Word of the Day – April 8, 2009

Word of the Day
In scuggery – In secrecy, hid.
William Marshall’s Provincialisms of East Yourshire, 1788

Republican Budget Savings Plan

  • Speaker Murphy and Majority 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. This week 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

  • Federal deductibility helps Iowans save money. For example, if an individual makes $50,000 and pays $15,000 in federal taxes, their base income for state tax purposes is $35,000.
  • 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.
  • Double taxation (tax on a tax): eliminating federal deductibility will allow the state to tax income never realized by taxpayers (i.e. $15,000 example above).
  • 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.
  • The majority of Iowa businesses are small businesses and their income is taxed at the individual rate. If their tax liability increases, they will either eliminate jobs or pass the added expense to the consumer to absorb the cost.

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.
  • Even with these new numbers, remember that the two budgets Governor Culver and the Democrats have approved over the last two legislative session are the highest spending and second highest spending budgets in the state’s history.
  • 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 will be the third highest spending budget (not counting the stimulus money) and will be almost a half a billion dollars more than the last budget approved by Governor Vilsack and House Republicans.
  • If Democrats simply went back and approved the last budget House Republicans approved when we were in charge of both chambers (FY 05), the state would have a surplus.
  • 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.

Transparency

  • The bill requires the development of a search budget database on the internet so anyone can track and research state government spending.
  • Republicans added specific requirements to database so departments must disclose inter and intra-departmental transfers and include key details so certain expenditures cannot be hidden under broad line-items like “Miscellaneous spending” or “General Administration.”
  • Unfortunately, Democrats in the Senate killed the bill for year. Republicans will attempt to add back into a larger budget bill before the legislature adjourns.

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