No, Virginia, there's no billion-dollar budget gap

Last night I watched the Republican gubernatorial debate on Iowa Public Television. If you missed it, you can read the full transcript here. Some Iowa stations are rebroadcasting the debate this Sunday too.

One of the worst things about televised debates is the lack of follow-up by the journalists who moderate. Wednesday’s exchange provided a classic example of this problem.  

In his opening statement, State Representative Rod Roberts claimed state spending is at record levels, and “next year’s budget gap is projected to be nearly a billion dollars.” A few minutes later, former Governor Terry Branstad mentioned in his opening statement that Iowa has a “projected budget deficit of nearly a billion dollars for the next year.”

These guys are working off the stump speeches they crafted months ago. In November 2009, the non-partisan Legislative Services Agency projected a large shortfall:

The budget statement shows 2011 appropriations are projected to exceed the expenditure limitation by $1.070 billion. The expenditure limitation is estimated at $5.396 billion and appropriations are estimated to total $6.466 billion.

Since then, state legislators convened for the 2010 session and adopted a budget for fiscal year 2011. On this page you can download pdf files with detailed information about the budget. The “general fund balance sheet” indicates that total funds available (expected revenues in fiscal year 2011) is about $5.46 billion. The legislature is not allowed to appropriate more than 99 percent of that figure, which would leave about $5.37 billion in available funds. In fact, legislators appropriated about $5.28 billion in general fund spending for fiscal year 2011, leaving a cushion of just under $92 million in case revenues fall below expectations.

Total spending in the 2011 budget is somewhat higher at $5.875 billion, but that does not represent any budget deficit. Iowa is receiving about $328 million in federal fiscal aid through the American Recovery and Reinvestment Act (better known as the 2009 stimulus), and legislators are drawing about $267 million from our state’s reserve funds as well.

Even including the federal and reserve fund money, spending for the 2011 budget is well below what the Legislative Services Agency was projecting in November 2009, when Republicans came up with their “billion-dollar budget gap” talking points.

Three journalists were sitting there moderating the debate, but none of them asked Roberts and Branstad to explain why they are still talking about a billion dollar budget deficit when the Iowa Legislature has approved a balanced 2011 budget.

In all the debate recaps I’ve read this week, not one journalist has pointed out that facts do not support Republican rhetoric about a billion-dollar budget gap. Not Todd Dorman or Kathie Obradovich or Ed Tibbetts or Kay Henderson or Charlotte Eby or Jason Hancock. Branstad sat down with the Sioux City Journal editorial board after the debate, but no one appears to have pressed him on his budget assertions during that interview either. And he’s the guy who really did keep two sets of books in order to run illegal deficits!

In a sense, you can’t blame Branstad and Roberts for using outdated projections to give the false impression that Iowa has a budget deficit. Why shouldn’t they, if no one in the media will call them on it? The truth is that independent observers at the Pew Center for the States consider Iowa among the states “least like California” in terms of fiscal problems. When Standard and Poor’s reaffirmed last year that Iowa deserves the highest possible credit rating, analysts cited, among other things,

   * Good fiscal management, with a demonstrated willingness to restrain spending and make midyear corrections to maintain fiscal integrity;

   * Strong financial operations with “rainy day” reserves built up to statutorily mandated levels;

   * Good income levels; and

   * Very low debt burden.

Yes, “very low debt burden” even after the I-JOBS infrastructure bonding initiative had been approved.

Now, Republicans are bound to disagree with Democrats about appropriate levels of spending and taxation. Republicans don’t like using “one-time federal money” to balance the state budget, even though supporting state budgets was one of the explicit goals of the stimulus bill. If state governments responded to the biggest revenue collapse in six decades with draconian budget cuts, the ripple effect would deepen the recession. It’s also worth noting that most of the stimulus funds Iowa will receive during the 2011 fiscal year are in Medicaid. Would Republicans rather have declined those funds?

Some Republicans don’t like pulling $267 million from our state’s reserve funds to help balance the 2011 budget. Why even have a reserve fund if you don’t draw on it in the aftermath of the longest recession since World War II and the steepest in terms of job losses? That’s the whole point of a “rainy day” fund as far as I can tell.

Branstad and Roberts are entitled to opinions about the budget choices Governor Chet Culver and Democratic statehouse leaders made, but as the saying goes, they’re not entitled to their own facts. There is no “billion-dollar gap” projected for 2011, or any budget deficit projected for 2011. If revenues come in too far below projections to be covered by the $92 million cushion built into the 2011 budget, mid-year spending cuts will be made, as they were in 2010. I hope we’ll be able to avoid that outcome, but that’s the reality.

I understand why journalists might feel reluctant to challenge Republican candidates during debates and interviews. They don’t want to seem biased, and they don’t want to burn bridges with someone who might be the next governor. Maybe journalists barely notice the chatter about the “billion-dollar budget gap”; when you’ve heard something a hundred times it can fade into the background. But the more voters hear “billion-dollar deficit” without any critique or follow-up, the more likely they are to believe something with no basis in fact.

Branstad, Roberts and Bob Vander Plaats will hold two more debates and many more public appearances and interviews before the June 8 primary. Here’s hoping their false spin on state finances stops getting a free pass from the media.

I’ll share other observations about Wednesday’s debate in future posts. Any comments about the governor’s race are welcome in this thread.  

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  • I had the pleasure of educating a younger man about Branstad

    and his years in office with respect to education yesterday.  This young man was telling me that when Branstad was Governor, Iowa was first in the nation in education and I pointed him to the facts, that the Governor who had had the record of having Iowa as first for education in the past, had not been Branstad, and after sharing some links, he went from a Branstad supporter to a Branstad opponent, at least as far as the primaries go.

    I haven’t been watching the Republican primary much, but I did tell him I had lived through Branstad as Governor, and to please let’s not do this again.  I did point out the two sets of books and some of the other “sins” of Mr. Branstad, and then just turned him loose.

    If I can’t defend Culver for some of his inaction, I hope to be able to at least set some people straight about who Mr. Branstad is and was when he was in office before.

    I feel for some of the Republicans, it is kind of a Reagan thing where they are making him better than he was with time, instead of looking back at what he really did.

    • you nailed it

      The revisionist history on Branstad is astounding. Now Bob Ray was a real leader.

      • I told him it was Robert Ray, at first he wasn't sure

        he believed me, then he started reading about Branstad and that was all it took.

        He couldn’t believe what he was reading, someone else had told him all this great stuff about Branstad and he was too young to really remember for himself.

        If I did nothing else, I think this young man will question what other people say and check it out for himself.

        Now, if I could just figure out how to change him to a Democrat. LOL

  • Kudos for making it through one of the worst 'debates' I have ever seen

    I will give you much credit.

    As for me I peeked in during commercials on Rachel’s show. It was all I could handle after the first ten minutes.

    One of the comments I caught was VP saying we should model our business taxes on freaking South Dakota. Good lord, Bob, we want people to come to Iowa, not act like it doesn’t exist.

    • not to mention the fact

      that I doubt most Iowans want the level of services, schools and roads they have in South Dakota.

      It was a lousy debate with a bad format, but it could have been more interesting if the moderators had ditched their canned questions and done some follow-up.