Season 2 - Episode 17: Following the Money

💰 Deciding Iowa – Episode 17 - Follow the Money

You’ve probably heard Iowa has a budget surplus.

But where did it come from…
 and what happens when it runs out?

In this episode, we break down the numbers behind Iowa’s surplus, tax cuts, and what they could mean for schools, Medicaid, and the future of our state.

The math matters.

🎥 Watch and decide for yourself.

#DecidingIowa #IowaPolitics #FollowTheMoney

Transcript

SPEAKER_00 0:00

Hello, Bramer County in Old of Iowa. I'm Dr. Sean Albrook. I'm a biochemprof, cancer scientist, and House District 57 candidate.

SPEAKER_01 0:07

And I'm Dr. Emily Bavers. I'm a physician, mom of three, and a health advocate. So you have probably heard that Iowa has a budget surplus and the legislature has vowed to continue tax cuts. But what does the budget actually look like and how exactly does the math math?

SPEAKER_00 0:23

It's true. You know, Iowa does have a budget surplus, but you have to go back a few years to understand why. Our surplus started to make news back in 2021 when Iowa ended the year with about$1.24 billion in surplus reserves.

SPEAKER_01 0:36

Wow. And some of this surplus came from Iowa cutting back on spending and very strong tax income during those years. But the majority of our surplus arrived in the form of one-time COVID-19 stimulus money.

SPEAKER_00 0:49

This federal money went directly to the state government to help support Iowans during unprecedented pandemic uncertainty and also to buy a plane.

SPEAKER_01 0:58

And the state also, again, appreciated strong tax revenue from those COVID stimulus checks that we all spent. The important message here is that Iowa's budget surplus is primarily due to one-time federal money.

SPEAKER_00 1:12

During the years when the surplus was built, Iowa was collecting about$10 billion in tax revenue, with the top income tax bracket in Iowa at about 8.5%. Since then, the legislature has passed the 3.8% flat income tax.

SPEAKER_01 1:27

Right. And that's a halfway cut, more or less. And so the result is that Iowa's state tax revenue has decreased to about$8.1 billion, a loss of about$2 billion annually in state revenue.

SPEAKER_00 1:41

That revenue loss demands a combination of less spending and a drawdown on our budget surplus to cover the difference.

SPEAKER_01 1:49

And you would think that the legislature would realize this revenue loss was coming and would not want to start a new budget spending line. Yet they did. They created$400 million annual extra expense for the state through our new ESA voucher bill.

SPEAKER_00 2:07

Ouch. Uh with state with less state revenue and that new ESA budget line, I predict cuts and deficits for Medicaid and public education because those make up a large chunk of our state's expenditures.

SPEAKER_01 2:20

And you would be absolutely correct to predict that because the Medicaid budget is running a deficit, made worse by the one big beautiful bill. And what nearly two-thirds of school districts in the state have to go on what's called a budget guarantee next year because of insufficient state funding. Normally, but that would be a bad look for the legislature, particularly in an election year, when they promised property tax relief. So to avoid that, they are digging even further into our state budget surplus to smooth out school funding gaps and keep Iowans unaware.

SPEAKER_00 3:07

It is pretty clear the state is accelerating its drawdown on its budget surplus. In fact, the the projected to be cut almost in half after this year. Wow. At the rate we're going, it won't last much longer.

SPEAKER_01 3:21

Yeah, and with the budget surplus dwindling, it's a fair question to ask how can the state even afford any more tax cuts?

SPEAKER_00 3:29

Perhaps legislators, including Reynolds, are pretending the surplus isn't declining as fast as it is.

SPEAKER_01 3:35

Or they are imagining any existing or future cuts can be covered by a catastrophic reduction on spending on services that Iowans depend on, like Medicaid and education.

SPEAKER_00 3:49

Or perhaps they've sold themselves that Iowa's economy is not shrinking and the revenues will go up.

SPEAKER_01 3:55

Well, whatever the case is, they've promised more tax cuts, and by golly, they intend to deliver.

SPEAKER_00 4:02

As it stands today, the property tax bill that they have uh introduced in both the upper and lower chambers will further decrease the state's revenue by about$3 billion over a period of six years.

SPEAKER_01 4:13

Yeah, and we really don't have the reserves or the thriving economy to absorb this revenue hit.

SPEAKER_00 4:19

You know, we all like the idea of lower taxes.

SPEAKER_01 4:22

Sure.

SPEAKER_00 4:22

But but you have to be pragmatic and smart about where and how you reduce tax burden.

SPEAKER_01 4:27

Yeah, I mean think about roads, bridges, school buildings, public buildings, health care for Iowans, supporting strong rural communities. Without adequate tax revenue, we will start to see the state infrastructure decay, the risks of accidents, health hazards, contamination, condemnation of buildings, all of those things will decrease without investment.

SPEAKER_00 4:50

Who else is wondering what will happen when the surplus is gone?

SPEAKER_01 4:54

Oh gosh. I think the answer is that our state's current and growing budget crisis will make Iowa a less desirable place to start your family, raise your family, send your kids to school, to drive here, to work here, or to retire here. That'll just continue an economic tailspin.

SPEAKER_00 5:14

When revenues go down further, what else can no longer be funded? What happens to state retirement program, for example? We need wise and strategic planning to invest thoughtfully in Iowa. We need to return to a progressive income tax structure that builds back up state revenues and leaves room to properly address property tax concerns, especially for seniors and first time home buyers, and sets Iowa up for long term financial stability under any administration.

SPEAKER_01 5:42

This is our home, and we really have to take care of it. Be well, Iowa.