Fact Check | There are differences in how to spend it, but the state budget surplus has money

If your time is short:

  • Iowa Democratic gubernatorial candidate Deidre DeJear said the state has $1.5 billion in reserve that could be spent on programs.
  • Republican Governor Kim Reynolds, seeking re-election, has always favored the use of excess taxes collected for tax relief purposes.
  • The governor has no say in how funds from a taxpayer relief fund are spent.

Deidre DeJear covered a lot on her turn at The Des Moines Register a regular feature of the Iowa State Fair, the political soapbox, as she enters the fall leg of her 2022 campaign to become governor of Iowa.

Public financing of education that follows inflation. Abortion rights. Affordable health care. Well-paying jobs.

As DeJear, a Democrat from Des Moines, spoke about ways to improve the delivery of mental health care in Iowa, she told the audience that Iowa can manage the costs because the state is not broke. :

“$1.5 billion of your taxpayers’ money is sitting in an account that this current governor calls a trust fund.”

She went on to say, “It’s Iowa’s rainy day fund, and it rains in our state.”

What is the Iowa Rainy Day Fund, and is $1.5 billion deposited in a trust fund that the governor can control?

The short answers: The Rainy Day Fund is a combination of two state budget funds for specific purposes, 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, DeJear’s communications director, said DeJear was referring to Iowa’s budget surplus that has fluctuated in recent years between $1.1 billion and $1.8 billion during his comments. “Between the state’s 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,” wrote Young in an email to PolitiFact Iowa.

Excess 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 for the current fiscal year, according to a nonpartisan State Legislative Services Agency tax services division July budget report.

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 sound budgeting practices and that the government’s surplus funds State should return to taxpayers. Reynolds stuck to that when she announced Aug. 24 that corporate unemployment taxes would drop to the lowest allowed under Iowa law after her administration sent to the unemployment benefit fund of Iowa $727 million from the Biden administration’s U.S. bailout and the Trump administration’s CARES Act.

Excess money the state collects after building up cash reserves goes into an economic emergency fund, which had a balance of $223.8 million, according to the July report. The fund cannot hold more than 2.5% of the government’s adjusted revenue estimate for a fiscal year. This year, that money is in addition to $671.4 million in the cash reserve fund for Iowa’s $895.2 million Rainy Day Fund. The rainy day fund cannot exceed 10% of the state government’s adjusted revenue estimates.

The cash reserve fund is money set aside to cover the state’s ability to pay bills while revenues come in and to generate interest income for selected programs. He gets the first chance to get a tax revenue surplus.

The Pew Charitable Trusts estimated that Iowa had enough cash in reserve to cover 37.4 days of state operations in fiscal year 2021, but did not have estimates for the 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 allowable balances, Pew reported.

State tax revenues that exceed what is allowed for the Economic Emergency Fund and the Cash Reserve Fund are sent to a Taxpayer Relief Fund. Difficult to grasp? Imagine that money is like water in a three-tiered fountain that fills the upper basin (cash reserve limit), pours into the second basin below when full (fund limit). emergency), then in a large third basin (taxpayer). relief) at the bottom.

The Taxpayer Relief Fund is specifically for tax relief. It can be used to help cash flow, but only in emergency cases provided for by law. If used in an emergency, however, the legislature must approve an appropriation and the money must be returned to the emergency fund at the end of the fiscal year in which it is drawn, according to US law. State.

The Taxpayer Relief Fund, created in 2011, was called the Taxpayer Trust Fund until 2018. It raised just over $1 billion in fiscal year 2022 to support just over $1.05 billion already there, for a total of $2.06 million, according to the July Tax Services report.

Our decision

DeJear said Iowa has $1.5 billion in a fund called a trust that could fund state programs instead. It should be the Taxpayer Relief Fund, although its spokeswoman said DeJear included all of the state’s surplus in the return. This would include the emergency fund endowed with $223.8 million.

Iowa has that at this point has more in store than DeJear’s general estimate. But the governor has no authority over how it is spent. Additionally, integrating the Taxpayer Relief Fund into what state budget managers view as the rainy day fund would require legislative appropriation, based on government revenue projections and cash flows. state, or possibly a change in the law establishing the tax relief fund.

While DeJear is correct that there is a large amount of unspent money left, she is wrong to suggest that the governor has unilateral authority to spend it on state programs. We evaluate the statement Generally false.

Our resources

Des Moines Registry Political Soapbox Website

Comments by Deidre DeJear, August 13, 2022

Email exchanges with Shekinah Young, August 18 and 22, 2022

General budget information from Governor Kim Reynolds’ office

Iowa Legislative Services Agency 2022 Session Financial Report, July 2022

Iowa Code, 8.55 Iowa Economic Emergency Fund, 8.56 Cash Reserve Fund, 8.57 Reduction of GAAP Deficit, 8.57E Taxpayer Relief Fund, 96.9 Unemployment Compensation Fund

Iowa Legislature, Changes to Chapter 1161 from 2018 Legislative Action

Trust Fund Definition, Merriam-Webster

Press release by Kim Reynolds, August 24, 2022

Kim Reynolds Statehood Address, January 11, 2022

Pew Charitable Trusts, “Budget Surpluses Push State Fiscal Reserves to All-Time Highs,” by Justin Theal and Joe Fleming, May 10, 2022

Iowa Workforce Development Unemployment Insurance Statistics Webpage

Iowa State Budget for Fiscal Year 2023

Iowa Department of Management, “What is the Cash Reserve Fund?”, “What is the Economic Emergency Fund?”, general budget information,

Americans for Tax Reform, “Iowa’s Taxpayer Relief Fund,” by Quy Le, July 29, 2022

Newton Daily News, “Opinion: Iowa’s Taxpayer Relief Fund – a unique approach among states”, by Jon Dunwell, January 31, 2022

HR1319 – US Bailout Act of 2021

White House Briefing Paper, US Bailout Plan

HR748 – CARES Act

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