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Budget

Uncle Sam’s Dependent

posted on November 16, 2018

We all know that the federal budget deficit created in Washington D.C. is not sustainable.  We also know federal budget fights lead to rash spending cuts and even government shutdowns.  But did you know that the state of Iowa and its agencies and programs received $8.5 billion from the federal government in 2017 alone, an amount that eclipses our current state budget of $7.5 billion?  This growing dependency on Uncle Sam is dangerous not only because federal funds could be reduced or eliminated in a flash, but often these funds come with a cost. It is time that the Iowa legislature take an inventory of all federal funds, measure the impact of those funds on the state, and consider what might happen if those funds were reduced or eliminated.

Since 2009 Iowa has annually received, on average, $7.5 billion from Washington D.C, though the exact amount fluctuates from year to year.  Iowans should be concerned that roughly half of the money flowing through state government is subject to the repercussions of the next federal spending crisis. And Federal funding to Iowa is never free money because most of it comes with very specific strings attached, requiring the state to commit additional funds and follow the rules Uncle Sam hands down.

The extended reach of the federal government is not a new phenomenon.  President Ronald Reagan cautioned that states should not become mere administrative districts of the federal government. Since our nation’s founding, states were supposed to be sovereign in many policy areas, but today the federal government is involved in almost every aspect of government.  This was never the intent of the Founding Fathers. James Madison wrote in the  Federalist Papers that the Constitution limited the powers of the federal government.

Most of the programs supported by federal dollars in Iowa are worthwhile and the goals of the spending are often laudable.  But just as we develop risk assessments and contingency plans in so many other areas of our lives, so too must state government take stock of all federal funding and ensure that Iowa can remain financially independent from Washington.  So what steps does Iowa need to take to ensure we aren’t reliant on the mercy of political outcomes in D.C.?

  • Itemize all federal funds coming into Iowa so lawmakers and taxpayers can clearly and easily see the programs that are the ultimate recipients of those funds.
  • Measure the dollars and obligations Iowa must commit to so we all understand what strings are attached.
  • Identify the end date, scheduled or foreseeable, for funding that is likely to come to an end.
  • Develop a plan to deal with potential federal cuts and the impact they would have on Iowa’s budget and the services provided to citizens.

The danger that stems from the growth of the federal government and its escalating national debt cannot be understated.  There is no sign that Washington will get its fiscal house in order anytime soon. The national debt is projected to grow to $30 trillion by 2027 and that doesn’t even account for the future liabilities of Social Security, Medicare, and Medicaid. It is estimated those programs alone have over $80 trillion in unfunded liabilities.

Iowa must protect itself from the inevitable fallout of Washington’s mismanagement.  Iowa will always be impacted by decisions made by Congress, but the more Iowa becomes dependent upon the federal government, the more our state loses sovereignty. Taking a full inventory of federal funds will spotlight the impact of federal dollars, make clear where federal money is going and what regulations are being forced upon Iowa, and as a result, help us prepare for when Uncle Sam is no longer able to provide such generous support to our state.