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Wash Journal   Fairfield Ledger
Neighbors Growing Together | Feb 20, 2018

State revenue grows, but slowly

Likely triggering midyear budget adjustments
By Rod Boshart, Gazette Des Moines Bureau | Dec 13, 2017

DES MOINES — Gov. Kim Reynolds and state lawmakers likely are going to have to consider midyear budget adjustments ranging from $50 million up to $90 million after a state panel Monday left its current revenue-growth projections unchanged and slightly lowered the expectations for fiscal 2019.

The three-member state Revenue Estimating Conference decided to keep its fiscal 2018 revenue growth projection at 2.4 percent, or slightly more than $7.128 billion through June 30 but lowered its fiscal 2019 growth estimate by $9.3 million to nearly $7.416 billion — figures that by law become the numbers the governor and Legislature must use for budgeting purposes in the upcoming legislative session.

“Iowa revenues, while still growing, are disappointing for the first five months of the fiscal year,” said REC member Holly Lyons of the nonpartisan Legislative Services Agency. “There is nothing, however, to indicate that the revenue growth will turn negative, but growth is very slow, slower than the revenue estimating conference forecast last October. Most Iowa economic indicators would suggest slow but steady growth.”

While unchanged from October, the revenue spelled some bad news given that the estimates then were scaled back by $133 million while overshot this year’s projected ending balance and could portend cuts or more borrowing from the state’s cash reserves to keep the ledger balanced, officials said.

“Some midyear adjustments will be required yet this fiscal year,” said David Roederer, a REC member who also directs the state Department of Management and is Reynolds’ budget director. “Even before October, we were saying (to state agency heads) you need to be prepared, so it’s not like this is catching anybody by surprise.”

Conference members said Iowa’s economy continues to grow, but Iowans’ personal incomes and wages are not increasing as rapidly as projected while sluggish farm prices continue to pose challenges and manufacturers are constrained by a lack of skilled workers to fill vacant positions. Added to that is uncertainty over federal tax changes and trade agreements that impact the state’s revenue situation.

“We’re very firmly on the side of we’re not sure what’s going to happen,” Roederer said in concluding his fiscal analysis during Monday’s Statehouse meeting.

The state revenue projections form the backdrop for new budget discussions for Reynolds, majority Republicans and minority Democrats when the 2018 General Assembly convenes on Jan. 8.

“Agriculture plays a large part in our economy and when corn is selling for $3 per bushel, it’s going to have a significant effect on the budget like we’re seeing now. This is not unique to Iowa and many surrounding states are dealing with this challenge as well,” said Rep. Pat Grassley, R-New Hartford, chairman of the House Appropriations Committee.

“While revenue estimates can be unpredictable, House Republicans are not,” Grassley added. “We will continue to live within our means and pass a responsible budget that funds Iowans’ priorities.”

For their part, legislative Democrats said they were willing to work in a bipartisan manner to make a “midcourse correction” that would invest in successful job-creation initiatives by paring back some tax credits.

“The state budget has become an embarrassment to all Iowans, regardless of their political beliefs,” said Rep. Chris Hall, D-Sioux City, ranking member of House Appropriations Committee. “Paychecks and family income are stagnant. Iowa now ranks dead last in the country for economic growth and the next legislative session will be spent paying off $144 million of debt.”

Reynolds’ office countered the Democratic criticism by issuing a statement noting that Iowa was named the third best-run state in the nation according to a financial analysis issued Monday that cited Iowa’s 17-year low unemployment rate, the strength of the state’s pension fund, its AAA credit rating, and the state’s low poverty rate.

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