ITA Principles for Sound Budgeting - FY2005 Review of the Iowa General Assembly Budget
Prelude
This is a budgeting process review of the Iowa Legislature's Fiscal Year 2005 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 eight "Principles for Sound Budgeting" is listed below. Each principle is accompanied with examples , if applicable, from the Legislature's FY 2005 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 the difficult economic conditions under which the Legislature operated this year, as did its counterpart bodies in many states, and the efforts made to continue government services at a reasonable level while not imposing additional tax burdens on Iowans. However, the ITA similarly recognizes the need to maintain a consistency in its evaluations of the accounting practices of the Legislature, emphasizing the need to adhere to these budgeting principles in order to ensure a sound economic basis for years to come.
Avoid the use of one-time or time-limited sources for ongoing expenses.
- $159.6 million is transferred from the Cash Reserve Fund to fund property tax credits.
- A number of general fund expenditures were shifted to other funding sources totaling $269.3 million.
- $143.3 million transferred from Senior Living Trust Fund for Medicaid.
- $81 million transferred from Tobacco Related Funds for Medicaid & substance abuse and debt service payments.
- $37.5 million transferred from Hospital Trust Fund for Medicaid.
- $7.5 million transferred from Environmental First Fund for soil conservation and park operations.
- Increased reliance on these time-limited sources perpetuates the state's budget problem in the future.
Avoid implementing new programs for a partial fiscal year.
+ The budget does not reflect implementation of new programs for a partial fiscal year.
Avoid multi-year accelerating commitments.
- Legislature set allowable growth for educational funding at 2% for FY 2005 and 4% for FY 2006.
Avoid new automatic, or "standing," appropriations.
+ Current standing appropriations have been reviewed and many are limited.
Accurately determine revenue and expenses.
- The Legislature relies upon a $26 million reversion from the University of Iowa Hospital and Clinics if the federal government approves an increase in the Medicaid reimbursement.
Align expenses and revenue in the same fiscal year.
+ The Legislature did not commit unknown gaming revenues to state programs; only a portion of the known gaming revenues were appropriated.
Avoid shifting program funding to property taxes or fees.
+ The homestead, agriculture land and family farm, military, elderly and disabled property tax credits are fully funded at their current levels.
+/- Whether property taxes will rise as a result of the FY 2005 funding levels for education is difficult to determine, and will continue to be monitored.
Avoid diversion of funds statutorily authorized for a specific objective to other purposes.
- This budget diverts $24.7 million from the Rebuild Iowa Infrastructure Fund (RIIF) to be used for items that do not meet the definition of "vertical infrastructure" as defined in Section 8.57, subsection 5, paragraph "c", of the Code of Iowa. Such diversions run contrary to the intent of the law that establishes the RIIF.
- This budget diverts $34.9 million from the Restricted Capitals Fund to be used for items that do not meet the definition of "vertical infrastructure" as defined in Section 12E.12, subsection 1, paragraph "b", subparagraph (1), of the Code of Iowa. Such diversions run contrary to the intent of the law that establishes the Restricted Capitals Fund account of the Tobacco Settlement Trust Fund.
