An article in this week’s House Republican Research Staff newsletter highlights and debunks statements that the Democratic majority has made regarding Iowa’s budget. One example follows:

Everything is okay because the state has a Triple A bond rating.

Ironically, this was the same thing that was said by executives of Fannie Mae, shortly before the company collapsed. (Source: http://www.bondsonline.com) In addition, the Treasurers office reports that the bond market is so bad right now, it cannot get any takers for the latest bond issue. What good is a Triple A bond rating if you can’t get anyone to buy the bonds?

Over the course of the past few months, the majority party in the House has been telling everyone that they did not overspend and that the state is in good financial shape. Nothing could be further from the truth and this article will debunk each of the Democrat lies about their role in causing the coming fiscal train wreck.

Democrat Lie #1 – The Democrats approved a balanced budget that complied with the 99 percent spending limitation.

Debunking the Lie – The state’s constitution requires a balanced budget, but it doesn’t prevent gimmicks being used in order to achieve that goal. In addition, they changed the 99 percent spending limit in order to spend an additional $48.6 million that was not allowed under current law. This is a clear violation of the spirit of the 99 percent spending limit, which requires use of the December revenue estimate.

Democrat Lie #2 – The Democrats increased spending by $764 million over two years, or an increase of 14.2 percent.

Debunking the Lie – According to Fiscal Services, they shifted $52.7 million in FY 07 supplemental appropriations into FY 08, shifted $88.5 million of general fund appropriations into the Rebuild Iowa Infrastructure Fund (RIIF) and shifted $46.8 million of additional funding from the Senior Living Trust Fund (SLTF) into Medicaid. When shifts are included, the budget increased by $952 million, or 17.7 percent. This is the biggest dollar increase in the budget in the history of the state.

Democrat Lie #3 – The reserve funds are at their highest level because of the Democrats.

Debunking the Lie – When the House GOP was in charge, the last budget approved was FY 2007. At the end of FY 07, the Cash Reserve Fund was full at $401 million (7.5 percent) and the EEF was full at $134 million (2.5 percent). In FY 09, the most recent budget approved by Culver and the Ds, the estimated balance in the CRF is $465 million (7.5 percent) and the EEF is $155 million (2.5 percent). That, of course, assumes that the current revenue estimates are met, which is highly unlikely considering the REC is likely to drop revenue estimates again in December. All the Democrats have done is maintained the 10 percent in reserves.

Democrat Lie #4 – The Democrats have almost completely repaid the Senior Living Trust Fund.

Debunking the Lie – In FY 07, the cumulative repayment balance was $110 million. However, the balance in the fund (actual deposits) was $76 million. By FY 09, the Democrats have a cumulative repayment balance of $263 million (again, if revenue meets projections) but due to excessive spending, the ending balance is estimated at only $37 million (once again, if revenue meets expectations). So, they repaid more to the fund but also withdrew much, much more.

Democrat Lie #5 – Everything is okay because the state has a Triple A bond rating.

Debunking the Lie – Ironically, this was the same thing that was said by executives of Fannie Mae, shortly before the company collapsed. (Source: http://www.bondsonline.com/News_Releases/news12080601.php) My hunch is that the Democrats don’t want their budget being compared to Fannie Mae. In addition, the Treasurers office reports that the bond market is so bad right now, it cannot get any takers for the latest bond issue. What good is a Triple A bond rating if you can’t get anyone to buy the bonds?

Democrat Lie #6 – The Democrats have spent so much because they were “cleaning up the mess” left behind by House Republicans.

Debunking the Lie – Not only have they not cleaned up any messes, the Democrats have made the mess much, much worse. For instance, take the condition of the Rebuild Iowa Infrastructure Fund. In FY 07, House Republicans got the number of “notwithstandings” down to a manageable 9, costing $40 million. (A notwithstanding means spending which is not for bricks and mortar.) By FY 09, the Democrats had increased it to a whopping 32 notwithstandings at a cost of $130 million, including $50 million for the Values Fund. Is this “cleaning up the mess”? Absolutely not. Now, since the state can’t issue bonds to make up the difference, the Democrats have created a huge infrastructure deficit.

Democrat Lie #7 – The Democrats do not plan on tapping cash reserves to balance the budget in FY 2010.

Debunking the Lie – When the recession of 2001 hit, the first thing that Governor Vilsack and the Democrats wanted to do was transfer $120 million out of the EEF to cover ongoing spending. Only resistance by Republicans kept the funds from being used until the last possible moment. With only $7 million in revenue to cover over $500 million in spending, the Democrats will be faced with three choices – raising taxes, cutting the budget, or using the reserves. It is easy to see which one is the most politically easy choice to make. Also, if they do not plan on tapping reserves, they must be planning across the board cuts, tax increases or both. They should tell the public what the plan to do before the election, not afterwards.

As you can see, the bottom line is that this is more proof that the Democrats have made an absolute fiscal mess that will hit after the election, either with an across the board cut, a tax increase, or both.

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