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House Journal: Page 1054: Monday, April 2, 2001

for which it was created. This is an unnecessary and, in some instances, unworkable
revision to Iowa's original budget reform legislation.

A key part of Iowa's 1992 budget reform law was creating a mechanism for filling
the state's two reserve funds. One of those reserve funds, the economic emergency
fund, pre-dated the 1992 changes, but it had never been adequately maintained. The
expenditure limitation, which provides that only 99% of estimated revenues may be
spent, created a mechanism for filling those reserve funds.

That original expenditure limitation has worked very well. Both of the state's
reserves are filled to their statutory maximum. Combined, they contain nearly half a
billion dollars. Given that the present law has worked so well, there is no reason for

Senate File 66 would change that original expenditure limitation by stipulating
that reversions (which are appropriated but unspent funds) not be considered in
calculating the expenditure limitation. This is an unnecessary alteration of the
expenditure limitation.

Every year, there are appropriated but unspent funds that are returned to the state
general fund at the end of the fiscal year. The expenditure limitation is meant to limit
expenditures. Reversions are, by their very nature, not expenditures.

Reversions are a very real aspect of budgeting, and it makes little sense to not
recognize that fact. According to the legislative fiscal bureau, over the last twenty
years reversions have averaged over $26 million a year.

Senate File 66 flies in the face of the legislature's own practice. The $26 million in
average unspent funds each year would be higher but for the fact that the legislature
has often chosen to fund technology projects with reversions. The state's successful
Y2K effort was started with a legislative appropriation of $15 million of anticipated
reversions in FY 1997. It makes no sense to assume that reversions will not exist for
the purpose of calculating the expenditure limit but then assume that they will exist
for purposes of making technology appropriations.

Iowa's 1992 budget reform effort has been successful because it was a workable
approach to limiting spending. This new limitation would also remove needed
flexibility in the budgeting process.

I have, for example, recommended salary savings in the FY 2002 budget through
workforce attrition. It is not possible to determine at this point exactly where this $4.3
million savings will be achieved; that will depend on which employees leave state
government over the course of that fiscal year. As a consequence, that savings is shown
as a reversion. To not reflect that savings in the calculation of the expenditure limit
takes away many of the tools that are necessary to make enterprise wide decisions
about expenditures.

For the above reasons, I hereby respectfully disapprove Senate File 66.

Thomas J. Vilsack

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