Financial Health of Iowa

by Jennifer L. Crull

Truth in Accounting provides an annual report about the financial health of Iowa and all 49 other states. The last time we reported on this in September 2012, Iowa was ranked 8th in the nation and our financial burden per taxpayer was $500. As we look at the report for the 2013 year, Iowa is still ranked 8th, but now our tax burden is a surplus of $100 per taxpayer.[1]

As state governments continue to recover from the recession, states are working to decrease their debt and increase the money they have available to pay their bills. In 2012, when we last reported about the financial state of the states, there were only six states that had a surplus per taxpayer. In 2012, that number has increased to eight.[2] The following table shows the top eight states from 2011 and 2012 and the taxpayers’ surplus. The table on page three includes all 50 states and the average for the 50 states.

The report has the following positive points about our state:

• Iowa beat the 180 day goal time between the close of its fiscal year and release of its 2012 Comprehensive Annual Financial Report (CAFR), publishing the report 167 days after the fiscal year-end. The timeliest states — Utah (111 days), Washington (138), and Michigan (151) — published their CAFRs well before the 180 day deadline. The worst state, New Mexico, took 426 days, over a year after fiscal year-end, to publish its CAFR.
• Outbound moves from Iowa in 2012 were 50.14% of total moves, down from 52.1% in 2011, meaning that moves into the state approximately equaled moves out of it.
• Iowa has the money needed to fund State employees’ retirement benefits and other outstanding bills. Iowa is in good financial shape because the Legislators and Governor have only promised citizens and employees what they can afford to deliver.[3]

The negative point of the report is about the lack of transparency concerning retirement benefits in the state. As the report points out, “90 percent of retirement liabilities are not clearly disclosed.”[4] Truth in Accounting discovered

a total of $2.2 billion of retirement benefits have been promised but not funded. Because of the confusing way the state does its accounting, only $218.1 million of these liabilities are reported on Iowa’s balance sheet.[5]

They also pointed out that

unfunded employees’ retirement benefits represent 24% of State bills. These unfunded liabilities have accumulated because State employees have been promised $1.4 billion of pension benefits and $738.2 million of retirees’ health-care benefits. Unlike most states, Iowa has the assets needed to pay these liabilities.[6]

As one can read, the state of Iowa’s financial situation is much better than it was last year, but we still need to work on the issue of properly reporting out liabilities concerning retirement obligations in the state. The following table shows the reported versus unreported retirement liabilities.

While Iowa’s surplus per taxpayer isn’t as high as other states, it is important to note that in 2010 our taxpayer burden was $500. So Iowa has worked hard in the last three years to take a state that was in a financial spiral and get the budget back in line and keep expenditures in check.[7] Now it is important for the state to focus on the pension system in Iowa. First off the state needs to do a better job of reporting the liabilities of the pension system. The following paragraph from the report speaks to the need of better transparency in the pension systems:

A detailed study of Iowa’s actuaries’ schedules found retirement benefits totaling $2.2 billion have been promised, but not funded. A review of the State’s balance sheet determined only $218.1 million of these liabilities are reported. This means the State does not report $1.9 billion of retirement liabilities on its balance sheet.[8]

While the Legislature is in session, take the time to ask your Representative or Senator about what plans are concerning the pension system in Iowa. If we don’t demand more transparency concerning this issue, how will the state know to change the way they report the information? For while we do have the money to pay our bills now, that doesn’t mean we will in ten years. The only way to ensure that we can meet the obligations of the pension system is if they are openly reported and fully funded.

(Endnotes)
[1] “Iowa,” Truth in Accounting, State Data Lab, <http://www.statedatalab.org/state_data_and_comparisons/detail/iowa> accessed on January 14, 2014.
[2] “The Financial State of the State,” Institute for Truth in Accounting, September 2012, pp. 54-55.
[3] “Iowa.”
[4] “Iowa State of State,” Truth in Accounting, State Data Lab, <http://www.statedatalab.org/library/doclib/IA-2012-1.pdf> accessed on January 14, 2014.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] Ibid.

IOWA TRANSPARENCY NEWSLETTER is a monthly newsletter reporting on government transparency in our state.

IOWA TRANSPARENCY NEWSLETTER is published by Public Interest Institute at Iowa Wesleyan College, a nonpartisan, nonprofit, research and educational institute whose activities are supported by contributions from private individuals, corporations, companies, and foundations. The Institute does not accept government grants.

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