Iowa treasurer: State should borrow to ensure bills are paid
DES MOINES, Iowa (AP) — Iowa’s long-time treasurer said Thursday the state should borrow money to make sure it can pay its bills on time amid a potential budget shortfall, but the Republican governor and a top legislative leader rejected the request and argued the Democrat was only trying to score political points.
Treasurer Michael Fitzgerald outlined his concerns in a letter to Reynolds in which he asked the governor to authorize using loan notes that are paid back quickly, don’t increase the state’s long-term liabilities and in some instances can generate earnings. He called the borrowing a “sensible way to manage the uncertainties we face,” noting the borrowing has been done 16 times since 1985, including by former Republican Gov. Terry Branstad during his first term in office.
Brenna Smith, Reynolds’ press secretary, derided the request, saying in an email that Fitzgerald was engaging in “tiresome, headline-grabbing scare tactics.” She added it is “unwise” to suggest the state can’t pay its bills and noted Iowa has more than $600 million in reserves available.
“Iowans should not be fooled by this dangerous, reckless rhetoric,” she said.
House Speaker Linda Upmeyer, R-Clear Lake, backed the governor’s office and said Fitzgerald was sounding “false alarms.”
Fitzgerald said his warning is not political. He pointed out he’s been state treasurer for more than 30 years and has worked with both Democrats and Republican governors.
“It’s for the good of the state,” he said. “We’re doing it to avoid the risk that the state can’t pay its bills on time.”
Fitzgerald said the Iowa Legislature has gradually spent the state’s general fund surplus, which are leftover dollars that accumulate at the end of budget years and totaled hundreds of millions of dollars a few years ago. And while the state has emergency funding as Smith pointed out, Fitzgerald said that reserve has already been tapped once this year and could be used again soon. He said Iowa’s general fund makes payments each month and bad timing could translate into unpaid bills.
Iowa is facing a budget crunch that could result in the first special legislative session since 2006. The roughly $7.2 billon funding plan for the budget year that ended in June has been reduced several times as incoming revenue was below projections. Reynolds and other Republicans have blamed a sluggish farm economy, but budget data also suggests a range of legislative decisions over the years have played a role — including growing tax credits and a larger-than-expected use of a new sales tax exemption on manufacturing sales.
The non-partisan Legislative Services Agency estimated this summer that Iowa faces a revenue shortfall of about $100 million, though that figure has likely fluctuated since then. Final numbers for the budget will be calculated in September. That’s also when Reynolds said she will announce whether to call a special session.
Reynolds has authority to transfer up to $50 million from cash reserves to plug a shortfall. A higher shortfall would require action from lawmakers, who would need to gather in Des Moines to either approval an additional transfer or vote for other actions, such as cuts.
Whatever happens, Reynolds faces scrutiny. She’s running for a full four-year term next year, and her opponents are blaming her for the budget constraints. Though she was lieutenant governor when the latest budget decisions were made, she supported decisions by then-Gov. Branstad, who has since become ambassador to China.
Meanwhile, reports have begun to surface about the impact of recent cuts to state departments. One agency announced it would cut travel that helps monitor conditions at nursing homes. Another dissolved its forestry bureau. The board that oversees Iowa’s three public universities announced large increases to tuition because it’s not getting enough money from the state.