Word of the Day – April 15, 2009

Quote of the Day
“The wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success but to create conditions under which every one will have a better chance to be successful.”
~ Calvin Coolidge, Inaugural Address 1925

Lyrics of the Day
“He taxed their property,
He didn’t give them any choice,
And back in England
He didn’t give them any voice.
That’s called taxation without representation,
And it’s not fair!

But when the Colonies complained
The king said: “I don’t care!”

He even has the nerve
To tax our cup of tea.
To put it kindly, King,
We really don’t agree.
Gonna show you how we feel.
We’re gonna dump this tea
And turn this harbor into
The biggest cup of tea in history!”

~ Schoolhouse Rock, 1975

Republican Budget Savings Plan

  • Speaker Murphy and Majority Leader McCarthy said in January that Democrats would perform a thorough line-by-line examination of the state budget. They have failed to live up to that promise.
  • House Republicans have identified over $200 million in budget savings. Some of those savings are: salary reductions for state employees, higher contributions from state employees for their own health care, sale of the state vehicle fleet and a freeze on the purchase of private land by the DNR. Over the last two weeks, Republicans offered measures that:
    • Eliminates all funded, unfilled FTE positions that have been open for six months – savings of $25 million state government-wide.
    • Requires consolidation of state information technology and email systems – savings of at least $20 million, possibly much more in FY 2010.
    • Privatized grass cutting and yard work at the Capitol complex –savings of at least $100,000.
    • Requires DAS to privatize the state vehicle fleet – savings of $27 million in FY 2010, $10 million in FY 2011 and beyond.
    • Reduced office supplies, service contracts, equipment purchases – savings of $2.1 million in FY 2010.
    • Reduction for all printing, binding, communications and a 50% reduction for advertising and publicity – savings of $450,000 in FY 2010.
    • Prohibits purchases for the state vehicle fleet until June 30, 2010 – savings of $11 million in FY 2010.
    • Prohibits the purchase of vehicle add-ons like GPS systems and bug shields.
    • State employees must provide meal receipts instead of claiming maximum.
    • Eliminates charter flights for DOT commissioners.

Elimination of Federal Deductibility

  • Wednesday, Democratic leaders admitted their plan to eliminate federal deductibility may not have enough votes to pay the house.
  • It is clear that Democrats underestimated taxpayer frustration with exploding government spending at the state and federal levels. Iowans aren’t fooled. They clearly understand that taking away their largest income tax deduction isn’t going to result in a tax cut. It is also very telling that the day 2,000 Iowans showed up on the steps of the Capitol for the Des Moines Tea Party, Democrats admit their tax increase plan is in trouble.
  • For many taxpayers, the amount of tax payments made to the federal government is the only – or largest – deduction available to them. For example, middle income taxpayers who do not own a home or have children cannot utilize income tax deductions and credits available to others; such as mortgage interest, property taxes and the child and dependent tax credits.
  • Winners and losers: Under the bill 541,108 or 39.8% of Iowa taxpayers will see no change in their tax liability or see their tax liability increase in tax year 2009. The bill increases taxes on some Iowans to pay for a tax cut for other Iowans.
    • 350,246 or 25.7% of all taxpayers will see a tax increase.
    • 190,862 or 14.1% of taxpayers will see no change in their tax liability.
    • 818,921 or 60.2% of taxpayers will receive a tax cut.
    • 25% of the individuals (87,076) whose taxes will increase under the bill make less than $40,000 per year.
    • 60% of the individuals (208,984) whose taxes will increase under the bill make less than $60,000 per year.
    • 12,218 individuals who make more than $200,000 will receive a tax cut under the bill.
  • On December 31, 2010, or tax year 2011, the federal tax cuts of 2001 & 2003 will expire increasing federal taxes on Iowans by $154 million. Nothing in HF 807 requires this additional revenue to go towards tax relief, or prevents the legislature from using this revenue for additional spending.

Budget Big Picture

  • The global Democratic target of $5.8 billion represents a 4 percent reduction compared to adjusted FY 2009. However, the 99 percent expenditure limitation only allows spending of $5.7 billion. That means Democrats must come up with at least $105 million in transfers or tax increases in order to balance the budget.
  • The original and revised FY 09 budget is the first budget to exceed the $6 billion mark. The budget that Gov. Culver and the Democrats will approve this session may be the largest spending budget in Iowa history if the federal stimulus money is included.
  • Republicans believe the Governor and Legislative Democrats should accept their share of the blame for the fiscal mess the state is experiencing. It is not the fault of misguided federal policies, greedy Wall Street bankers or the natural disasters. We must be clear– when we left last May we had already had built ourselves a $563 million shortfall. We now face $1.1 billion shortfall over the next 15 months.

Bonding Plan

Gov. Culver has proposed a $750 million bonding plan that if approved will need to be paid back over 20 years. Some of the project submitted to the Governor’s Office to be included in the plan are:

  • The Tower of Invincibility: A grand tower of at least 10 stories built in the center of Vedic City in Jefferson County that will allow grand vistas of the city in all directions.
  • Bronze Sculptures: Two full-size bronze sculptures of John Bloom’s WPA mural “Shucking Corn” in downtown DeWitt to create an entrance identity for DeWitt.
  • Football Coaches Offices: Coaches office addition at the Athletic and Wellness Center at Loras College in Dubuque.
  • Parking Ramp: 392 stall parking ramp for the University of Dubuque.
  • Library Book Drop: Constrution of a library addition for a book drop for the library in Newton.
  • Republicans are skeptical of the governor’s request to borrow $750 million through bonding. According to the State Auditor, using the RIIF for infrastructure (vertical or horizontal) would provide, in just a 3-year period, more than the $700 million of bonding proposed by the Governor that requires a 20-year payback.
  • If the infrastructure fund was used for what it was intended instead of spending it on various non-infrastructure priorities, this borrowing discussion wouldn’t be happening.

Other Message Points

  • According to The Des Moines Register, Iowa lost 17,500 jobs in 2008. That is like losing an entire town the size of Coralville. In January, there were over 80,000 Iowans out of work according to Iowa Workforce Development. It is the first time the number of unemployed Iowans has reached 80,000 since September of 1987.
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Dansette