Here we go again…

Fiscal responsibility is a must in our personal lives.  What we earn is not nearly as important as what we spend.  Without fiscal responsibility there is little else we can accomplish.  The ability to live within our own means is essential, so we can pay our bills on time, have money in savings for unexpected emergencies, and set some funds away for retirement. In other words cover our expenses and acquire personal financial independence for the future.

So why do some people in government continue to encourage government to live outside their means?

Mike Ralston, of the Iowa Department of Revenue and Finance, held a press conference earlier in September to announce that they discovered a $62.1 million shortfall in the state 2002 fiscal year-end.  The Revenue Estimating Conference (REC) projected a $5 million increase in accruals compared to FY 02, meaning there is a $67.1 million hole in the FY 03 budget.  Actual accruals for FY 03 were $322 million, the REC projected accruals to be $389.1 million.  Since overall general fund revenue was predicted to increase by only 0.5 percent, a slight increase in accruals was expected.  It also appears that reversions are $1 million short, meaning the total hole will be about $68 million.

Accruals are revenues that come in after the fiscal year ends but are credited to that fiscal year.  The “big four” components of accruals are income tax withholdings, sales tax, use tax, and corporate income tax.

You never know for sure how much money will actually come in!  But the expenses that are budgeted will surely get spent. This is why we only budget to spend 99% of our revenues; maybe this should be 98%.

This all comes following the Governor’s transfer of $15.2 million from Medicaid to fully fund the state employees increase in wages that he negotiated, and the extra bonuses he negotiated for some of the department heads.

What did I say about fiscal responsibility?

Governor Vilsack is thinking about calling the legislature back for a special session.  However, State Auditor David Vauldt says that is not required.

In the next few weeks I will be gathering more information on what the close of fiscal year 2002 really looks like.

I don’t think the legislature should jump to any conclusions without having all of the facts.  We need to know all of the available options.

It is just as important for government to live within its own means as it is for people to live within theirs.  After all, government is a representation of the people and not the other way around.

Until next time,

Tom Sands