Deidre DeJear covered a lot during her turn at The Des Moines Registry A regular feature of the Iowa State Fair, Political Soapbox, as she heads into the fall leg of her 2022 election campaign to be Governor of Iowa.
Public education funding that keeps up with inflation. Right to abortion. Affordable health care. Well paying jobs.
As DeJear, a Democrat from Des Moines, spoke about ways to improve mental health care delivery in Iowa, she told the audience that Iowa can handle the costs because the state is not broke:
“$1.5 billion of your taxpayers’ money is in an account that this current governor calls a trust fund.”
She went on to say, “That’s Iowa’s emergency fund, and it’s raining in our state.”
What exactly is Iowa’s emergency fund, and is $1.5 billion sitting in a trust fund that the governor can control?
The short answers: The emergency fund is a combination of two special-purpose state budget funds, the Economic Emergency Fund and the Cash Reserve Fund. And state law and the Legislature, not the governor, control how that money is spent.
Shekinah Young, communications director for DeJear, said DeJear was referring to Iowa’s budget surplus that has fluctuated between $1.1 billion and $1.8 billion in recent years when making the comments. “Between the state surplus and the tax relief fund (also known as the Trust Fund) we have $3 billion in resources that could be used for state programming,” Young wrote in an email to PolitiFact Iowa.
The surplus explained
Iowa’s budget surplus for fiscal year 2022, which ended June 30, was $1.28 billion and is expected to be $1.11 billion in the current fiscal year, according to a July budget report from the Division of Fiscal Services. Nonpartisan state Legislative Services Agency.
Republican Gov. Kim Reynolds, who is seeking re-election, and Republicans who control both houses of the Iowa Legislature say the surpluses are the result of good budgeting practices and that excess state money should go back to the taxpayer. Reynolds seized on that when he announced on August 24 that business unemployment taxes would be reduced to the lowest level allowed by Iowa law after his administration sent $727 million from the American Bailout to the Iowa unemployment benefits fund. of the Biden Administration and the CARES Act of the Trump Administration.
The excess money the state collects after creating cash reserves goes into an Economic Emergency Fund, which had a balance of $223.8 million, according to the July report. The fund may not withhold more than 2.5% of the state’s estimated adjusted income for a fiscal year. This year, that money adds to $671.4 million in the Cash Reserve Fund for Iowa’s $895.2 million emergency fund. The emergency fund cannot exceed 10% of the government’s adjusted income estimates. state.
The Cash Reserve Fund is money set aside to cover the state’s ability to pay bills while revenues accumulate and to produce interest income for selected programs. You get the first crack in excess tax revenue.
The Pew Charitable Trusts estimated that Iowa had enough money in reserve to cover 37.4 days of state operations in fiscal year 2021, but had no estimates for fiscal year 2022. The national median for fiscal year 2021 was 34.4 days. Iowa, Connecticut and Georgia filled their rainy day funds to the maximum balances allowed, Pew reported.
State tax revenues in excess of what is allowed for the Economic Emergency Fund and the Cash Reserve Fund are sent to a Taxpayer Relief Fund. Hard to understand? Think of money as water in a three-tiered fountain that fills the top container (cash reserve limit), spills into the second bottom container when full (emergency fund limit), and then into a third container large (taxpayer limit). relief) at the bottom.
The Taxpayer Relief Fund is specifically earmarked for tax relief. It can be used to help cash flow, but only in emergencies prescribed by law. However, if it is used in an emergency, the Legislature must approve an appropriation and the money must be returned to the relief fund at the end of the fiscal year in which it is taken, state law says.
The Taxpayer Relief Fund, established in 2011, was called the Taxpayer Trust Fund until 2018. It raised just over $1 billion in fiscal year 2022 along with just over $1.05 billion already there, for a total of $2 .06 million, the July Fiscal Services Report said.
DeJear said Iowa has $1.5 billion in a fund called a trust that could, in turn, pay for state programs. That would have to be the Taxpayer Relief Fund, though its spokeswoman said DeJear was including all of the state’s surplus in the statement. That would include the emergency fund which has $223.8 million.
Iowa has to at this point have more in store than DeJear’s general estimate. But the governor has no authority over how it is spent. Additionally, making the Taxpayer Relief Fund part of what state budget administrators consider the rainy day fund would require a legislative appropriation, based on state revenue and cash flow projections, or possibly changing the law. which establishes the fund for tax relief.
While DeJear is right that there is a lot of money left unspent, he is wrong in suggesting that the governor has the unilateral power to spend it on state programs. We rate the statement Mostly False