The tremendous turnaround in the financial strength of Iowa has been well documented over the past few years. A huge budget shortfall in 2011 turned into a huge surplus through three years of sound budgeting principles and tough decisions.
Currently, Iowa has over $850 million in our ending balance. This is money that has accumulated over the past 3 years. Many people refer to this as a “surplus,” but I believe it is more like a savings account. We do not have this amount of money left over every year, it has built up over time into $850 million total.
When discussing what to do with the $850 million, there are many different proposals brought forth. I believe the money is best spent in one of three ways. First we return it to the taxpayers. I have voted several times to give the money back to those who paid the excess taxes.
Second, we could use it to pay down some of the state debt. Last year we paid off over $100 million of state debt, mostly from Governor Culvers I-Jobs program and the state debt from the Honey Creek resort in southern Iowa. Paying down this debt will save millions of dollars of interest over the years.
Finally, we can save it for a rainy day. This is an extremely popular choice when discussing this issue with constituents. The state of Iowa currently has two reserve accounts in state code. We have the cash reserve account, which by law must contain 7.5% of our state budget (about $466 million). We also have an economic emergency account, which by law must contain 2.5% of our state budget (about $155 million). So in total, the state of Iowa keeps 10% of our state budget in reserve. These accounts are extremely important to ensure that the state can meet our financial commitments in tough economic times.
After hearing from many constituents who suggested that we save the money for a “rainy day,” I began research how our reserve accounts compare to other states. I was pleased to find that by having 10% of our budget in savings, we are ranked #8 in the nation compared to all states. The top three states are Alaska, Wyoming and West Virginia.
The tough decisions that the Legislature has made over the past 3 years has resulted in a dramatic turnaround to our state budget and improved our state for the better!