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TOUGH BUDGET YEARS AHEAD

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NOTE: This article has been updated with new information about budgets (1/25/17).

This is a good news, bad news kind of story.  The good news is the state's economy is growing.  The bad news is that its not growing as fast as experts thought. back in March 2016, when legislators passed the budget.  Farm prices and summer floods have a lot to do with this slowing of the economy.  Regardless of what caused it, legislators' first order of business willb e to cut the current year budget by nearly $120 million, and most of those cuts will be permanent for the next couple of years.

Republicans are not happy that their first act of business after taking total control of Iowa government is to cut budgets mid-year, and seriously limit spending next year.  Many new legislators came to town to cut taxes and create a better business environment so Iowans could get jobs (or better paying jobs), so state budgets and family budgets would improve and there would be less need to rely on the social safety net.  Instead, they get to cut those very programs, and cannot afford to do the tax restructuring that was central to many of their campaigns.  

The first bill new legislators will need to vote on is a $117.8 million “deappropriation bill” – which cuts money that programs had planned to spend this year (fiscal year 2017).  There are now five months left in the state's fiscal year, and the budget passed by the Legislature last year spends more money than the state is going to get this year.  So legislators must adjust their spending - and that means is cutting budgets, what lawmakers call a "deappropriation."

The proposed Deappropriation Bill (Senate File 130 & House Study Bill 27) includes:

  • $88 million in cuts to programs and services.
  • $26 million transferred from business and other tax credit programs.
  • $4.5 million from unused property tax credits (they estimated more would claim these, so this doesn't affect anyone).
On average, the cut is about of 4.5% of each department's budget, but they are given the ability to make the cuts as they think best.  That is why we have not been able to list the effects of each cut - because we simply do not know which programs will be cut within each department. Unfortunately, most of these cuts will need to be permanent, and if passed, may not be restored in the next budget.  Here are some of the cuts in the bill (you can see a full spreadsheet here).
  • Department on Aging ($400,000) - 3 unfilled positions plus additional cuts
  • Medicaid ($13.9 million)
  • Other human services ($22 million)
  • Public health ($2 million) 
  • Legislature ($600,000)
  • No cuts to vocational rehabilitation and Department for the Blind (Governor recommended; not in final agreement)
For the next year (fiscal year 2018), the Governor recommends a 3% increase in funding, and keeps that funding pretty much the same for Fiscal Year 2019.  The Governor's budget leaves only $3.7 million on the table that he could have been spent under the state's 99% expenditure limit.  This is how it breaks out for next year's budget:
  • $219.2 million total increase in spending ($7.457 billion budget)
  • $132.2 million for schools (2% increase)
  • $49.8 million for Medicaid (lower end of estimate)
  • $17.5 million Technology Reinvestment Fund
That leaves only $20 million left to pay for any other services, so not enough to restore most of the $117.8 million FY17 mid-year cuts. Again, these are just recommendations, but as you can see above, legislators do not have much room to move money around unless the economy turns around. 

There are some bright signs for Iowa's economy - Amazon is building a distribution center in Iowa, so is now charging sales tax for Iowa residents.  Legislators will be looking at the March revenue estimates to see if they can add anything to their spending list. 

  • You can see a spreadsheet of the Governor's health/human services budget proposals for both FY17 and FY18 here.   Other areas of the budget can be found here.
Legislators hope to have the deappropriation bill on the Governor's desk sometime the week of January 30.  Then legislators can move on to job two, school funding.  By law, legislators must pass school funding in the first 30 days of session (February 7). They have blown past that deadline in the past several years,  but new leaders are confident they can meet the deadline and give schools time to set their budgets.  The Governor is recommending 2% increase, but some legislators think that may be too much.  
 
Once the current year budget is fixed, and legislators have finalized how much of next year's budget goes to school funding, they can then set their budget targets for FY 2018, and the work of the seven budget subcommittees will begin.