The tremendous turnaround in the financial strength of Iowa has been well documented over the past few years. A huge budget shortfall in 2011 turned into a huge surplus through three years of sound budgeting principles and tough decisions.
Currently, Iowa has approximately $697 million in our ending balance. Some people refer to this as a “surplus,” but I view it more like a savings account. This is not money that we have leftover each year; rather, it is accumulated over the last three years cumulatively.
There are several different options I feel are best when discussing what to do with this $697 million. One option is to return it to Iowa taxpayers, something I’ve voted to do several times. A second viable option is to use the money to pay down some of Iowa’s debt. Last year, we paid off over $100 million of state debt, primarily from Governor Culver’s I-Jobs program and state debt from the Honey Creek resort in southern Iowa. By paying down this debt, we are able to save millions of dollars in interest.
The third option I like is to save the money for a rainy day, an option I find very popular among constituents I’ve spoken with. The state currently has two reserve accounts per the state code. We have the cash reserve account, which by law must contain 7.5% of our state budget, currently approximately $523 million. We also have an economic emergency account, which must contain 2.5% of our state budget, or about $174 million. In total, Iowa keeps 10% of its state budget in reserve accounts. These accounts are extremely important to ensure that the state is able to meet its financial commitments during tough economic times and other unforeseen struggles.
After many discussions with constituents who favor saving this money for our “rainy day” fund, I began researching how our reserve accounts compare with other states. Alaska, Wyoming and West Virginia ranked as the top three, but I found that Iowa’s reserves rank eighth in the nation.
The turnaround over the last three years has been dramatic, and it is thanks to tough decisions made by the legislature. Having extra money in our reserves helps strengthen our economic outlook, and I am very encouraged by the progress that has been made.