The Des Moines Register’s editorial this morning provided a concise (for Democrats) explanation about why Iowans should not get their $800 million over-payment returned to them. Â It’s to be expected that now that there is extra revenue coming in, we see the Left drooling over the opportunity to spend our money.
It’s a wonder we managed to survive the past few years with so little money to spend.
But seriously, we did just fine. Â And that should be the point now. Â We’ve managed to do a great job of assessing where the government is spending money it doesn’t need to be spending, and cut some of it back (there’s more to cut, but we’ll leave that for another time). But even though we have one of the lowest unemployment rates in the country and a surplus in the Treasury, doesn’t mean it’s okay for the state government to keep the extra money from Iowans from last year.
We don’t operate our state from savings, we operate it from revenue. Â Well, except for when we borrow, but let’s not quibble over that today.
The Register puts a number of items up for spending that are long-term expenses… they aren’t a leaky roof, as they try to relate it, but they are the lawn, the car upkeep, the utility bills. Â They may even be things we should do and pay for, but if we are going to expand our expenses (which should be questioned regardless), the money for those things should come from current revenue, not savings. Â Otherwise, we are making the same mistake we’ve made time and again in the past by paying for ongoing expenses with one-time resources. Â It’s a foolish mistake. Â It’s like taking your year-end bonus and paying the light bill and getting an oil change. Â If your budget doesn’t allow you to pay for those things from your existing income, you are not in good financial shape to begin with.
If the I-JOBS program of Culver’s last 2 years in office had waited until this money was available, I could accept the idea of spending it on that kind of a project. Â But alas, we were far too impatient and had to instead saddle our next generation with keeping the gambling enterprises alive in order to pay for this program.
And the Register can’t help but show how they have bought into the ridiculous notion that government jobs bring value. Â The only kind of jobs that bring value to the economy are those that contribute to the Gross Domestic Product (GDP)… that is, jobs that actually generate income by creating products or services that people want to buy. Â Government jobs don’t do that, and instead are a drain on GDP.
We don’t really have a pressing one-time financial need in Iowa, aside perhaps for some infrastructure such as bridges and roads, that the state government needs to attend to, although I’m sure some think otherwise. Â There may be plenty of recurring expense needs that need attention (either to add or drop), but using this surplus to cover the lack of revenue for these items is foolish.
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I take a bit of exception to the idea that HF1 provide the people’s money back to them as a tax credit for 2013 taxes. Â I realize that the printing and mailing of checks is an expense, but the money needs to get to Iowans now, not a year from now. Â We’ve done it before, we can do it again. Â Mail out the checks.
Obviously, lawmakers want to keep the interest on that money, eh?
Back in 2001, Iowa decided to securitize its portion of the multi-state tobacco lawsuit settlement. â€œSecuritizeâ€ means to borrow against it. They issued almost $700 million in bonds through the Iowa Tobacco Settlement Authority, with the settlement money itself as the asset backing the bonds. Most of them are even tax-exempt.
Such is the nature of public finance; the settlement was a windfall of revenue that didnâ€™t have to be taxed from the citizens, but instead of just riding the wave, the government used it as collateral to borrow money. Never put off spending that can be done today.
More than seventy percent of the money Iowa receives from the tobacco settlement goes to debt service on those bonds – these, like most government bonds, are coupon bonds, meaning that the accrued interest is paid periodically, usually every six months. The remainder goes to health-related things such as smoking cessation, but the bonds themselves financed â€œvarious capital projects.â€ Iâ€™m not sure what that entails, so far I havenâ€™t found any list of specific projects.
If the tobacco industry finally succumbs to things like smoking cessation programs, those bonds will find themselves unsupported. Not to worry though – they are state-issued securities and failure to deliver will negatively impact Iowaâ€™s credit. Because of this, the legislature would almost certainly pick up the tab with taxpayer money.
So, smoke up – there are bonds to cover.
In the meantime, you canÂ click here to track the sale of Iowaâ€™s Tobacco Settlement Authority Iowa Asset-Backed Series C bonds, my favorite resource for municipal bond information. Of course the fact that I have a favorite resource for such information suggests that I need a more fulfilling career, or perhaps a meaningful relationship.
