DES MOINES — A state panel of revenue experts Thursday scaled back projections for tax collections through June 2018 in the face of worldwide uncertainty, but still expects Iowa’s economy will grow at a “muted” rate as low farm prices put a drag on other sectors.
The three members of the state Revenue Estimating Conference agreed to lower the current fiscal year growth estimate set in March by $49.3 million to slightly more than $7.308 billion — a level that still would mean an increase of 5.6 percent in state tax receipts by next June 30. For fiscal 2018, the panel expects the state will take in over $7.607 billion in taxes — a new target that would be up 4.1 percent but down $71.9 million than previously expected.
“The growth spurt has subsided,” said REC member Holly Lyons of the Legislative Services Agency. “There’s still growth, but it’s muted.”
Lyons said she reduced her revenue growth expectation due to “mixed” signs in the Iowa economy, noting that declining corporate income tax receipts, depressed commodity prices and poor export prospects are creating a “high degree of uncertainty” even through Iowa continues to add jobs and enjoy wage stability. She said there are no signs of recession or economic downturn in Iowa.
REC member David Underwood, a retired business executive from Mason City, shared concerns about economic, political and international uncertainty but he said he also sees positive signs giving him “guarded optimism” that state tax collections will continue to grow at a moderate rate.
David Roederer, the Iowa Department of Management director who chairs the Revenue Estimating Conference, said his optimism was “dampened” by concerned over the “ripple effect” that farm prices below production costs would have on manufacturing and other ag-related industry.
“I think we have some challenges out there,” he added, saying the farm and export uncertainty was enough of a “warning sign” for state revenue estimators to be “extremely cautious” in projecting future revenue growth.
The three-member panel will meet again in December when they will revisit their growth estimates and set tax receipt projections that will frame the state budget discussions for Gov. Terry Branstad and the 87 General Assembly during the 2017 legislative session.
Branstad has indicated he plans to propose a two-year budget plan to legislators on Jan. 10.