Review of Iowa FY 2015 Budget

OFFI CE OF AUDITOR OF STATE
STATE OF IOWA
State Capitol Building
Des Moines, Iowa 50319-0004
Telephone (515) 281-5834 Facsimile (515) 242-6134
Mary Mosiman, CPA
Auditor of State

For Immediate Release

July 28, 2014 Contact: Bernardo Granwehr, Auditors Office, 515-242-5949

State Auditor Mosiman Reviews Fiscal Year 2015 Final Action Budget

(Des Moines, Iowa) State Auditor Mary Mosiman, in fulfilling her duty as the Taxpayers
Watchdog to report directly to the people of Iowa on the condition of the States finances, has
completed her review of the Fiscal Year 2015 final action budget.

Iowa Improves its Fiscal Position

Iowa has made significant progress exercising spending restraint over the last few years as revenues
have grown. The budget for Fiscal Year 2011 included expenditures which exceeded the States annual
revenues by $764 million. Auditor Mosiman said, Not only has the spending gap been reduced to
$171 million, but we now have a surplus of almost $750 million, in addition to our reserve funds which
are full. The fiscal discipline of the last few years is paying off, and we need to ensure it continues.

Budget Continues to Reduce Reliance on One-time Monies

Auditor Mosiman said, We have made significant improvement over the last few years regarding
sustainability shifts, which use one-time revenues for ongoing expenses. That practice has been
practically eliminated. The Fiscal Year 2015 final action budget reduces the reliance on one-time
monies to $29 million compared to nearly $700 million in Fiscal Year 2011.

Auditor Mosiman added, We continue to have transparency-related shifts shifting ongoing General
Fund expenses and revenues to other funds. These types of shifts distort comparisons with previous
years. Our office tracks these shifts because we want Iowans to be able to accurately compare one
years state budget to the next. This budget reduces transparency shifts $65 million from last years
budget, so this is a step in the right direction.

Impact of Enacted Laws

Mosiman noted two ambitious laws passed in 2013 begin to have financial impacts in Fiscal Year 2015
the property tax reform law and the education reform law. Auditor Mosiman had previously noted
provisions in each law have a delayed impact followed by multi-year accelerating commitments. The
cost of these two laws alone will exceed $150 million in Fiscal Year 2015 and will increase in future
years.

Mosiman said, Since our State leaders have, together, determined property tax reform and education
reform are high priorities for Iowa, and they enacted laws with multi-year accelerating financial
commitments to future budgets, it is paramount they plan accordingly. If the laws are to be effective as
enacted, and Iowa is to continue the progress it has made in the last few years, long-term planning is
essential.

Auditor Mosiman concluded, The final action Fiscal Year 2015 budget shows that Iowa continues to
make progress in the areas of transparency and fiscal sustainability.

Mary Mosiman has been serving as Iowas Auditor of State since May 2013. Mosiman is a graduate of
Iowa State University and a Certified Public Accountant.

####
July 28, 2014
1
Auditor of State
Mary Mosiman, CPA
Comments on Fiscal Year 2015
Final Action Budget
July 28, 2014
State of Iowa
General Fund Budget
General Fund Information
Review of the Numbers
Items Noted
Remarks today will focus on:
Mary Mosiman, CPA, Auditor of State, July 28, 2014
2
2
State of Iowa
Sound Budgeting Principles
Following sound budgeting principles
produces budgets which are:
complete
transparent
sustainable
3
State of Iowa
General Fund Appropriation FY15
4
55.4%
26.6%
10.6%
6.2%
0.6%
0.6%
Education
HHS
Justice
Admin & Reg
Ag & Natural Resources
Economic Development
FY15 Approps: $6.979 billion
3
State of Iowa
General Fund Revenues FY15
5
52.3%
33.9%
6.9%
3.5%
3.3%
Personal Income Tax
Sales/Use Tax
Corporate Income Tax
Other Taxes
Other Receipts
* Based on December 2013 REC estimated gross revenues for Fiscal Year 2015.
FY15 Revenues: $6.983 billion
State of Iowa
General Fund Budget
Shifts that Impact Sustainability
$0
$100
$200
$300
$400
$500
$600
$700
$800
FY11
Final Action
Budget
FY13
Final Action
Budget
ARRA - Federal
stimulus
Economic
Emergency
Fund
FY12
Final Action
Budget
$

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s
$698
$302
$396
$102
$59
Expenditure shifts to:
6
FY14
Final Action
Budget
$36
FY15
Final Action
Budget
$29
Other one-time
resources
4
State of Iowa
General Fund Budget
Shifts that Impact Transparency
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
FY11
Final Action
Budget
FY13
Final Action
Budget
$

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FY12
Final Action
Budget
$275
$341 $340 $335
$405
FY14
Final Action
Budget
FY15
Final Action
Budget
State of Iowa
FY15 General Fund Budget
Shifts that Impact Transparency
($ in Millions)
8
Commerce Revolving Fund $28
Environment First Fund $13
Gaming Enforcement Revolving Fund $11
Gaming Regulatory Revolving Fund $6
Health Care Trust Fund $222
RIIF - Regents Tuition Replacement $30
Skilled Worker and Job Creation Fund $26
RIIF - CAT Program $5
Total Transparency Shifts $340