Ash Trays and Slot Machines
Should you choose to smoke inside a casino, you will be supporting other types of bonds as well. The Iowa Events Center, for instance, was constructed with funds obtained from the sale of bonds that are supported with revenue from the casino at Prairie Meadows.
All of Iowaâ€™s casinos – how many are there now? – contribute revenue in some manner to state and local government coffers through various direct and indirect means, everything from taxes, licensing, and even leases for facilities, not to mention sales and fuel taxes from the nearby communities, although casinos run by indigenous peoples can be an excellent source of untaxed cigarettes.
Casinos have become the first, last, favorite, and perhaps only tool in the box of economic development officials, and cities across the state still want more of them.
There was a time when every person with the sniffles was given antibiotics, despite the fact that while antibiotics fight bacteria, they are useless against viral illnesses. Today, casinos are the alleged cure-all of choice: Factory closes down, build a casino; young people move away, build a casino; county supervisor dozes off during a meeting, build a casino.
Some jobs will be created, some taxes will be collected, and some concerts and shows will be held to keep people busy, but the underlying problems will remain unresolved. No goods or services are created in a casino, and no assets are being bolstered. Money is simply changing hands.
It is also hard to imagine large numbers of people coming to Iowa for the casinos. Iâ€™m sure some people do, but I would think that most of the patrons are from the areas near the casino itself, and thus the money is really just churned around the community, with government taking a healthy chunk after each rinse cycle.
Gambling has traditionally been treated as a vice, and one that was more often illegal than it was celebrated. This vice has now been legitimized as a source of revenue – the beast must have flesh to survive – and it is hard to imagine a serious push to reverse course, although there might be some resistance if the Iowa Finance Authority tries to open a cathouse.
Image Â© gavran333 – Fotolia.com
This week’s newsletter from Peter Cownie provides some insight into some of his goals as a legislator.Â Helping keep young people in Iowa after they graduate from high school and/or college has been a challenge in recent decades.Â Reasons for the large numbers of youth leaving the state range from financial opportunity to entertainment to lifestyle.Â Ultimately, jobs are key, and attracting young people means attracting companies.Â Peter also looks at ways to promote staying in Iowa for college education.
The best question a citizen can ask a person seeking public office is: why are you doing this? Every candidate should have a passion for what he/she is trying to accomplish and remember that passion each time he/she makes a decision. I was asked this question more than any other during the campaign. My answer is simple: I want to see more young people in Iowa. I grew up in Iowa and I want to do something about the young people that have chosen not to stay here and those that might think to leave in the future.
I serve on the Economic Growth Committee and we recently heard a presentation from the Generation Iowa Commission. I asked the presenter what deters young people from staying in Iowa after college. The answer was one word: jobs. I could not agree more. Young people will go where the best jobs are located. The current economic times will only reinforce this reality. In every decision a legislator makes this session, he/she needs to keep in mind the 80,000 unemployed Iowans and how we can help put them back to work. We also need to bear in mind those young people who want jobs in Iowa.
The Iowa Legislature needs to remember the big picture. The big picture is that Iowaâ€™s population is not growing quickly compared to other states. According to estimates from the Census Bureau for 2000-2008, Iowa ranks 42nd in population growth percentage. I have introduced a bill that will help retain and recruit young people to Iowa. This bill would allow college graduates who stay in Iowa to deduct the interest on student loan payments changing the limit from $2,500 to $5,000 annually. Students in Iowa graduate with the highest debt levels ($26,208 on average) in America. This bill would give direct help to college graduates who are just starting a job and could use the relief in their pocketbook. It is in the best interest of the Iowa Legislature to reach out to our young people and ease their burden. This bill will help keep our young people where we want them: Iowa.
This week’s newsletter also appeared in the West Des Moines section of the Des Moines Register, along with pieces from Pat Ward and Chris Hagenow.Â You may note that Pat hits hard on the Popular Vote bill, which we have opposed here as well.
Peter, Pat and Chris, along with Bob Brownell, also hosted a public forum in West Des Moines on February 28, which I attended.Â More on that later.