Iowa's economic story in the past few years has been one of a significant turnaround toward fiscal sustainability, according to state Auditor Mary Mosiman.
"Put very simply, Iowa was not working in the right direction," Mosiman told about 300 business leaders gathered at noon for the Business Record's annual Economic Forecast Luncheon at the Sheraton West Des Moines Hotel. Mosiman was part of a five-member panel of experts who provided insight on Iowa's economic outlook.
"Beyond the national economic challenges that we had at that time (during the recession), we were not following sound, consistent budgeting principles," she said. "We were focusing on current day only, one day at a time, and we were not working for fiscal sustainability. But that has changed."
Today, by comparison, the state's budget deficit has been eliminated and its reserve funds are intact, Mosiman said. Additionally, the budget is balanced, with expenditures matched to revenues, she said.
"This was accomplished by working together, and the fact that Iowa had a relatively healthy, stable revenue growth over a three-year period of time - 8.8 percent average annual revenue growth," she said. "And that was combined with a 2.9 percent expenditure growth. So that was well done by our 151 decision-makers (the Legislature and the governor)."
One of state government's biggest challenges going forward will be implementing the comprehensive property tax reform legislation that was enacted a year ago, Mosiman said.
"It was enacted as a multiyear, accelerating fiscal commitment, which means it will have a cost in future fiscal years, beginning with the upcoming fiscal year 2015," she said. "And obligating a dollar amount to future budget years is challenging. But we have determined together that property tax reform is important; we need to make sure our decision-makers have long-term planning and long-term commitment to making this happen over the next several years."
Additionally, Iowa must be wary of potential federal budget cuts as Uncle Sam puts its fiscal house in order. The state receives approximately $7 billion annually in federal funding, an amount roughly equal to the entire $7 billion state budget. "We need to make sure that we are prepared if federal funds are reduced or even completely eliminated," she said.