Dispute over Reynolds’ use of COVID cash highlights budget shell game

Republicans work hard to sell the idea their party is the one that stands for fiscal responsibility. They are leaning heavily on that message on the federal level as Democrats approach a vote on the second of two multitrillion-dollar spending bills.

Here in Iowa, Republicans in the Legislature have for decades espoused the principle of not spending “one-time money” for ongoing expenses. So, for example, if the state received a three-year federal grant for public safety, GOP lawmakers likely would resist using the money to hire more state troopers who will still have to be paid after the federal cash is gone. Like much political rhetoric, this makes sense if you don’t look too closely.

Gov. Kim Reynolds isn’t letting any pesky principles slow her down, however, as she tosses around federal coronavirus cash like a jackpot winner in a casino ad. Last week, a state audit reported she improperly spent almost $450,000 of federal COVID-19 aid on employee salaries.

Salaries, obviously, are an ongoing expense. The audit report says 20 of the 21 employees involved were employees of the governor’s office before the pandemic and each employee was paid only their regular salary. So these weren’t temp workers or hourly employees getting overtime.

“What is not clear, is why these salaries were not included in the Governor’s budget set prior to the fiscal year and prior to the Pandemic. Based on this information, we conclude that the budget shortfall was not a result of the Pandemic,” the audit report states.

Why weren’t those salaries in the governor’s budget? Well, that’s a complicated question. The Legislature hasn’t seen fit to include line items for most executive branch salary increases in the state budget for more than two decades. (Democrats in the Legislature and Gov. Chet Culver stopped approving a separate salary bill in 2009, during the national recession. Republicans have continued the practice since they took over the House majority in 2011.)

Instead, lawmakers approve a lump sum for state agencies that may or may not cover negotiated pay raises. Department managers have the authority to allocate the money as they see fit. That often means open positions are left dark or other costs are cut to cover salary increases, all without any public accountability.

Adding to the lack of transparency on salaries, the governor’s office routinely “borrows” employees who are paid by other executive branch agencies. That allows the governor to bulk up her own staff without the political cost of asking lawmakers for more money.

This audit report makes that salary shell game a big liability. It alleges the governor’s office employed more people than its budget could support and used the federal money to plug the hole. The governor’s office argues the staff were spending most of their time on COVID-19 mitigation efforts, an “allowable expense,” and the only issue in dispute is documentation of that time.

If the governor’s office can’t come up with contemporary documents, the audit recommends reimbursing the state’s coronavirus relief fund so the feds don’t claw the money back. The auditor’s report says the governor’s office has failed to produce any documentation despite being asked for it twice. State Auditor Rob Sand warned the governor’s office over a year ago that he was questioning the use of federal virus money for state salaries.

There’s a political undertone to this dispute: Reynolds, a Republican, is seeking reelection. Sand, a Democrat, has been considered a potential rival for the job, although he has not announced any 2022 plans so far. In the meantime, however, Sand is doing what GOP lawmakers refuse to do: Make sure there’s some accountability for how the governor is spending nearly $1.5 billion in federal cash.

Reynolds already had to return $21 million to the state coronavirus relief fund that Sand and the U.S. Treasury Department said she misspent on a software project that had been planned prior to the pandemic. The Legislature, which had previously refused to appropriate money for the project, ended up paying the tab.

Sand hasn’t always hit the mark with his review of the governor’s federal COVID-19 spending. In June, his office accused Reynolds of illegally using about $152,000 of federal COVID aid to promote herself through a public-service media campaign. I thought this was a stretch and so did the Iowa Ethics and Campaign Disclosure Board, which found no violation of state ethics rules.

Even so, the Republican majority in the Legislature should recognize this latest conflict as a sign they should reform budgeting practices for state salaries. They should pass annual salary bills or require line items in department budgets for employee raises. They should forbid agencies from paying salaries for people who work in a different department. By approving lump-sum budgets for the executive branch, they should recognize they’re squandering their power over the purse strings and abdicating their responsibility. They should, but they won’t.

They should, but they won’t, scrutinize and hold the governor accountable for every dime of federal COVID-19 relief money that is pouring through her hands. They had the opportunity to do that this year and decided instead to leave all the federal aid out of the state budget, with the governor in charge of allocating the money.

Iowans should demand actual fiscal responsibility from the party that claims to own that title. They should, but they probably won’t.