ITA Principles for Sound Budgeting - FY2004 Review of the Iowa General Assembly Budget
Prelude
This is a budgeting process review of the Iowa Legislature's Fiscal Year 2004 budget recommendations. The goal of this review is to encourage the key fiscal policy developers and lawmakers of Iowa to continue their consideration of these criteria in developing the budget year after year. 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 Legislature's FY 2004 proposed budget. A plus sign (+) indicates the Legislature abided by the principle and a negative sign (-) indicates the Legislature 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.
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 $13.3 million from non-general fund sources used in funding tuition replacement in FY 03 with general funds.
- Replaces $23.9 million from non-general fund sources used to fund the Student Achievement and Teacher Quality Program in FY03 with general funds.
- $60.6 million of one-time revenue sources which is comprised of $20 million from the Endowment for Iowa 's Health (tobacco), $10 million from the Rebuild Iowa Infrastructure Fund, $26.7 million from unclaimed property, and $3.9 million from a legal settlement is transferred into the general funds.
- $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.
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.
+ The budget recommendations do not reflect new multi-year accelerating commitments.
Avoid new automatic, or "standing," appropriations.
- Standing appropriations were reviewed by the Legislature.
- The standing limited appropriation for the early intervention block grant was due to sunset this year. The sunset is extended which continues this standing appropriation.
- A $25,000 standing appropriation to the Department of Revenue is created for the enforcement of the Tobacco Enforcement Act.
Accurately determine revenue and expenses.
- The projected revenue 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 Department of Economic Development is appropriated a lump sum and given the authority to appropriate the money for various programs to meet specified goals set by the legislature.
- The Medicaid appropriation does not align with its projected expenses for FY 04. Medicaid reform measures contained within House File 619 are anticipated to meet this shortfall. If the reforms do not meet this anticipated revenue, then a supplemental appropriation will be needed next year.
Align expenses and revenue in the same fiscal year.
- The reliance on revenue collected in FY 2005 from passage of the streamlined sales tax project (SSTP) to finance the Grow Iowa Fund is premature. Even with passage of the proposed legislation, too many factors must be met before Iowa would realize any revenue in FY05. The anticipated revenue may not be realized until a later fiscal year which results in this identified revenue stream not aligning with the expenditure.
Avoid shifting program funding to property taxes or fees.
+ The Legislature adopted a provision precluding increases in property taxes to compensate for state funding reductions of various property tax credits.
+ The budget voids and repeals the county assessor requirement to reassess machinery and equipment property to replace the loss in funding from the state due to reductions in the Machinery & Equipment Replacement Fund. This provision assures that a property tax is not imposed on exempted m&e property.
- Funding for various property tax credits is reduced 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.
- The repeal of the county assessor requirement to reassess machinery and equipment property to replace the loss in funding from the state may result in an increase in overall property taxes.
