Everyone knows about the upcoming “fiscal cliff,” and everyone but leaders in Congress and the president can agree on what they want to see happen: compromise and move on. Numbers released by Gallup this week not surprisingly show the American public (approximately 70 percent according to the poll) wants members of Congress and the president to make a deal. The public has a strong distaste for politicking; they want something done.
So if this describes the politics of deficits and debt, what should we expect regarding the politics of surplus?
Fortunately, we can look to Iowa for the answer. The Des Moines Register reports that the Revenue Estimating Conference (REC), Iowa’s three-person panel of budget gurus who make quarterly assessments on incoming revenue, projects state revenues to grow by just over 3 percent this fiscal year and the next. According to the Des Moines Register and the REC, revenues increased more $35 million from the previous estimate made in October of $6.483 billion. The Legislative Services Agency and others also report that Iowa’s cash reserves (so called “rainy day” funds) are full at well over $600-700 million.
Reporting good news about a budget at any level of government has been a rarity the last four years. For elected officials, however, being especially optimistic about the current economic climate is politically dangerous. Why? Basic psychology tells us it is best to promise a little and then exceed expectations; to do the reverse is to invite serious backlash and harsh criticism.
At the moment, Governor Branstad is hedging his bets, arguing that the state’s fiscal condition, while sound, is inextricably linked to the federal government’s finances (i.e. the fiscal cliff, the debt ceiling, and the stopgap spending measure due to expire in March). Indeed, the fiscal cliff is a great lesson in federalism; how state budgets (as well as local budgets) are tied to the federal government. However, the political posturing at both levels is also linked and makes you wonder if anyone ever gets excited about budgets.
At the moment, Governor Branstad is among a group of governors rated by Governing Magazine’s Lou Jacobson as “not currently vulnerable.” If appropriate, expect giddiness and self-appraisal about Iowa’s finances to be reserved for the campaign trail in 2014.
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This post was written by Chris Larimer on December 14, 2012