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Let’s Get Real About Spending

posted on January 3, 2019

Strengthen Iowa’s Government Spending Limit

“How can the state stop spending so much money?” This is a common question asked across Iowa. While there are many ways this could be accomplished, one of the broadest solutions would be to strengthen the existing spending limitation that exists in Iowa by adding language to our state’s constitution.

Download the Spending Limit Quick Guide

The Iowa legislature is restricted to spending 99 percent of the revenue they collect each year. Because this limit only exists as a statute, a future legislature could simply pass a new statute that further weakens this limit or removes it altogether. A constitutional amendment would be the strongest way to control the growth of government and future spending.

Since spending and tax limitations can take various forms, Matthew Mitchell, a senior fellow at the Mercatus Center, contends that the most effective solution will have the following characteristics:

  • A spending limitation formula based on the sum of inflation plus population growth.
  • Be based upon spending rather than revenue.
  • Require a supermajority rather than a majority to be overridden.
  • Would immediately refund revenue collected in excess of the limit.
    Is written in the state constitution rather than in code.

During the 2018 legislative session, a bill has been introduced in the Iowa Senate for a constitutional amendment spending limitation. This measure would “limit the annual increase in spending from year to year to the lesser of 99 percent of the estimated revenue for that fiscal year, or 4 percent above the prior year’s revenue.”

Fiscal analysis of by the Legislative Services Agency (LSA) applied the rules of the resolution to the past twelve legislative sessions and found that,”if the expenditure limitation requirements in SJR 2 had been in place in each of those fiscal years, appropriations to the General Fund would have been lower than the enacted appropriations in seven of the fiscal years.”

If the spending limit had been in place since fiscal year 2009, state government could have spent over $500 million less than it did.

State Senator Charles Schneider has said, “Going into fiscal year 2017, we could have had a carryover surplus of at least $442.8 million. Had that been the case, we would not have had to deappropriate funds for fiscal year 2017, and we would not have to dip into the cash reserve fund to fill the remaining budget gap for this fiscal year.”

Critics of spending limitations argue that they will deprive the state of the ability to fully fund government programs, but even the most stringent state limitations have demonstrated that they did not cut government spending but merely slowed its growth rate. Iowa policymakers should seriously consider a state spending limitation amendment to ensure the taxpayer remains on equal footing with special interests.

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