ITA Principles for Sound Budgeting - FY2005 Review of Governor Vilsacks Budget Recommendations
Prelude
This is a budgeting process review of Governor Vilsack's Fiscal Year 2005 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 2004 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 eight "Principles for Sound Budgeting" is listed below. Each principle is accompanied with examples, if applicable, from the Governor's FY 2005 proposed budget recommendations. A plus sign (+) indicates the Governor abided by the principle and a negative sign (-) indicates the Governor deviated from the principle.
Avoid the use of one-time or time-limited sources for ongoing expenses.
+ $20 million is transferred from the General Fund back to the Senior Living Trust Fund to partially replenish previous utilization of this time-limited source to cover general fund expenses.
+ $15.2 million is transferred back to the Medicaid Program to replace funds that were used to pay for FY04 salary adjustments.
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 multi-year accelerating commitments, other than those currently in effect.
Avoid new automatic, or "standing," appropriations.
+ There are no new standing appropriations recommended, and current ones appear to have been reviewed.
Accurately determine revenue and expenses.
- Various revenue adjustments are dependent upon legislative action, as is the entire budget. However, the projected increases resulting from the proposed legislation are built largely upon assumptions which are not supported by sufficient details to justify such an assumption. No assurances can be given that the projected revenues will be realized.
Align expenses and revenue in the same fiscal year.
+/- The Governor's proposed budget attempts to align expenses and revenue in the same fiscal year, however the reliance on revenue collected in FY 2005 from passage of various tax law changes is premature and unstable which could result in expenses being under funded.
Avoid shifting program funding to property taxes or fees.
+ Funding increases are recommended to offset prior cuts for mental health allowable growth, the homestead property tax credit, and the elderly & disabled property tax credits.
+ Fully funding the school foundation aid allowable growth is recommended.
- The net effect is an approximate $6.8 million decrease in funding for property tax credits which could result in increased property taxes or not fully funding these tax credits to those who qualify. This number includes the changes made last year that impact the FY05 budget.
Avoid diversion of funds statutorily authorized for a specific objective to other purposes.
+/- $5 million in interest earned by the Cash Reserve and Economic Emergency Funds is to be deposited into the General Fund rather than deposited into the Rebuild Iowa Infrastructure Fund as statutorily required. This transfer has occurred the past two years through "notwithstanding" the statutory requirement. Although the Governor has proposed to divert these funds, he has also proposed to codify this diversion.
