Auditor Blasts Governor’s Budget

From this week’s House Republican Newsletter:

Auditor: Governor’s Budget Lacks Transparency, Continues Poor Budget Practices

On Monday, February 16, state Auditor David Vaudt gave his annual review of the Governor’s budget recommendations for FY 2010. The Auditor was highly critical of the Governor’s poor budget practices and the lack of transparency in the Governor’s budget.

According to Vaudt, the Governor described Iowa’s budget problem for FY 2010 as an “economic challenge that is historic in its scope.” The Governor went on to say, “This world-wide economic recession is affecting every state in the nation.” Combined with natural disasters suffered by this state in 2008, it is easy to conclude Iowa’s fiscal challenges relate solely to the recession and disasters.

In fact, the Auditor states that the combined impact of the recession and disasters on the FY 2010 General Fund is $110 million. While this is a big number, equal to almost 2 percent of the General Fund budget, the number only contributes, at most, 20 percent to the $500 million to $700 million fiscal challenge the state faces. The majority of the challenge comes from two years of poor fiscal practices.

“Let me be clear—the recession and 2008 disasters are not the primary cause of Iowa’s projected FY10 shortfall. It doesn’t take a $500 to $700 million solution to solve a $110 million problem.”

On the issue of budget cuts, the Auditor said “With all the talk about the significant cuts in spending – 1.5 percent across-the-board in FY 09 and 6.5 percent for most State departments in FY 2010 – it’s disappointing to see such miniscule reductions in total spending for General Fund services.”

Vaudt explained “true total expenditures” are the true costs of providing general fund services – no matter the source of the funds to pay those costs. Under the Governor’s proposal, true total expenditures will decrease only $36 million (0.5%) in this fiscal year, and they will only decrease $49 million (0.7%) in Fiscal Year 2010. “This is because deep spending cuts to most programs were almost completely offset by spending increases in a few protected programs,” said Auditor Vaudt. “That’s not a spending cut, that’s a spending re-distribution!”

[Note: these numbers are very close to the numbers that Fiscal Services uses to describe the spending gap and the increases or decreases in the Governor’s budget recommendations. Any differences in the numbers are due to assumptions by the Auditor as to what defines “true total expenditures”.]

The Auditor is harshly critical of the Governor’s proposed spending reductions. He states “Because the Governor proposes only $43 million of true spending reductions, his budget proposal relies on a number of the poor budgeting practices used in previous years to bridge budget gaps. These budget practices include: transfers from other funds – $107 million, expenditure shifts – $130 million, and underfunded costs – $89 million.“

According to the Auditor, these practices effectively defer almost two-thirds of Iowa’s Fiscal Year 2010 fiscal problem to Fiscal Year 2011.

The Governor’s budget proposal raises several other issues that Auditor Vaudt urges the Legislature consider as they develop their budget proposal. These issues include:

  • Using Federal stimulus monies to reduce, not increase, Iowa’s spending gap
  • Solving the state’s fiscal challenges without transferring the problem to local governments
  • Considering the impacts of FY 2010 decisions on the FY 2011 budget and beyond

Auditor Vaudt concluded, “Challenging times create opportunities. Let us not pass up this opportunity to make Iowa government a better value for Iowa’s taxpayers.”

House Republicans concur that using gimmicks and one-time federal money will only make the problem worse in future fiscal years. House Republicans will fight for transparency in the budget process and oppose those gimmicks and poor budgeting practices that will only make the problem worse in the future.

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