Iowa State Universities and Government-Funded Programs Could See $52M in Proposed Cuts

Iowa Budget Cuts
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Iowa Senators have proposed to trim the state’s current fiscal budget by $52.0 million. Presently, the senate house is majority-represented by the Republican Party. With this decision, there has been a lot of pushback from Democratic senators and those who would be impacted by the proposed Iowa budget cuts.

There has been a little more pushback than usual because Republicans want to cut spending in the middle of the current fiscal year, which ends June 30, 2018. All of this is due to an expected revenue gap for the state. Even though the state’s economy is growing overall, there is less revenue being generated because of the struggling farming sector.

If the $52.0 million in budget cuts get passed, the most impacted area would be education. Three universities would see about $19.2 million in reduced funding. This would put the universities in a very bad position because the semester began at the start of January. Also, the universities have already planned their budgets using the initial funding amount that was expected to be received.

The breakdown of the funding cuts would be a loss of $8.7 million for the University of Iowa, a reduction of $6.9 million for Iowa State University, and a loss of at least $3.7 million for the University of Northern Iowa. Also, community colleges would face a reduction of $5.4 million in funding from the state.

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Other major proposed budget cuts include $9.9 million from the Department of Human Services. This would include a $6.6-million budget cut from administration and $2.2 million from children and family services. In addition, $4.8 million would be held back from the Iowa Judicial Branch (the state’s court system). Another $3.4 million would be seen in cutbacks to the Department of Corrections.

Iowa’s Farming Sector Is Hurting the State’s Revenue

As mentioned earlier, the reason for the proposed budget cuts is the declining farming sector in the Iowa, which is the largest industry in the state. This has resulted in a revenue gap for the state, even though there were gains in the financial, insurance, and manufacturing sectors in Iowa.

A big reason for the decrease is that corn and soybeans have seen big declines in revenue over the past few years. In the case of corn, the prices have fallen by more than 50% since 2013. In 2013, one bushel of corn was selling for more than $8.00 Today, this number is hovering around $3.50.

When looking at soybean pricing, it is very similar to the price decline seen in corn. In 2013, the price for one bushel of soybeans was north of $17.00. Today, the fair market price for one bushel of soybeans is slightly under $10.00.

The price of farmland has also seen a decrease; since 2013, the price for one acre has decreased by 17.5%.

With commodity prices declining, it means that less revenue is earned for the same amount of work that would have been completed in 2013. In regards to real estate, it means that there are fewer financial options. This means, if a farmer went to bank for a loan, they would receive a lower loan balance then in the past. Business loans are a very common in the farming industry. A loan is obtained at the start of crop season and is paid off once the season is over and revenue is earned.

Conclusion on Iowa Budget Cuts

It seems that the state was not very proactive in creating a safety net to ensure that there would be no revenue gaps. The evidence of this is that the senate is now trying to change its budget in the middle of the fiscal year. It seems that this move was made out of desperation. In the future, it is possible there will be further Iowa budget cuts planned, to ensure that there are no budget changes in the middle of the year.

Sources: 

Iowa Senate plans $52 million in budget cuts, hitting universities, courts and human services,” Des Moines Register, January 25, 2018.

Courthouse Closings, Disruptions on Campus Predicted from Proposed Budget Cuts,” Iowa Public Radio, January 25, 2018.

Stagnant farm economy slows growth in Iowa, Nebraska,” Des Moines Register, October 1, 2017.

Economist sees Iowa farmland value decline as ‘orderly adjustment’,” AgUpdate, January 25, 2018.

Soybeans,” NASDAQ, last accessed January 26, 2017.

Corn,” NASDAQ, last accessed January 26, 2017.

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