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State auditor praises Branstad’s budget

(Des Moines, Iowa) – Continuing in his role as the “Taxpayers’ Watchdog” and his duty to report directly to the people of Iowa on the condition of the State’s finances, State Auditor David A. Vaudt has completed his review of the Governor’s proposed budgets for Fiscal Years 2014 and 2015. Vaudt said, “These are the most fiscally responsible budget proposals I have analyzed in my ten years as State Auditor. These budgets are fiscally sustainable and plan for the long-term.”

Budget Proposals Nearly Eliminate Reliance on One-time Resources

Auditor Vaudt has continually criticized the practice of shifting General Fund costs to one-time or limited-time resources because services are not sustainable when the one-time monies are depleted. The Fiscal Year 2011 adopted budget shifted nearly $700 million of General Fund costs, creating a huge spending gap for Fiscal Year 2012 when many of the one-time monies were depleted. In contrast, the Governor’s proposed budgets reduce the reliance on one-time monies to $37 million in Fiscal Year 2014 and $35 million in Fiscal Year 2015—a 95% reduction. Vaudt said, “The practice of shifting General Fund costs to one-time or limited-time monies has been nearly eliminated in these budget proposals. The remaining shifts are insignificant in the context of our State’s budget, but we need to be vigilant to keep these types of shifts in check.”

Historic Proposals

If adopted, the Governor’s budget proposals eliminate the spending gap in Fiscal Year 2014. Vaudt said, “Consider where we were just a few years ago—saddled with a spending gap of $764 million. To eliminate the spending gap in just three budgets is very significant.” Vaudt noted two factors led to the dramatic elimination of the spending gap from Fiscal Year 2011 to Fiscal Year 2014—modest, 2.4% average annual spending growth coupled with 8.8% annual revenue growth. The
proposed budgets reflect a departure from past practices where State spending simply increased as revenues increased without regard for the spending gap or the long-term sustainability of expanding existing programs or creating new ones. Vaudt said, “The Governor’s proposals build on a long-term approach—an approach that takes into account the long-term sustainability of services instead of only thinking about the next year.”

Other Noteworthy Items

Auditor Vaudt noted increased salary costs are not funded in the Governor’s proposed budget. This is a typical practice utilized by the State for budget proposals developed before collective bargaining agreements have been reached. Auditor Vaudt said, “While past practices have excluded salary and benefit costs from budget proposals, the difference this year is there is room in the Governor’s budget proposals to absorb additional costs within Iowa’s available ongoing revenues.” There will be considerable pressure on revenues and spending in the coming years as a result of Federal actions. Vaudt noted, “The Federal sequestration alone will have an impact of $46 million in Fiscal Year 2013.” Federal monies cover approximately 50 percent of Iowa’s General Fund costs. “As the Federal government addresses its fiscal imbalance, Iowa can expect additional reductions in Federal support,” added Vaudt.

In Fiscal Year 2012, Iowa’s pension system, IPERS, added $200 million to its unfunded actuarial liability, which now stands at $5.9 billion at the end of Fiscal Year 2012. Vaudt noted the contribution rates to IPERS have increased over the past few years to partially address this issue. Vaudt said, “IPERS is only 80% funded today, versus 98% funded in 2000. Improving the funded status of IPERS has to be a priority in our long-term financial planning.”

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