Lawmakers Weigh Options to Pay for Flood Damage

The flood waters have just started to recede in some parts of the state, but lawmakers are already considering several options to help pay for the massive reconstruction effort.

Gov. Chet Culver has indicated that once the scope of the damage is truly known the Legislature will be called back into session. The state will lean heavily on federal money, which will dwarf any amount the state can contribute, but experts agree federal dollars won't cover the entire cost. It's still unclear just how much money will be needed to rebuild flood-damaged Iowa, but early estimates expect the cost will it will be in the billions.

In a statement today, Culver said he wants the federal government to pick up the entire tab for emergency response efforts and debris removal related to the disaster. Federal, state and local governments usually shoulder the burden of funding disaster recovery, but Culver said the magnitude of the flooding means the federal government should pay a bigger share.

On the state level, three options seem to be emerging for Iowa to contribute financially in reconstruction efforts. The first is to tap into the state's rainy-day fund. The state's cash reserve and economic emergency funds currently sit at just under $600 million.

Dave Swenson, an associate scientist in the department of economics at Iowa State University, said that if the rainy-day fund is as healthy as has been reported, tapping into it could be a viable option.

"But that fund is not just for catastrophes," he said. "It's there in case the economy enters into a down cycle that dries up tax revenues needed to pay recurring expenses."

With many predicting continued economic troubles down the road, using the rainy-day fund may not be as feasible an option as it is at first glance, Swenson said.

That could cause people to lean toward the next possible funding mechanism: the state borrowing money to pay for the rebuilding efforts. Swenson said the state will get a lot of federal money to pay for infrastructure repair, but lots of public buildings, such as the facilities at the University of Iowa, have been damaged and will need to be paid for with state money.

"When you borrow money, that allows you to fix things as quickly as possible," he said. "You can't move as quickly on a `pay-as-you go' basis."

The Des Moines Register columnist David Yepsen has already championed the idea, and state Senate Majority Leader Mike Gronstal said he is open to it as well. They pointed out that Iowa ranks 47th in per capita levels of state and local government public debt. But many conservatives are already crying foul, saying legislators want to incur debt so they can continue to use rainy-day funds to pay for other projects and cover up budget shortfalls. They say the state should do everything it can to avoid borrowing money by using bonds to pay for disaster damages.

A third option is an increase in the state's gas tax. Legislators say all options must be left on the table until the final damage assessment is complete, but in an election year with already skyrocketing fuel prices, observers agree that this option would be a tough sell.

At the end of the day, lawmakers will probably utilize numerous options to pay for the extensive flood damage when they are called back into session later this year.