Iowa's Bond Debt Situation

Just like home mortgages, payments on bonds issued by the state seem to go on forever. And while the state of Iowa has a significantly-lower amount of outstanding bond debt when compared to other states, the cost of these bonds still has a big impact on what can be done to address state infrastructure needs of today and tomorrow.

In 2009, Governor Chet Culver and legislative Democrats believed it was wise fiscal policy for the state to borrow $800 million for a variety of state and local infrastructure projects. The I-Jobs program, as it was called, ended up primarily financing the repairs to the University of Iowa in the aftermath of the floods of 2008. Perhaps the biggest ongoing impact of the I-Jobs program is the continual debt service payments for this ill-fated and politically motivated scheme. The state issued $695 million of bonds backed by the state’s gaming tax revenue. Here in 2022, the state still owes $403.1 million of the bonds’ principal and another $150 million in interest. The state will pay approximately $45 million this year from state gaming tax collections to the holders of these bonds, instead of using the funds for needed repairs and new construction at state facilities. The payments on all the I-Jobs bonds will not end until Fiscal Year 2034. 

Another portion of the I-Jobs program was the issuance of $115 million academic building revenue bonds by the Iowa Board of Regents. The Legislature authorized this series of bonds to fund construction projects at the three state universities. While the bonds are backed by tuition revenue from each school, the state actually makes the payment via the Tuition Replacement line item in the Rebuild Iowa Infrastructure Fund (RIIF). The I-Jobs bond and other previous academic building revenue bonds are still being paid off today. In Fiscal Year 2022, the state appropriated $28.1 million from RIIF for the year’s payment on these bonds. And still, there is $261.4 million of principle owed on the outstanding bonds along with $59 million of interest on the bonds. These payments will not be finished until Fiscal Year 2036. 

The state has two other buildings where bonds were issued to finance their construction. In 2007, the Democrat-led Legislature authorized the selling of bonds to finance the construction of a new Iowa State Penitentiary at Fort Madison. Today, the state is still making annual payments on the 20-year bonds. In Fiscal Year 2022, the state will pay $13.8 million of judicial revenue for this bond. The state still owes $70 million in principle and $12.7 million in interest on the bonds that will finally be paid off in 2027. 

The other building financed by bonds is the curious-looking headquarters of the Iowa Utilities Board. Financing of that project comes thru fees charged to utilities regulated by the IUB. The state still owes $7.2 million in principle and $700,000 in interest on the bond which will be paid off in Fiscal Year 2029.

Each year the Legislature sets Supplemental State Aid (SSA) for K-12 schools. SSA is percentage growth in state aid to schools. The House Republican K-12 education funding plan places over $159 million of new money into schools. Claims that funding for schools has been cut or that K-12 has been “underfunded” are political sleight of hand tactics. Republicans have increased funding each year over the past 10 years. The last time funding was cut was while Democrats controlled both chambers of the Legislature and the Governor’s Office. 

In just the State Supplemental Aid bill, schools see a funding increase of 2.5% for both the regular program and categorical supplements. The State Cost Per Pupil (SCPP) amount on which the school aid formula is based increases from $7,234 to $7,413, an $186 increase per student. The House GOP plan includes a $5 State Cost Per Pupil increase to narrow the District Cost Per Pupil (DCPP) gap, as well as a transportation equity piece that makes all payments necessary to get all school districts up to the state-wide average when it comes to transportation costs. That means K- 12 school districts are seeing increased funding from the Legislature for normal operations plus additional support to help transportation costs and other budget demands. Additionally, the plan extends the Property Tax Relief Payment program for another year which has the state pick up any property tax growth in the Additional Levy portion of the school funding formula providing a break on property tax increases. 

On top of that money, House Republicans are appropriating an additional $19.2 million for schools to use to offset the extra costs of employing para-educators, substitute teachers, bus drivers, and administrative and support staff due to worker shortages, and other increased costs incurred by the school district resulting from inflation. House Republicans recognize what is happening around the country with inflation and with worker shortages. This helps put money towards those areas and get positions filled at schools as well as offset higher costs. Claims that House Republicans are shortchanging education remain as hollow this year as they have been for the last decade.

Iowa has a workforce shortage. Legislators hear it from every part of the state and across several sectors. Right now, the top job opening is registered nurses. There are 5,415 advertised openings across Iowa. The second job opening is heavy and tractor-trailer truck drivers at 1,055. Iowans see companies looking at ways to make their openings look appealing by offering bonuses, higher pay, benefits, etc. House Republicans see the worker shortage along with the job openings and see the need to make a change with Iowa’s unemployment system to make it a re-employment system. 

Beginning in January, Iowa Workforce Development launched a Reemployment Case Management (RCM) system. The new program offers extensive job search assistance to newly unemployed Iowans with the goal of getting them back to work more quickly. The RCM program has been specifically tailored to Iowa’s unemployment process based on proven national models. Its intention is to provide enhanced services so claimants can more quickly discover the best possible pathway toward a new job and minimize the amount of time spent receiving unemployment benefits. 

Governor Reynolds and IWD Director Beth Townsend announced the Reemployment Case Management (RCM) program in October as part of a series of steps to address Iowa’s urgent need for more workers in the economy. When fully implemented, the RCM program will include 18 new Career Planners who are assigned to meet individually with Iowans seeking reemployment beginning with the first week of their unemployment claims. 

The Career Planners will work to directly connect unemployment claimants with training and educational opportunities in high-demand careers. They will be assisted by new technology that’s being added to Iowa’s existing IowaWORKS system, thereby making it easier to match an unemployment claimant’s work history with the skills in demand by Iowa companies with open jobs. 

See below the list of top 25 job openings in Iowa.

 • Registered Nurses - 5,415 • Heavy and Tractor-Trailer Truck Drivers - 1,055 • Licensed Practical and Licensed Vocational Nurses - 1,051 • Customer Service Representatives - 957 • Retail Salespersons - 922 • First-Line Supervisors of Food Preparation and Serving Workers - 654 • Janitors and Cleaners, Except Maids and Housekeeping Cleaners - 641 • Laborers and Freight, Stock, and Material Movers, Hand - 625 • Security Guards - 601 • Managers, All Other - 582 • Physical Therapists - 573 • Occupational Therapists - 548 8 • Cooks, Restaurant - 523 • First-Line Supervisors of Production and Operating Workers - 521 • General and Operations Managers - 514 • First-Line Supervisors of Retail Sales Workers - 510 • Speech-Language Pathologists - 491 • Merchandise Displayers and Window Trimmers - 469 • Production Workers, All Other - 433 • Cashiers - 367 • Executive Secretaries and Executive Administrative Assistants - 353 • Bus and Truck Mechanics and Diesel Engine Specialists - 343 • Driver/Sales Workers - 330 • Maids and Housekeeping Cleaners - 309 • Sales Managers – 295 

(info from IWD and IowaWorks)