Desmoinesdem debunks McKinley claims of fiscal doom

Today desmoinesdem at BleedingHeartland.com walks us through Senate Minority Leader Paul McKinley’s latest column and debunks each of his claims about pending fiscal doom.  It’s well worth reading, as desmoinesdem does a great job fact checking and citing reliable, non-partisan sources:

McKinley tends to hit the same talking points in each of his regular Friday e-mail blasts. Here are some typical assertions from the most recent “McKinley’s Memo” (July 9): “By First Learning to Crawl, We Can Begin to Walk and Run.”

Because of too much spending during the last four years by Governor Culver and legislative Democrats, Iowa still faces a $1 billion dollar deficit next year.

Sorry, no. Iowa isn’t facing any budget deficit, let alone a billion-dollar budget deficit. Like his fellow Republicans, McKinley is making projections about the fiscal year that begins in July 2011. It’s way too early to know what state revenues will look like during the 2012 fiscal year, but we do know that when projections in November 2009 suggested a billion-dollar shortfall for the current fiscal year, Iowa Democrats made the adjustments necessary to adopt a balanced budget during the 2010 legislative session.

Also notice how McKinley’s July 9 memo ignores the latest state revenue estimates from the fiscal year that just ended. Those projections came out at the end of June and suggest that Iowa will end FY 2010 with a larger-than-expected surplus.

A recent report by State Auditor Dave Vaudt shows why we are in the alarming predicament that we find ourselves. Prior to Governor Culver and legislative Democrats coming into power, the state was spending approximately $1.01 per $1.00 that was coming into the state. Since Governor Culver and his fellow party members have taken over, the state has been spending approximately $1.13 for every dollar coming in.

The extra spending in recent years has come from federal stimulus money, which was approved with the specific goal of supporting state budgets, as well as Iowa’s reserve funds. Is McKinley saying Iowa should have rejected the federal stimulus money? Much of it supported education budgets, Medicaid and unemployment benefits. Is McKinley saying Iowa shouldn’t have dipped into rainy day funds during a severe recession that began after this state suffered the worst flood damage in history? Remember, Democrats have maintained healthy reserve accounts in Iowa while many other states fully depleted their reserves during the recession.

Clearly Iowa does not have a revenue problem – we have a spending problem. During the last four years, we have seen the four largest spending budgets in state history. We have seen hundreds of millions of dollars in property tax increases and a quintupling of state debt.

Iowa is not suffering under a crushing debt load. Click here to view a list of all 50 states plus the District of Columbia, ranked by state and local debt as a percentage of state gross domestic product. Iowa ranks 48th on this list, with a debt load way below the national average, even taking into account the I-JOBS infrastructure bonding initiative.

Republicans opposed I-JOBS on the grounds that infrastructure projects should be funded only on a pay-as-you-go basis. However, GOP politicians never tell you where they would have found the money to rebuild flood-damaged facilities in Linn County or on the University of Iowa campus. The crumbling infrastructure and substandard sewers in many Iowa communities suggest that if anything, this state’s leaders have been too reluctant in the past to borrow for capital investments. Iowa State University economist Dave Swenson has pointed to long-term benefits from the I-JOBS projects: “Iowa is getting very valuable social goods that will serve us for 20 years.”

While Terry Branstad was governor, Iowa borrowed more (adjusted to today’s dollars), and a large chunk of Branstad’s state bonding was used to meet budget obligations in 1992. I-JOBS was entirely devoted to capital investment, not paying the bills for ongoing government programs.

Without fundamental and systemic reforms, Iowa could become like California with serious structural deficits.

Professionals who assess the states’ financial condition have declared Iowa to be among the states “least like California” in terms of budget problems. Iowa would not be one of only seven states to have the highest bond rating from all three major agencies if we faced disaster without “fundamental and systemic reforms.”

we must continue to take steps to trim the size and scope of state government and continue to remove the waste and duplication that exists. We should start by adopting the over $300 million in additional savings offered by Senate and House Republicans during the last two years.

About a third of that $300 million figure comes from flawed estimates of how much could be saved by cutting services to undocumented immigrants. Also, I doubt it would be practical to “combine the administrative functions” at the University of Iowa, Iowa State and the University of Northern Iowa. Republicans claim that idea would save about $62 million a year. Other proposed cost-cutting is questionable as well; privatizing the state vehicle fleet would not necessarily save taxpayers money, especially not in the long run.

McKinley has made even more ridiculous assumptions about the state budget. Last year he claimed Iowa could save $200 million to $300 million each year on special education “[i]f we taught [children] how to read in kindergarten and first grade.” That concept was so implausible it didn’t even make theRepublican list of proposed spending cuts.

Iowans all over the state will see hefty property tax increases courtesy of Governor Culver this fall.

It’s misleading to pin all the blame for property tax increases on Culver. Moreover, McKinley ignores the fact that local governments and school districts would have been much more starved for cash if not for the 2009 American Recovery and Reinvestment Act. The federal stimulus money McKinley cites as proof of Iowa Democrats “spending too much” helped prevent even larger property tax increases during the most severe recession in 60 years.

Creating an environment where small businesses and employers can thrive, succeed, grow and therefore hire more people is absolutely essential. Unbalanced budgets leading to higher taxes and the constant onslaught of anti-jobs legislation promoted by Governor Culver and legislative Democrats have not moved Iowa’s economy forward and instead have held it back.

Reality check: Iowa has had a balanced budget every year for the past four years, and Democrats have not raised income or sales taxes. Also, many Democratic initiatives have aided job creation in Iowa. To cite just a few examples, the Power Fund, which Republicans opposed from the start and want to scrap, has awarded money to many Iowa businesses. The Iowa Demonstration Fund (also passedthe first year of Culver’s term) is specifically aimed at small and medium-sized businesses like these. During the most recent legislative session, Democrats approved a bill to increase the Research Activities Credit available for small businesses.

McKinley advocates the usual Republican one-two punch of cuts in public services to pay for corporate tax cuts, but that’s not his only idea for making Iowa strong.