The state of Iowa experienced a revenue shortfall last fiscal year must close the books by September 30 with a balanced budget which will require a special session of the Iowa Legislature.
State Treasurer Michael Fitzgerald, who is one of two Democrat statewide elected officials, sent Governor Kim Reynolds a letter this week suggesting the state borrow money.
“As we enter September, we do not know how much more we will need to take from our reserve accounts to balance the FY17 books. Facing greater uncertainties in FY18 and reduced balances, as a AAA state, we need to be prudent in how we manage our finances. I am recommending that we issue a cash-flow borrowing to ensure we have the money available to pay our bills, including school aid payments, on time this fiscal year,” he wrote.
“Not paying our obligations on time can have serious impact on Iowans, for example, delaying payments to school districts could force them to borrow money and incur unnecessary costs they cannot afford,” he added.
Reynolds said earlier that she intends to use Economic Emergency Fund to cover the shortfall. She can only transfer $50 million without legislative approval, so the legislature will have to approve any additional funds.
Former Governor Terry Branstad transferred $131 million from the fund and made $118 million in budget cuts and adjustments prior the end of collection for FY17 in June.
Iowa Speaker of the House Linda Upmeyer (R-Clear Lake) accused Fitzgerald of sounding a false alarm.
“Treasurer Fitzgerald continues his attention-seeking ways of running to the press to sound false alarms and scare the public rather than speaking with Governor Reynolds or legislative leaders. If he had serious concerns about the budget, then he would have brought it up while the Legislature was in session or reached out over the summer,” she said.
“The Department of Management has assured legislative leaders that the reserve accounts have enough funds to cash flow the state this fiscal year,” she added. “What’s interesting is that Treasurer Fitzgerald didn’t sound these same alarms in 2009 before former Governor Culver enacted a 10% across-the-board cut. Instead, he pointed to our AAA credit rating, which we still have today, as evidence that we would be able to pay the bills. He’s creating a fake issue to score political points, plain and simple.”
I have to agree with Upmeyer, Fitzgerald is grandstanding. Iowa does not have a revenue problem; it has a spending problem. The increases in revenue just have not kept up with the increases in spending, and the last thing the state should do is borrow money. The Iowa Legislature and Governor Reynolds have the opportunity to address a state budget that grows each fiscal year.
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