Staff Editorials

Iowa's budget shortfalls are more than a revenue problem

Lawmakers and Gov. Terry Branstad are right to pull from the state’s cash reserves to fill the latest $131 million budget gap, the result of lower than expected revenues.

We’re sure most Iowans would likewise use their savings account when faced with an immediate need.

This shortfall marks the fourth time in as many quarters that state revenue projections have been downgraded — $46 million last March, $70 million in October and $86 million in December. It’s not realistic for lawmakers to attempt to cut spending — again. Especially not this late in the fiscal year.

But dipping into the piggy bank is only a temporary fix. To solve the problem, lawmakers must thoroughly inventory the state’s complex system of tax credits and exemptions.

State revenues are not down — they actually are increasing, if only slightly.

The most recent comprehensive study from the Iowa Department of Revenue, based on 2010 figures, shows $12.1 billion in state revenue is being displaced each year by more than 250 tax cuts, exemptions and credits approved by the legislature and Governor. That number is expected to grow when an updated report based on 2015 figures is released.

As our March 5 editorial noted, $12.1 billion is “an astounding number” in a state with a $7.2 billion general fund.

Since 2014, after massive bipartisan property tax and education reforms, State Auditor Mary Mosiman has warned of future budgetary challenges due to “millions of dollars of multiyear, accelerated commitments.”


The 2017 price tag for the property tax backfill and Branstad’s teacher leadership program is nearly $500 million (an increase of $77 million from 2016).

But instead of carrying a larger surplus forward into this budget year, more than $300 million was spent in the final days of the last session — $98 million tapped for farm and business tax relief.

House Appropriations Committee Chairman Pat Grassley (R-New Hartford) has proposed capping tax credits available to Iowa businesses, industries and individuals next year. That would be a start.

But lawmakers must be much more aggressive and commit to a thorough housecleaning of tax cuts, exemptions and credits.

Giving tax breaks is a lot more fun than taking them away. But until lawmakers get serious about demanding hard evidence that a given tax break creates growth that more than offsets lost revenues, state budgets will continue to run red.

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