Des Moines, Iowa – State Representative Chris Hall (D-Sioux City), Ranking Member of the House Appropriations Committee, today sent a letter to State Auditor Mary Mosiman requesting a special audit on the closing of the 2017 Fiscal Year (FY).
“On June 30th, the state was $104 million short of closing the books with a balanced budget. On September 21st, the Reynolds Administration said the state only needed $14.6 million to close the books on Fiscal Year 2017,” said Hall. “Iowa taxpayers deserve to know whether the Reynolds Administration used budget gimmicks (delayed payments), shell games (transfers), or kept two sets of books to close the fiscal year and avoid a special session.”
Rep. Hall requested the special audit under Iowa Code, Section 11.6. In the FY 17 budget, Reynolds and GOP lawmakers were forced to make $249 million in budget revisions through cuts, transfers, or borrowing. The state will have to repay $144 million that was borrowed this year.
The full letter to State Auditor Mary Mosiman is below.
September 26, 2017
State Auditor Mary Mosiman, CPA
State Capitol Building, Room 111
Des Moines, Iowa 50319
I am writing to request under Iowa Code section 11.6 that you conduct a special audit on the closing of the state’s books for Fiscal Year 2017. I believe Iowa taxpayers deserve to know whether Governor Reynolds and Republicans used budget gimmicks (delayed payments), shell games (transfers), or two sets of books to close the fiscal year and avoid a special session.
According the Legislative Services Agency, the state was $104 million short of closing the books with a balanced budget on June 30. On Sept. 21, the Reynolds Administration said the state only needed $14.6 million to close the books on FY 2017. Yesterday, the non-partisan Legislative Services Agency also recommended additional investigation into substantial revenue growth after June 30.1
Here are the key questions we believe must be answered about how the Reynolds Administration closed the state’s books without a special session:
1. When the 2017 Fiscal Year ended on June 30, the non-partisan Legislative Services Agency (LSA) said the budget was short $104.4 million.2 How was that number reduced by the Iowa Department of Management to borrowing just $13 million to close the state’s books?
2. Since thousands of Iowans had their refunds delayed earlier this year because the state didn’t have money to pay them,3 how many refunds for tax year 2016 still need to be paid by the Iowa Department of Revenue and what is the total dollar amount?
3. The Legislature appropriated $1.622 billion for Medicaid in FY17. The Managed Care Organizations (MCO’s) reported millions in losses last year and still have not agreed to capitation rates for FY 18. What is the final dollar amount spent on Medicaid in FY17? Have all payments for FY 17 services been paid by the Iowa Department of Human Services to the MCO’s? If not, how many payments have been delayed and must be paid out of the FY18 budget? Is there an ongoing reconciliation process for any Medicaid invoices from FY17?
4. What other invoices from FY17 have not been paid to date? What is the total amount of the FY 17 invoices that will have to be paid in the FY18 budget?
5. The REC estimated the state’s net accruals in March would be $29.1 million this year. Over the last four years, accruals have ranged from -$16.2 million to a $19.6 million. To close the books this year, the state is now reporting net $73.5 million in accruals, which is the highest number in the last decade. Why is that number so high over the estimate? Can you recommend changes to the processes the Executive Branch uses to close out a fiscal year to improve predictability?
As the self-proclaimed “Taxpayers Watchdog,” I believe it’s important for you to provide the “independent, accurate, and timely audits of the financial operations” of the state budget as mentioned on your website.
While I do understand it will take time to complete the audit, I hope you can expedite the special audit this fall so it is completed before the 2018 Legislature convenes in January. As you know, any unpaid liabilities that turn up in your audit for FY 2017 will have to be paid in an already tight FY 2018 budget.
I appreciate your prompt attention to this matter.
Rep. Chris Hall, Ranking Member1. “Iowa Legislature Avoids Special Session”, Des Moines Register, 9/20/17
House Appropriations Committee
3. “Iowa didn’t have money to pay tax refunds at previous pace without delays”, Des Moines Register, 6/17/17