WARNING: Iowa headed for fiscal instability

Exactly one year ago in this blog, I asked the question “Where did all the money go?” Iowa has been experiencing revenue growth ranging from 3.5 to 6.2 percent in last five years. But we are not funding the basic needs for our state. I’m extremely concerned about the proposed tax cuts considered by the Iowa Legislature and the Governor. I believe it will be a major mistake for Iowa’s long-range fiscal stability. 

The Senate is proposing a $1.031 billion per year tax reduction. The LSA’s analysis of this bill estimated that on average, tax revenues would be reduced by 22 percent or more, which is more than one-fifth of the state budget. There would be major reductions to services in education, healthcare, highway patrol, the judicial system and every state department’s services to Iowans. I believe this is not feasibly possible to implement, while, at the same time, provide quality services to Iowans. We just cannot afford it!

Below you will find a spreadsheet and graph, which depicts a dire drop in our state surplus and reserve funds. Over the last five years, we have lost a billion dollars from these funds. The result of any major tax reduction will only dig a deeper hole for the state and place Iowa in a deficit. This act of fiscal instability (the spending down of $1 billion of our surplus and reserve funds over a five-year period) would happen yearly. This current fiscal year and the last fiscal year, Iowa deficit spent over 170 million dollars. It is time we spend responsibly.

We all appreciate tax breaks, but we also appreciate a great place to live. Just this month, Iowa was awarded the US News and World Report’s “Best State to Live In.” In all of the eight category rankings to determine the Iowa status, our lowest score was in fiscal stability. This notion of more tax cuts will destroy Iowa’s ability to be fiscally stable.

Any business or family household understands if their revenue or income decreases, they need to cut back on spending. Reducing one-fifth of your revenue would be like a family member working four days a week instead of five. Their family revenue would decrease by 20 percent. When we have been overspending a budget that is coming in at three to six percent ahead of the previous year’s revenues, reducing the income by one-fifth would be a disaster. The needs of the family to provide for family members—and businesses to provide to its customers—would greatly diminish. I implore the legislature to look at long-range planning and whether we can afford another tax reduction. Any tax reductions should be accompanied by identified spending reductions of services to Iowans. The tax reduction for services for Iowans should be identified so Iowans know up-front what quality services they will lose. 

Please ask your legislator how we can give these massive tax breaks and still provide quality services to Iowans at the same time…and have them identify the quality services they plan to reduce. 

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Educationally yours,

Dr. Tim Grieves
Chief Administrator