NEWS

State faces $100 million in budget cuts

William Petroski
bpetrosk@dmreg.com
The Iowa Capitol

A decline in projected state tax revenue will force $100 million in spending cuts for the current state fiscal year, according to Gov. Terry Branstad's top budget administrator

David Roederer, director of the Iowa Department of Management, said Monday the governor will propose budget reductions when the Iowa Legislature convenes in January. Branstad intends to work cooperatively with lawmakers to selectively address the budget shortfall, but he does not anticipate it will include cuts in state aid for kindergarten-through-12th grade schools.

The current state budget, for the fiscal year ending June 30, 2017, is now projected to have about $7.2 billion in revenue. That's up 4.2 percent compared with the past state fiscal year, but it represents a decline of $96.2 million compared with a revenue forecast issued in October. For the 2018 state fiscal year, revenue is projected at about $7.5 billion, which would be up 4.8 percent compared with the current year's latest forecast.

Roederer chairs a three-member Iowa Revenue Estimating Conference that reviewed the state's balance sheets on Monday. He said flatly after the meeting that Branstad won't order across-the-board budget reductions and he emphasized that Iowa is not entering an economic recession.

"Keep in mind that the economy is growing and the revenues projected to come into the state are growing. They are just not growing at the rate that the budget was based on," Roederer said.

The three-person Revenue  Estimating Conference reviews state revenue figures Monday, Dec. 12, 2016, at the Iowa Capitol. From left are, David Underwood, a business consultant from Clear Lake; David Roederer, director of the Iowa Department of Management; and Holly Lyons, fiscal division director of the Legislative Services Agency.

David Underwood, a business consultant from Clear Lake who serves on the panel, said it's difficult to forecast state revenue growth considering a wide array of potential factors, including a transition at the White House following the election of Donald Trump as president. Some of these factors could range from possible changes in U.S. trade policies to tax cuts and a possible increase in interest rates. He also said industrial sales important to Iowa continue to be weak relative to exports, but Iowa employment levels remain strong.

Conference member Holly Lyons, fiscal division director of the Legislative Services Agency, also cited a host of factors that could affect Iowa's economy, ranging from the state's agricultural economy to oil prices.

"Our manufacturing sector is very much tied to the agricultural sector. The two are pretty well coupled," Lyons said. But Underwood said there is some optimism that Iowa's farm economy, which has been hit by low prices for commodities, won't drop any farther. Roederer agreed, saying, "I think we will start seeing much more positive news out of the farm sector."

Branstad spokesman Ben Hammes said in a prepared statement that the governor is promising that K-12 school funding will not be cut as a result of the lower projection.

"Gov. Branstad looks forward to working with the House and Senate to give Iowans a stable and sustainable budget representing our priorities," he said.

Iowa Senate Republican Leader Bill Dix of Shell Rock said the latest revenue estimates underscore the need for economic growth and reform in state government.

"Senate Republicans are committed to implementing pro-growth policies which will provide confidence to job creators and reform government to protect the taxpayers. These policies will put Iowa on a strong path to address the current budget situation," Dix said.

Rep. Pat Grassley, R-New Hartford, chairman of the Iowa House Appropriations Committee, cited a need for lawmakers to closely examine the effectiveness of every program to find areas of efficiency and duplication. "House Republicans are up to the challenge to fund Iowans’ priorities in a responsible way," he added.

However, Rep. Chris Hall, D-Sioux City, the ranking Democrat on the House Appropriations Committee, blamed Branstad and House Republicans for putting the state's budget "in the red" and for stalling the state's economy.

"It’s clear their unsustainable tax giveaways to out-of-state corporations have not produced good jobs, skilled workers, rising incomes for hard-working Iowans, or a stronger economy like they promised," Hall said. I hope Republicans and Lt. Governor Reynolds will heed the warning from our nonpartisan budget experts. We must recognize that shortchanging schools again to make way for massive corporate tax giveaways will not help working families or grow Iowa’s economy."