The state of Iowa’s legislative session in 2014 is facing a difficult budget dilemma due to previous decisions made in 2013. At the start of FY2013, lawmakers had nearly a billion-dollar surplus, which they utilized to provide moderate gains for the middle class. However, the same session also saw the enactment of one of the biggest tax giveaways in the state’s history, which distributed millions of dollars in a regressive set of smaller tax credits, putting the previous gains at risk.
The 2013 property tax cuts, estimated to cost the state $3.1 billion over the ten years ending in FY2024, will continue to eat into the revenue, shrinking future surpluses and eliminating the funds that could have been used to finance new initiatives or reinstate previous budget cuts. The cuts will also affect local governments, leading to a loss of $741 million over ten years, putting a strain on public services such as fire and police protection, local libraries, parks, hospitals, elementary and high schools, and public transit systems.
Various tax changes will also have an impact on services, with many business tax credits being modified and caps raised, leading to potential spending increases through the tax code, costing the state nearly $475 million by FY2024. The creation of the Taxpayers Trust Fund income tax credit commits funds from the Taxpayers Trust Fund for the foreseeable future, costing over $90 million in the current year, for a tax credit that returns only income taxes, leaving out those who are too poor to pay income tax but do pay significant shares of their income in sales and excise taxes.
All of these multi-year commitments will continue to deplete future surpluses, creating challenges in the coming years to sustain essential services. Even if the state maintains robust revenues and modest spending growth, crucial programs and services will likely continue to be underfunded. K-12 schools have had their per-pupil spending held below actual cost increases due to two state budget crises in the last decade, leading to compounded underfunding of public education. Furthermore, Iowa Workforce Development has already closed 36 out of 55 field offices and has only enough money for one full-time wage theft investigator.
Iowa lawmakers must recognize the long-term impact of tax cuts on spending choices. Past decisions will force future legislatures to lower investments in critical services upon which economic growth depends. The state must set a sustainable course for the future while dealing with the consequences of past choices. They must consider the long-term impacts of tax cuts and ensure that future surpluses are preserved for investments in critical services; otherwise, they risk underfunding programs and services that are essential for the state’s economic growth and prosperity.
To address the budget dilemma, Iowa lawmakers must adopt a sustainable and long-term approach that recognizes the importance of critical services and programs. They must focus on raising revenue and reforming tax policies that create more equitable and fairer outcomes for all residents. This can be achieved by examining ways to eliminate regressive tax credits and loopholes while ensuring that the tax system is progressive and serves the best interests of all Iowans.
The state must also prioritize funding for essential services, such as education, healthcare, public safety, and infrastructure, and invest in measures that promote economic growth, job creation, and innovation. It is also essential to identify areas of waste and inefficiency within the budget and eliminate them to ensure that taxpayer dollars are spent wisely and effectively.
In conclusion, the 2014 legislative session in Iowa faces a budget dilemma due to past decisions that have put critical services and programs at risk. Iowa lawmakers must adopt a sustainable and long-term approach that prioritizes investments in essential services and promotes economic growth and job creation. They must also reform the tax policies to ensure that they are progressive and fair and eliminate.