An Iowa state employee forwarded me this email that Governor Chet Culver sent out.
Dear Fellow State Employee,
Over the last few weeks, I have ordered all state departments to reduce spending. This will have an effect on state employees, and the services you provide Iowans. I want to take this opportunity to tell you directly why I took these actions, and what the next steps will be as we respond to the national economic situation.
As you know, we are in the midst of an economic challenge that is historic in its scope. While its cause comes from actions on Wall Street, supported by misguided federal policies from Washington over the past eight years, the result has been an economic recession that is hitting Main Streets and factories and farms and families – and state governments - across the nation.
And as we speak, 43 of our states are either in or headed towards a deficit. Iowa’s Constitution does not allow our state to operate in a deficit. This means cuts in spending are needed to balance our budget.
This process began this fall, when the state’s revenues fell short of predictions. As a response, I directed agencies to cut expenses and unnecessary travel, and to freeze state hiring.
But maintaining a balanced budget and staying in front of this national economic crisis requires continued and shared responsibility throughout state government, as well as in communities statewide.
Last week marked another important step in this process. On Friday, the Revenue Estimating Conference lowered revenue projections for both fiscal years 2009 and 2010.
At that time I indicated I would take action to cut spending in the current 2009 budget by an additional $60 million. I was advised then that this amount would be an appropriate, measured response to the REC action. It would allow my office, state budget planners, the respective state departments and the legislature to begin focusing on the task ahead of putting together a 2010 budget.
However, after further review of our revenue projections and budget commitments along with several meetings of my budget team, I am convinced that $60 million in additional adjustments to the current budget is not enough to prepare us for the challenges before us.
The REC indicates that revenue estimates for both 2009 and 2010 may be reduced even more in April. My Council of Economic Advisors predicts that the bottom of this economic downturn has not yet reached Iowa. And economic trends, both nationally and internationally, continue to bear bad news.
As Governor, I hear these warnings. I will protect our State’s fiscal position, and I will do so without raising taxes on Iowans.
Therefore, over the next few weeks, I am going to take the following steps:
First, I am directing the Department of Management to immediately revise its projected balance sheet for the General Fund in order to adjust for the recent REC action and make other adjustments based upon DOM’s best projections of income and expenditures. This means the State will have a projected negative ending balance on June 30, the end of our current fiscal year.
Therefore, next week I will make across-the-board reductions in General Fund expenditures to assure there will be no State budget deficit at the end of fiscal year 2009. I will sign an Executive Order to implement an across-the-board cut of 1.5% to the general fund, or $91.4 million.
I will ask for one exception to this across-the-board cut: the Correction Officers and Troopers who are on the frontlines and are essential to our public safety. I will ask the legislature to “backfill” an appropriate amount of funding to make sure essential positions are not cut.
In addition, I will ask the legislature to approve transferring approximately $10 million to the General Fund from accounts and funds in state government that have balances that exceed the amount needed for the current fiscal year.
These actions are in addition to $77 million in reduced spending that I announced on December 9. Together, these cuts represent nearly $180 million. This will have an impact on programs that the State provides.
As you can imagine, this is not what I want to do, but as Governor I believe that this is what must be done.
Nonetheless, we are in a better position than most states. We have more than $620 million in cash reserves that will help us through this situation. We have a AAA bond rating that allow us to do some things that other states cannot.
And I am confident that, in January, President-elect Obama and Congress will immediately go to work on an economic stimulus package that will make a difference to critical financial issues facing all States, such as funding for Medicaid, improving our infrastructure, creating new jobs, and rebuilding our economy.
We did not cause this economic crisis. But the responsibility falls to us to respond to it. We have endured challenges in the past, and we have succeeded. Our long history of fiscal responsibility, coupled with the actions I have taken, gives me optimism and confidence about what the future holds for our state. Our Iowa values of resilience, strength, and common-sense will sustain us through this, and any, challenge.
Finally, as this year comes to a close, I want to thank you for your service to our state. From floods and tornadoes, to the economic situation we now face, state employees have always risen to the occasion. So, even as we meet these unexpected challenges, on behalf of the First Lady, and the Lt. Governor, I want to wish you and your families a safe holiday season, and best wishes in the New Year.
Chester J. Culver
Governor of Iowa