Fiscal Year 2010 begins on July 1 of this year and the budget recently passed by the Iowa Legislature will go into effect. The State anticipates collecting $6.97 billion. $820 million of that is returned to individuals and businesses in the form of tax refunds and $400 million will be forwarded to school districts which have enacted a 1-cent sales tax. That leaves about $ 5.85 billion available to the State. The Legislature may only appropriate 99 percent of this anticipated revenue, so our $5.77 billion budget constitutes the State’s General Fund. Next year’s $5.77 billion budget is about $365 million less than the budget approved by the Legislature last year. In other words, we have cut the State’s budget approximately 6 percent.
This 6 percent cut has been greatly cushioned by federal stimulus dollars. The vast majority of federal stimulus dollars have helped prevent cuts to education and Medicaid. The State received $110 million in Medicaid and $40 million in education funding from D.C. to help Iowa through this June 30. For next year, the federal government will contribute $145 million to Iowa’s Medicaid program and $321 million to our state universities, community colleges, and school districts. Furthermore, another $63 million of federal stimulus dollars are going to shore up Iowa’s prison system, children’s health insurance, mental health costs, and various other human services programs.
With the influx of federal stimulus dollars, the State has been able to avoid tapping into the State’s Rainy Day funds too much. When full, the State’s Rainy Day funds have a balance equal to 10 percent of the State’s budget. After making appropriations for flood recovery and to backfill cuts made by the Governor, the State’s Rainy Day funds will have a balance of about $440 million headed into Fiscal Year 2010, or about 7.5 percent of the State’s budget.
The budget cuts made up to this point have not been easy, but these cuts would have been far worse without the help Iowa is receiving from the federal government. Next year, the Legislature will have to look at making further budget cuts unless there is a dramatic improvement in the economy. The goal has been to protect funding for education, health care, and public safety to the greatest degree possible while also helping Linn and Johnson Counties recover from the floods of 2008. The goal is also to manage our use of federal dollars and the State’s Rainy Day funds so as to prevent dramatic cuts in any one year, but maintain sufficient resources to endure the current economic downturn.
Over the course of this legislative session, I received many e-mails from constituents concerned that funding may be cut to any number of important programs. I would often respond by stating that the Legislature does not seem to be in the business of making anybody very happy this year. That will probably be true for next year as well. We will try to minimize the pain, but more cuts may be looming to public services in Iowa.