Tuesday, June 03, 2008

Lawmakers Should Heed Vaudt's Budget Warning

Below is a recent editorial published in the Des Moines Register:

Feeling uneasy about Iowa's budget? For good reason, based on state Auditor David Vaudt's recent report: Democratic lawmakers hid some spending and sidestepped state spending limitations by shifting $444 million in general-fund expenses to special accounts for the fiscal year that starts July 1.

That's a record, but the practice is nothing new. When Republicans led the Legislature, they did the same thing, and were criticized, too. (On the chart Vaudt presented, though, Republicans were doing this in at least some years when revenue growth was declining, not growing.)

Tapping special accounts typically occurs because lawmakers want to spend more than they can afford based on regular revenue streams.

But special accounts are supposed to be used for special purposes, and not to routinely cover shortfalls. One example: The Senior Living Trust Fund, created in 2000, was intended to help older Iowans live in their own homes as long as possible.

Over the years, almost $600 million has been diverted from that fund to cover general-fund costs, Vaudt said. While lawmakers are repaying some of that money, they keep borrowing it. That apparently will leave just $37 million in the trust fund in a year.

It's like a family drawing down their children's college-savings accounts to pay regular household expenses.

Mike Gronstal, Senate majority leader, said he is not comfortable with dipping into special funds, and wants to move away from doing that. But it has to be done in the context of establishing policies that better protect middle-class Iowans, said the Council Bluffs Democrat.

"We fully agree this budget is not perfect, and it was not easy to dig ourselves out of all the bad budget practices the Republicans engaged in, but in every respect this budget improves on the previous Republican budgets," he said. Gronstal also said he believes Democrats have put more money into special accounts than Republicans did.

Still, it looks like the gap between spending and revenue may grow because of multiyear commitments and promised tax credits. Add a possible recession, and the emergency funds socked away won't go far.

If that comes to pass, and Iowa's special accounts are exhausted, it will mean cutting the state budget or raising taxes.

Instead, elected officials of both parties should shake their bad habit. Move quickly to phase out relying on those special accounts to cover regular general-fund expenses. That will better position Iowa for the hard times that always come around sooner or later.