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Budget

Reducing Government Spending: It Can Be Done

posted on January 11, 2018

The state of Iowa is facing a tight budget. Although revenues at this time are not declining, Iowa’s revenues continue to be lower than projected. Some of the factors contributing to this include a decline in Iowa’s agricultural economy and the increasing consumer behavior of online purchases where sales taxes are not paid. Iowa is also in need of serious tax relief to encourage economic growth, but high spending levels restrict what the legislature can do regarding tax relief. This means that the legislature must consider reforming the state budget and looking for ways to reduce the rate of spending. Nebraska’s Governor Pete Ricketts (R) can serve as an example for Iowans as he is leading his state’s effort to reform spending, which is not only sound policy for taxpayers, but also for economic growth.

Governor Ricketts recently gave a speech, “Taming the Leviathan: Reducing the Size and Scope of Government,” at Hillsdale College where he outlined the philosophy of limiting government and identified what polices he is initiating to reform spending in Nebraska. Governor Ricketts and the Nebraska legislature have been able to reduce the rate of growth in state spending by 90 percent.

“Before I took office, the rate of growth of government was 6.5 percent. In this most recent budget, the rate of growth was only 0.6 percent, and we are still working to reduce the size and scope of government,” stated Governor Ricketts.

Governor Ricketts has been successful in reducing the growth rate in Nebraska’s spending because of new policy innovations that have increased government efficiency. This past summer Governor Ricketts issued an executive order to review all Nebraska regulations and he has made it an objective to change the nature of state government work by training employees in agencies “on how to identify wasteful processes and speed up service delivery.”

In 2015 Governor Ricketts launched a new reemployment program, which reformed Nebraska’s unemployment program. Part of the reemployment program focuses on individual, case-by-case assistance to unemployed workers, which not only requires them to participate, but also helps them find employment. This program has proven successful in both helping people reenter the workforce and also saving taxpayer dollars.

“Nebraska paid out $13.75 million less in unemployment benefits in fiscal year 2016 compared to 2015 as people got back to work faster,” noted Governor Ricketts. Overall, Governor Ricketts stated that the program resulted in a “20 percent reduction in weeks of benefits claimed and a 30 percent reduction in Nebraskans reaching the end of their unemployment benefits.” The reemployment program also helped the business climate in Nebraska by lowering the state’s unemployment tax by 25 percent, which saved businesses $17 million.

Other measures that Governor Ricketts is utilizing is expanding the success of the reemployment program and applying that to Nebraskans who are receiving food stamps and helping them to obtain better jobs and higher wages “by an average of $6,900 a year.” This program is currently a pilot program, but Governor Ricketts notes that half of those participating in the program have obtained better employment with a higher wage. Just this fall the Ricketts administration also launched “Bring Up Nebraska.” That program is designed to help protect Nebraska’s families and vulnerable population by connecting them with community resources, both public and non-profit.

In his Hillsdale speech Governor Rickets quoted President Ronald Reagan who stated that “no government ever voluntarily reduces itself in size.” Governments at all levels are always demanding more taxpayer dollars. Iowa can learn from our neighbors to the west that policy innovation can lead to not only better policies, but also reduce the rate of government spending, which opens the door to significant tax relief.

States should be “laboratories of democracy,” which means that states should be leaders in policy innovation. Reducing the rate of government spending will not be easy and it will take time, but it is necessary if Iowa wants to achieve true tax relief that reduces the tax burden and allows for greater economic growth and opportunity.