Recently rumors have been spreading about Governor Tom Vilsack of Iowa being a possible vice-presidential nominee for the Democratic ticket in the fall. Given recent events in Iowa, however, they will likely prove to be little more than just rumors.
Iowa has had the proud distinction of being one of states weathering the recent nationwide budget crisis without raising taxes. A Republican state legislature was, in part, responsible for this happy nonoccurrence. But Governor Vilsack also played a role. In the run-up to his reelection in 2002, Vilsack insisted that he wasn’t interested in raising taxes to shore up the state budget. However, now that Vilsack has won a second term–and all indications are he won’t run for a third–his true liberal colors have shown through. Vilsack is proposing a $300-million tax increase for the fiscal year 2005 budget, including a 60-cent increase in the cigarette tax, the closing of corporate income-tax loopholes, and an expansion of the sales-tax base–read: “raising the sales tax.”
Like all tax-and-spenders, Vilsack is both crying poverty and calling for “sacrifice.” According to the governor’s budget report, general-fund spending in the last three years is down eight percent. In his condition-of-the-state speech, Vilsack called on Iowans to sacrifice, using that word twelve times. If spending doesn’t increase, the governor claims, 3,900 teachers will be laid off and 9,000 eligible children will not receive state-funded health care.
Vilsack blames the current budget crisis on the decline in tax revenue. Yet his actions as governor demonstrate where the true problem lies:
‐ In his first two years as governor, general-fund spending was up about 7.9 percent, approximately the same amount that it has been reduced in the last three years.
‐ Vilsack supported a $40-million plan to reduce class size despite already declining K-12 enrollment. He also supported a $250 to $300-million plan to boost teacher pay, despite average teacher salary being 33 percent more than average private-sector pay in Iowa.
‐ Instead of taking the $100 million that the federal government sent to Iowa last year and using it to shore up this year’s budget, Vilsack spent it on his economic-development boondoggle called the Grow Iowa Values (GIV) fund. The GIV fund is supposed to boost Iowa’s economy by giving state grants to companies willing to move to or expand in Iowa. In other words, it’s corporate welfare.
‐ In 1999 Vilsack agreed to a $97-million raise for state employees, and in 2001 he agreed to a $144-million raise. Last year, in the midst of the budget crisis, he negotiated a $101-million raise. When the state legislature refused to fund the full increase last year, Vilsack raided the Medicaid budget to the tune of $15 million to make up the difference. Had the state legislature not reduced some of the Governor’s salary increases for state employees over the years, the cumulative cost of the pay raises would be $1.2 billion instead of the current $991 million.
‐ In his negotiation with state employees last year, Vilsack gave away the ability of the state to cut costs by furloughing state employees. Guess state employees aren’t the people Vilsack had in mind when he called on Iowans to “sacrifice.”
Overspending got Iowa into this mess, with total state spending seeing a real increase of about 20 percent from fiscal year 1994-2001. Now the governor wants to compound the problem with a 6.2-percent increase in general-fund spending for fiscal year 2005. Consider that last year inflation was 2.3 percent, and Iowa population growth from 2001-2002 was 0.16 percent. In other words, Vilsack wants an increase that is 2.7 times higher than inflation and 38 times higher than population growth. Furthermore, the governor proposes increased spending on “priorities” such as tourism advertising ($500,000), replacement of his salary transfer from last year ($15.2 million), tobacco-cessation efforts ($500,000), class-size reduction ($29.3 million), and the Historical Preservation Grant Program and battle flag preservation ($900,000).
The governor also expressed concern for economic growth in his budget message. Yet most of the services included in Vilsack’s proposed to expansion of the sales-tax base are business services. He wants to raise the sales tax on services such as engineering, accounting, public relations, consulting, surveying, and tax preparation. The proposed sales-tax hike will cost taxpayers about $208 million. One wonders how raising taxes on business services will help economic growth in Iowa.
It is also worth noting that one of the services not included in Vilsack’s sales-tax expansion is attorneys’ fees. Perhaps the reason is that trial lawyers are some of Vilsack’s biggest supporters. Or perhaps attorneys were also exempt from the governor’s call for sacrifice.
Finally, Vilsack wants to sink the state into debt. He proposes $300 million in bonding, including $150 million for the Vision Iowa and Cultural and Tourism funds, $18.3 million to Iowa Public Television for finalizing digital-television conversion, and $15.4 million to the University Board of Regents for various capital projects.
So far most of the Republicans in the state legislature are not willing to play ball. By most accounts, the relations between the governor and the GOP leadership are colder than, well, the weather in Iowa is right now. (If you don’t live in Iowa, trust me on this.) This stems from an economic development package agreed upon by the governor and the state legislature last year. In it, the governor got his much-desired Grow Iowa Values fund, and the GOP received income-tax cuts and regulatory reform. At the eleventh hour, Vilsack reneged on the deal, item vetoing the tax and regulatory reforms. Now, the GOP is in no mood to negotiate. As State Senator Neal Schuerer recently told me, “The GOP leadership has no interest in Vilsack’s budget proposal.”
Not only is Vilsack’s budget proposal going nowhere, it has also doomed whatever chance he had of being the veep nominee. John Kerry–(safely) assuming he is the Democratic nominee–will have to spend much of the general-election campaign fending off charges that he is a tax-and-spend Massachusetts liberal. He won’t need a tax-and-spend Midwestern liberal as his running mate. To borrow Wesley Clark’s memorable phrase, it would make the ticket “bottom heavy.”
–David Hogberg is a research analyst at the Public Interest Institute, an Iowa-based think tank. His blog site is “Cornfield Commentary.