WHITVER: Iowa Has a Dangerous Dependence on Federal Money

One of the biggest issues facing the state of Iowa is the reliance we have on the Federal Government. When looking at the entire state budget, it is interesting to note the different funding sources. In fiscal year 2013, almost half of our state budget came from the Federal Government ($6.05 billion), while the rest came from state revenues ($6.242 billion). The state revenue comes mostly from state income tax, corporate tax and sales tax. 

I believe it is dangerous to rely so heavily on the Federal Government. We all understand the problems with the Federal Government. They have a deficit of about $1 trillion per year, and a total debt of almost $17 trillion. To make matters worse, they are showing no signs of trying to reduce the deficit. The Democrats in the United States Senate passed a budget last week that would raise taxes by almost $1 trillion, yet still add $7.3 trillion to the federal debt. In addition, the budget never balances...NEVER!

Since my time in the Senate, I have found that many people at the Capitol refer to the federal dollars coming to Iowa as "free money." This could not be further from the truth. While the Feds are eager to pass out the money, the problem is, they don't have it! They continue to print money, or worse yet, borrow money and pass the debt on to our kids. In addition, what money they do have is still money that Iowans pay in taxes. This is not "free money."

In recent years, we have done a good job of lowering our dependence on the Federal Government. The amount of money sent to us from the Feds has decreased from $7.11 billion, to $6.55 billion to $6.05 billion over the past 3 years. This is a great sign. 

However, the temptation to further our dependence on federal money continues to exist. A perfect example is the discussion we are having on Medicaid expansion at the Capitol. While it is true that we will not spend a lot of Iowa money on Medicaid expansion for the next three years, there will be a tremendous amount of federal money involved.

While some argue that we are insane for not taking the "free federal money," when fully implemented, Medicaid expansion would increase the amount of federal money we accept by about $1.5 billion. This would be a 25 percent increase to the amount of money sent down from the Feds, from $6 billion up to $7.5 billion. I do not believe it is wise to further our dependence on a dysfunctional and incompetent Federal Government. At some point the Federal Government will not be able to fulfill its obligations, leaving the states to pick up the tab.

While some at the Capitol do not take this into consideration, I think about it on every vote that I take. In order to continue our strong fiscal position that we have established under Governor Branstad, we need to continue to reduce our dependence on "free federal money." This will help insulate us from inevitable budget cuts and sequestration scenarios at the federal level. 

As always, feel free to contact me at jack@jackwhitver.com.