowa Infrastructure Fund revenue is based upon the assumption that the U.S. Supreme Court will overturn the Iowa Supreme Court's decision regarding the differing tax rates for racetracks and riverboats.
Align expenses and revenue in the same fiscal year.
- The reliance on revenue collected in FY 2004 from passage of the streamlined sales tax project (SSTP) is premature. Even with passage of the proposed legislation, too many factors must be met before Iowa would realize any revenue in FY04. To begin with 10 states with at least 20% of the total population must also pass SSTP before it even takes effect. Furthermore, the legislation provides for voluntary compliance and many of the act's effective dates do not occur until 2006. For these reasons, the anticipated revenue would not be realized until a later fiscal year which results in this identified revenue stream not aligning with FY04 expenses.
- Actual Rebuild Iowa Infrastructure Fund revenues to be realized in FY04 are built upon an assumption and do not align with FY04 expenses.
Avoid shifting program funding to property taxes or fees.
+ The elderly and disabled property tax credits are fully funded.
- The homestead tax credit standing appropriation is limited again this year. Limiting this appropriation results in county budgets absorbing the cost in their budget and may result in increased property taxes or not fully funding these tax credits to those who qualify.
