Governor Releases Budget Recommendations for FY 2010

From this week’s House Republican Newsletter:

On January 28, Governor Culver released his budget recommendations for FY 2010. The Governor proposes a 6.5 percent budget cut, shifting $200 million from the Cash Reserve Fund (CRF), and no increases in income or sales taxes.

Unfortunately, this is the equivalent of putting a band-aid on a gun shot wound. Instead of proposing a 1.5 percent across the board (ATB) cut for FY 09, the Governor should have done a larger ATB cut, thus spreading the pain across two fiscal years.

Now he is proposing a 6.5 percent ATB cut in FY 10, which is like taking an axe to the gut instead of taking a scalpel to trim the fat. And even the 6.5 percent cut is not enough. Not only does it require the Governor to use $200 million from the CRF to balance the budget, there is also a very good possibility that the March Revenue Estimating Conference (REC) estimates will come down by another $100 million. If that happens, a much bigger cut than the 6.5 percent will be necessary.

Which means that his decisions to only cut 1.5 percent late last year and then cut 6.5 percent now are bad budgeting decisions.

Additionally, going into the cash reserves may be necessary, but it should be a last resort, not a first step.

There is also the issue of taxes. The Governor claims that his budget does not raise taxes. However, several of his budget actions will result in property tax increases.

For instance, the Governor recommends cutting the funding for allowable growth from 4 percent to 2 percent. However, he wants to leave the spending authority at 4 percent, which will result in a shift to property taxes.

The Governor also cuts the funding for the property tax credits by $40 million, which under current law means a tax increase for homeowners. Finally, the Governor cuts funding for county mental health programs, which will put more pressure on the state to allow property taxes to make up the difference.

The Governor and the Democrats have talked about wanting to do something about the state’s high property tax rates, but the Governor’s budget will make the system worse and increase taxes on property owners. When the Governor claims his budget doesn’t raise taxes, he is not talking about property taxes.

In addition, the Governor cuts tax credits by $15 million and the research and activities credit by $13 million. This will increase taxes on Iowa businesses that depend on these credits to create jobs.

The Governor has a reduction of $20 million for reorganization savings. He does not identify how the savings would be achieved but mentioned purchasing consolidation as a possible cost savings measure.

House Republicans will be closely examining the Governor’s budget and will suggest savings by prioritizing spending, identifying wasteful or unnecessary spending.

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