Word of the Day – April 22, 2009

Word of the Day
Callifudge – trick, a hoax, a swindle
Francis Taylor’s Speech of South Lancashire, 1901

Bonding Plan

  • According The Des Moines Register, 71 percent of Iowans oppose the bonding plans proposed by Democrats.
  • Democrats aren’t even saying how they will pay for it – only that future legislatures will have to come up with the money.
  • Republicans are skeptical of the Democrats plan to borrow between $700 million and $750 million through bonding.
  • Paying for any of the projects under discussion will cost the taxpayers more through bonding than through a pay-as-you-go strategy. Senate File 376 currently has $175 million in bonding in it and will cost taxpayers $316 million in principal interest. Senate File 474 has $100 million in bonding in it and will cost the taxpayers $217 million in principal and interest.
  • 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.
  • Had Democrats not used well over $200 million in infrastructure dollars for non-infrastructure things, some of the projects listed directly below could have been paid for without borrowing anything.
  • Over the last two years, Democrats in the Legislature have used well over $200 million in infrastructure dollars for non-infrastructure spending. That means we could be using a pay-as-we-go approach instead of a borrowing plan for projects like:

Some of the projects Democrats want to borrow money through bonding to pay for include:

  • $5 million for the Cedar Rapids Public Library
  • $5 million for the Cedar Rapids Public Works Building
  • $10 million for the National Czech and Slovak Museum
    • The above three projects are among the $46 million targeted to Cedar Rapids. None of this $46 million is dedicated to flood prevention.
  • $25 million for public broadband technology
  • Undetermined amount for state parks
  • $7 million for community colleges
  • $12 million for community attractions and tourism
  • $10 million for river enhancement community attractions and tourism
  • $100 million for regents institutions

Here are some of the places Democrats want to spend infrastructure dollars in 2009:

  • $188,000 for D-line bus service and employee ride program,
  • $50,000 for asbestos demolition assistance for the city of Seymour,
  • $200,000 Tai village roadway in Des Moines
  • $200,000 AAU Jr. Olympics summer 2009,
  • $500,000 Pinicon Ridge park Wapsi River crossing,
  • $100,000 Warren county economic dev. building renovation,
  • $200,000 Administering the I-Jobs program,
  • $12.8 million for lake restoration,
  • $130,000 for vision screening,
  • $3.0 million for trails,
  • $3.0 million for passenger rail.

Here are some of the things Democrats spent infrastructure dollars in 2007 and 2008:

  • $300,000 for a construction of a train depot and platform in Dubuque. Unfortunately, there is no Amtrak service to Dubuque and none is likely to happen the near future.
  • $80,000 to repair an antique organ in Clermont.
  • $100,000 to partially finance a multi-use community center in Des Moines that also happened to be in House Majority Leader McCarthy’s district.
  • $750,000 line-item to help finance the Principal River walk in Des Moines. It will consist of a series lighted and landscaped walking paths and bridges to connect the east and west sides of Des Moines.
  • $50,000 to be used to market a free shuttle service to state employees.
  • $120,000 in state funding for decorative planters in the city of Des Moines.
  • $6.3 million to refurbish and redecorate offices within the state capitol building – including offices for House Democrats.

Gov. Culver has also proposed a $750 million bonding plan that if approved will need to be paid back over 20 years. Some of the projects 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.
  • 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: Construction of a library addition for a book drop for the library in Newton.

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.