5
State of Iowa
A Review of the Numbers - Revenues
($ in Millions)
9
Final Action
Budget
FY15
REC Estimate - December 2013 $6,983
Budgeted Revenue Adjustments (20)
Revenues Shifted:
Transparency Shifts 340
Total Annual Revenues $7,303
Annual Revenues @ 99% $7,230

State of Iowa
A Review of the Numbers - Expenditures
($ in Millions)
10
Final Action
Budget
FY15
Appropriations $6,979
Expenditures Shifted:
Transparency Shifts 340
Sustainability Shifts 29
Underfunded Costs - Medicaid 53
True Total Expenditures $7,401
6
State of Iowa
General Fund Budget
A Review of the Numbers
($ in Millions)
11
Final Action
Budget
FY11 FY12 FY13 FY14 FY15
Annual revenues $5,533 $6,226 $6,508 $6,995 $7,230
True total
expenditures 6,297 6,447 6,669 7,012 7,401
Spending gap ($764) ($220) ($161) ($17) ($171)
Spending gap as
% of annual
revenues (13.8%) (3.5%) (2.5%) (0.2%) (2.4%)
Final Action Budget
State of Iowa
General Fund Budget
A Review of the Numbers
($ in Millions)
12
Final Action
Budget
Annual revenues $5,533 $6,226 $6,508 $6,995 $7,230
True total
expenditures 6,297 6,447 6,669 7,012 7,401
Spending gap ($764) ($220) ($161) ($17) ($171)
7.7%
4.4%
Final Action Budget
4-Year Average Annual
Revenue Growth
4-Year Average Annual
Expenditure Growth
7
State of Iowa
General Fund Budget
A Review of the Numbers Annual Revenues
($ in Millions)
13
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
Annual Revenues True Total Expenditures
$171 million gap
$0
$200
$400
$600
$800
$1,000
FY14
Estimate
$

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14
State of Iowa
Surplus Carryforward
($ in Millions)
$0 $0
$381
$572
$679
FY10
Actual
FY11
Actual
FY12
Actual
FY13
Actual
$746
FY15
Final
Action
8
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$746
Surplus
Carryforward
$523 Cash Reserve
$

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15
State of Iowa
Total Reserve Funds and Surplus Carryforward for
Fiscal Year 2015
($ in Millions)
$174 EEF
State of Iowa
General Fund Budget
A Review of the Numbers All Revenues
($ in Millions)
16
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
$8,000
Annual Revenues and Surplus True Total Expenditures
$575 million surplus
9
State of Iowa
General Fund Budget
Spending in Terms of a Dollar
17
$0.85
$0.90
$0.95
$1.00
$1.05
$1.10
$1.15
$1.20
FY11 FY12 FY13 FY14 FY15 Final
Annual Revenues Annual Revenues and Surplus
$1.02
$0.93
18
State of Iowa
Budgeting Principle:
Avoid multi-year accelerating financial
commitments.
If the budget includes such commitments,
must ensure adequate resources.
10
19
State of Iowa
Two laws enacted in 2013 begin to have
substantial fiscal impacts in FY 15:
Property Tax Reform
Education Reform
Both laws had:
Delayed fiscal impact
Multi-year, accelerating commitments
State of Iowa
State Appropriation to Local Governments
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
FY15
$

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20
FY16 FY18 FY17 FY19 FY20 FY21 FY22 FY24 FY23
Property Tax Reform
11
State of Iowa
Teach Iowa Scholar Program
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
$

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FY16 FY18 FY17 FY19 FY20 FY21 FY22
Education Reform
22
State of Iowa
Fiscal Sustainability
When dealing with laws that have multi-year
accelerating financial commitments, State
officials must ensure the State maintains
adequate resources to meet those
commitments.
Long-term planning is essential for fiscal
sustainability.
12
23
State of Iowa
General Fund Budget
Items Noted
Salary and benefit cost increases are not
funded 6
th
consecutive year agencies have
had to absorb increased costs.
Iowas pension systems remain underfunded.
Iowas largest system, IPERS, is 81% funded.
The Judicial Retirement system is 71% funded,
and the Peace Officers system is only 64%
funded.
Notwithstanding language has no fiscal
impact on budget.
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
FY08
Actual
FY09
Actual
FY10
Actual
$6.6
$5.0
$8.3
$7.3
FY12
Actual
FY11
Actual
$7.1
$

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$6.9
FY13
Actual
State of Iowa
General Fund Budget
Items Noted
Reliance on Federal Monies
13
25
State of Iowa
General Fund Budget
Conclusions
Final action FY15 budget shows that Iowa
continues to make progress.
Fiscal sustainability is evidenced by spending
discipline during times of revenue growth, and
by maintaining statutory balances in reserve
funds.
Long-term planning will be key to successfully
dealing with future budgetsspecifically the
expense of accelerated multi-year
commitments.

Review of Iowa FY 2015 Budget

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