Revenue estimates spark debate over depth of shortfall

Iowa could end the 2009 fiscal year with $161 million less in net revenues than lawmakers expected when they finalized the budget at the end of this year’s legislative session, according to estimates by the non-partisan Legislative Services Agency.

If those numbers prove accurate, Gov. Chet Culver could be forced to call a special legislative session in order to balance the state’s budget.

Gov. Chet Culver

Culver’s budget director Dick Oshlo did not agree with the LSA’s estimates, saying the state would only be facing a $58 million shortfall. Since the legislature left a $44 million balance when it adjourned, and Culver has the authority to transfer $50 million from the state’s rainy day fund, a special session will not be needed.

“While the state’s tax receipts deteriorated more than expected during the last two months of the fiscal year due to the ongoing effects of the national economic recession, this is a manageable number,” Oshlo said. “Fortunately, receipts improved during the final days of June. At this point we see no legitimate reason for a special session to balance the state’s budget.”

However, Oshlo’s figures are based on the state’s gross receipts, and “government operates on net receipts,” said David Swenson, an economist at Iowa State University.

“In effect [the Department of] Management is counting all of its deposits but, at least for the short term here, not pending obligations,” he said. “It is in my view budgetary hocus pocus. Now you see an unbalanced budget, now you don’t.”

Ultimately, the state is looking at a $161 million problem, Swenson said, because gross receipts are down $58 million, net refunds are up $72 million and there is an additional $31 million in school infrastructure payments that must come out of FY2009.

The governor’s office was quick to point out that the reason gross receipts were used was because they are the only real numbers that currently exist. The LSA’s figures are just estimates, and true net receipts won’t be known until September when the Department of Management closes the books on the fiscal year 2009 budget.

There is also revenue that will be collected within the next 90 days but allocated to the fiscal year that ended Tuesday, money that will improve the state’s financial situation and is not included in the LSA projections.

Culver Press Secretary Troy Price told the Iowa Independent last month that until accruals, expenditures and refunds are all taken into account there is no way of getting an accurate picture of the 2009 budget.

Republicans pounced on the new figures. Sen. Minority Leader Paul McKinley said Culver is violating the state’s Constitution by ending the fiscal year with an unbalanced budget.

“Republicans and independent expert economists for the past few years have consistently and continually warned Gov. Culver and legislative Democrats, who remain in a state of denial about Iowa’s budget, that Iowa’s taxpayers cannot afford the record spending, record borrowing and record deficits,” he said.

Gubernatorial hopeful Christopher Rants said Culver should stop denying there is a problem and bring the legislature back into session.

“It is time to quit worrying about the political ramifications of admitting that we have a deficit and get about the business of fixing it,” Rants said. “Gov. [Tom] Vilsack put aside partisan politics and called a special session in 2001 and 2002 to balance the budget after revenues declined. Culver needs to do the same.”