The latest Iowa state budget reports coming out of Des Moines have the State of Iowa and Governor Chet Culver in somewhat of a bind.
Mr. Culver claims the numbers are hunky-dory. The non-partisan Legislative Services Agency says the numbers are significantly un-hunky-dory.
Here’s the breakdown as it stands today:
- In April and May 2009, net General Fund receipts fell $161.4 million compared to the same two months last year
- Net General Fund revenue on a July 1 to June 30 cash basis was down $248.3 million
- The REC (Revenue Estimating Conference) projection called for a decrease of $157.9 million for the full fiscal year (excluding transfers), leaving cash year-to-date growth $90.4 million below the estimate
- The FY 2009 budgeted ending balance is $44.6 million
So here’s the problem (as stated by LSA):
The FY 2009 budgeted ending balance is $44.6 million. Iowa Code allows the Governor to transfer up to $50.0 million from the Economic Emergency Reserve Fund (EEF) to the General Fund to cover the shortfall. Given the recent negative trend, it is possible the FY 2009 revenue shortfall will be more than the $94.6 million available from the projected ending balance and EEF.
The LSA has calculated that net revenue for the remainder of the fiscal year (June through the close of the books September 30) must be greater than negative 4.9% for actual revenue for the year to be within the $94.6 million available.
So if revenue comes in below -4.9 percent, the $94.6 million will not be enough to cover the shortfall.
If that happens, the Governor may have to call a special session to balance the FY 2009 budget. If he waits till January to fix it retroactively, the Comprehensive Annual Financial Report (CAFR) will show the budget out of balance. The Comprehensive Annual Financial Report is used by bond rating agencies to calculate Iowa’s bond rating. So an unbalanced budget could lower our Triple A bond rating.
We’re very short on options to fix this as we’ve already spent all the money for FY 2009. So the only choice the Governor has is to ask the Legislature to transfer more money from the cash reserves or use the remaining federal stimulus money. Either one will solve the FY 2009 budget but make things even worse in FY 2010 and FY 2011.
The biggest problem we have is, our state government and legislators have spent too much and cut too little. The consequences of our legislators actions are we may have two budgets out of balance – 2009 and 2010. And, even worse, the 2011 budget could end up with a $1 billion spending gap.
You and I can’t manage our finances that way. Our politicians shouldn’t be managing our tax dollars that way either.
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