Revelations last fall about the mismanagement of Iowa's film-tax-credit program came at a convenient time for the governor and the state legislature, as they provide an opportunity to evaluate tax credits at a time when the state budget is tight.
Governor Chet Culver has included two major cost-cutting features in the budget proposal he released last week: reorganizing state government (saving $341 million) and making changes to the state's more-than-two-dozen tax-credit programs (saving $52.5 million). The governor's budget proposal reads: "In Fiscal Year 2011, state tax credits are expected to cost the state $525 million if no legislative changes are made. ... [T]he Culver-Judge Administration believes that state tax expenditures must ... be scaled back in light of declining state revenues."
Culver did not specify how he wanted the legislature to achieve cost savings by $52.5 million, only referring to seven recommendations of his Tax Credit Review Panel, which released its report on January 8.
The legislature has one easy option to achieve the governor's cost-saving target. The review panel estimated that following its recommendations would result in first-year savings of $55.2 million and second-year savings of $106.3 million. Basically, lawmakers could rubber-stamp the report.
But this is also an opportunity for the state to re-think the way it does economic development through tax credits. If it's so inclined, the General Assembly could do a more-comprehensive overhaul of tax credits, making them better tools.