The shame of Legislature’s budget choices

By Peter Fisher

The Iowa Legislature seems poised to balance next year's budget on the backs of Iowa's most vulnerable populations, while leaving subsidies to wealthy corporations largely untouched. This is shameful.

It does not reflect Iowa values and it runs counter to the approach most Iowans support to balance our budget.

Some budget cuts are unavoidable. The recession has reduced Iowa's revenues and the state will have less federal stimulus funds to help balance next year's budget.

But the Department of Human Services is slated to bear a disproportionate share of cuts. The department will be forced to cut field staff - the caseworkers providing direct services to Iowans - by 27 percent beyond the cuts made this year. More than 500 employees will be terminated.

The cuts to DHS mean less ability to respond to cases of child abuse, even with child abuse on the rise. The cuts also mean long delays in processing applications for food assistance or Medicaid, when need is driven higher by the recession. And terminating hundreds of state employees worsens the Iowa economy, as the families of those employees are forced to retrench and spend less.

Is this how Iowans want the Legislature to balance the budget? A voter survey last fall showed it is not. A majority of Iowans support a balanced approach that includes measures to increase revenue.

Only a third urged relying only on spending cuts. Large percentages favored limiting tax credits and plugging loopholes in the corporate income tax to stem the growing tide of wasteful business subsidies.

But the business lobby in Des Moines is winning the day.

In the past five years, business tax credits have grown by an astonishing 117 percent. Meanwhile, corporations continue to exploit huge loopholes in our income tax law that allow them to shift profits out of state and avoid Iowa tax on those profits.

The bill before the Legislature takes only baby steps toward reining in tax credits. The governor's fiscal 2011 budget proposed a $52.5 million reduction in tax credits, a 10 percent cut. The Legislature has come up with just a fraction of this amount.

The governor's panel convened late last year to review all tax credits recommended ending the film credit and seven others, capping most others, and sunsetting all credits. Under the proposed bill, the film credit remains suspended, and only a few minor credits are eliminated.

Worse yet, the bill gives the false appearance of cutting credits, since it reduces the caps for 10 credits expected to cost the state about $130 million next year. The lowered caps would have little effect, reducing the credit claims by less than 1 percent. For the most part, credits will continue to grow unchecked.

Meanwhile, a bill to close corporate tax loopholes - as 23 other states have done - would recapture $60 million to $120 million in lost revenue, but cannot even get a vote in the House or Senate.

How much would it take to maintain the services DHS field workers provide? Just $15 million. Yet one check written to one corporation under the Research Activities Credit in 2007 was for

$17 million.

Our lawmakers could take action to assure that those with the most resources share some pain to help those with the least. Instead, the Legislature would have the poor, the hungry and the victims of abuse bear the brunt of budget cuts in order to preserve tax breaks to profitable corporations.

Peter S. Fisher of rural Solon is research director of the Iowa Policy Project, a non-partisan, non-profit policy research and analysis organization in Iowa City. IPP is part of the Iowa Fiscal Partnership, which makes reports available at www.iowa

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