Iowa’s State Budget: Spending Our Way to a Crisis Again 

by Public Interest Institute Monday, April 06, 2009
MOUNT PLEASANT, IA – Governor Culver and the State Legislature increased spending by nearly $1 billion in just two years, pushing state General Fund spending over the $6 billion mark for the first time in Iowa history. As revenue grew over the last few fiscal years, Legislators and the Governor chose to increase spending to levels that were simply not sustainable if the state entered an economic downturn, which it now has, and revenue began to fall.

State budget negotiations are ongoing in the current Legislature. Public Interest Institute’s POLICY STUDY, Iowa’s State Budget: Spending Our Way to a Crisis Again, provides recommendations for our elected officials to prevent additional budget crises.

On the federal level, the recently-adopted economic stimulus package provides bailout funds to the 50 states. Iowa’s share of the funding will be around $1.9 billion. Legislators and the Governor should take care to remember that the federal stimulus funding is a one-time, not an ongoing, funding source. Any new programs or increases in ongoing spending that are created using those funds will create shortfalls and cause problems down the road.

For a more long-term solution, we suggest expenditure limits for the state budget that would limit the state’s annual spending growth to the growth in state population plus inflation. This limit must be a Constitutional limitation, to prevent circumventing the limits through the use of “notwithstanding” language in legislation, as is done with our current 99% expenditure limit law for General Fund spending. The expenditure limit must also apply to both General Fund and Non-General Fund spending.

Even with such an expenditure limit, the budget would continue to increase, but at a slower rate of growth. Had this expenditure limit been enacted, total budget savings from FY 2006-FY 2009 would have been more than $3.1 billion. Ideally, this is money that could have been returned to Iowa taxpayers or not collected from taxpayers to begin with. At any rate, “with more reasonable spending increases, we would not be in the middle of the budget crisis we are today,” said Amy Frantz, Research Vice-President with Public Interest Institute in Mount Pleasant, Iowa.

Public Interest Institute’s INSTITUTE BRIEF and POLICY STUDY, “Iowa’s State Budget: Spending Our Way to a Crisis Again,” are available at

For an interview or more information on this issue, contact Amy Frantz, Public Interest Institute Research Vice-President.

Public Interest Institute is a non-profit, non-partisan, public policy research organization located in Mount Pleasant, Iowa. The Institute promotes the importance of a free-enterprise economic system and limited government in society based upon individual freedom and liberty. Public Interest Institute believes that ideas have consequences, and involved individuals can make a difference. We challenge concerned citizens to become better informed about public policy issues.

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