2015-16 HOUSE REPUBLICAN BUDGET PRINCIPLES
House Republicans are committed to these principles to produce a balanced and sustainable state budget:
- We will spend less than the state collects;
- We will not use one-time money to fund on-going needs;
- We will not balance the budget by intentionally underfunding programs; and
- We will return unused tax dollars to Iowa’s taxpayers.
The House Republican position on government spending is reasonable, sustainable and based on simple common-sense budgeting principles.
It is important to Iowans that we do not spend more than we have and live within our means. While standing by this principle for the last five legislative sessions, Republicans have found common ground with the Governor and Senate Democrats. We expect that to continue this year. Living within our means is something the hardworking taxpayers of Iowa do every day. Government needs to do the same.
The House Republican budget plan spends 99.9% ($7.168 billion) of on-going revenue ($7.175 billion) ensuring that government does not spend more than it has and lives within its means. This is a 2.48% (173.8 million) increase over FY 15.
Partisan rhetoric from legislative Democrats claim the GOP plan will dramatically affect government services in a negative way. It is difficult to argue that a nearly $180 million increase
will tie the hands of government agencies and prevent them from fulfilling their responsibilities.
Iowans are sending $7.175 billion to state government coffers. That is a tremendous amount of money. Spending more than they are sending to the state sets hardworking taxpayers up for either future budget cuts or a tax increase. Instead of that, the Legislature should simply live within its means.
The House Republican General Fund budget plan does not use the ending balance, the Cash Reserve or the Economic Emergency Fund. According the non-partisan Legislative Services Agency in regards to the ending balance, “It should be noted that these excess funds are considered one-time revenues that can carry-forward from one fiscal year to the next. The transfer amounts can be unpredictable from one year to the next… Reliance on these revenues for ongoing operational expenses of government programs can result in budget shortfalls if an economic downturn causes a drop in annual tax revenue.”
The Cash Reserve is used to cash flow the state budget. Taking money from it jeopardizes timely payments to school districts and local governments.
The Economic Emergency Fund is used for catastrophic problems such as the floods of 2008.
If there are legitimate one-time expenses – such as paying off state debt, or making targeted investments in key infrastructure projects, or improving water quality – then using one-time resources like the ending balance may be appropriate. House Republicans voted to pay off state debt using ending balance dollars in 2013 and 2014.
The Iowa Department of Revenue released a report last week showing that some of Iowa’s most important indicators point to an economic dip that could indicate a coming contraction. Agriculture is emanating particularly worrisome signs even as the report collected data through March of 2015, many weeks before the state’s bird flu epidemic hit.
The Iowa Leading Indicators Index (ILII) is a compilation of eight economic measurements. Four of them--diesel fuel consumption, average weekly unemployment claims, the U.S. Treasury bond yield spread and the number of residential building permits--positively impacted the index. But the agriculture future profits index, the new orders index, average weekly manufacturing hours and the Iowa stock market index all contributed negatively.
The agricultural profits index contributed most to the decline, as the 12-month moving average of corn, soybean, hog and cattle profits shrunk for all four commodities. Prices for corn, hogs and soybeans are down from March of last year. And while cattle prices are up, the breakeven point for them has increased. The new orders index was the second-largest contributor to the index’s decline, as its 12-month moving average of orders received for manufacturing continues to slide from last year.
The department’s report summarizes previous changes in the ILII with six-month intervals, and the latest percentage decrease of 1.5 percent between September 2014 and March 2015 is the worst six-month performance over the past three years. The last positive percentage change over a six-month interval came between May and November of 2012, but every interval between then has been negative.
The index is considered to have reliably signaled an economic contraction when it declines by at least a two percent annualized rate over a six-month period and a majority of the eight indicators decline over that same period. This latest report comes very close to signaling a contraction. With the last six-month index having a majority of indicators declining and the overall index declining by 1.5 percent, the index was only .5 percent short of signaling an economic contraction.
The full report from the Department of Revenue can be found here.