State revenue estimate stays flat this year, up $33 million in 2011

DES MOINES – Citing cautious optimism that Iowa's economic recovery is blooming, a state panel today pumped up its estimate for fiscal 2011 revenue by $33 million as lawmakers begin key budget negotiations.

The three-member state Revenue Estimating Conference slightly revised its current year estimate upward by $900,000 but budget-makers said that would have no impact or require more cuts through June 30.

For fiscal 2011, REC members expect state tax collections will growth by 0.6 percent to slightly more than $5,436 billion – a $33.1 million gain from their expectations in December.

“We're cautiously optimistic that things are improving and the worst is behind us,” said Richard Oshlo, the REC leader and Gov. Chet Culver's budget director.

Democrats who control the Legislature said the extra cash may be added to an ending balance cushion to guard against another round of across-the-board cuts next fiscal year, although the money could be used to close the gap between Culver and lawmakers in finalizing the fiscal 2011 spending plan.

Senate Majority Leader Mike Gronstal, D-Council Bluffs, said Democratic leaders intend to deposit the projected new state revenue in the “rainy day” reserve to avoid the need for mid-year cuts in education, health care and public safety in fiscal 2011. But he also noted that a share of that money will be needed to protect Medicaid services for vulnerable Iowans.

 “It remains to be seen,” said Sen. Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee. “I think it has to be looked at in the context of how many more state employees do you want to lay off – how many DHS workers, prison guards or state troopers do you want to lay off?

“I understand they want to be conservative. It's in the range, but the doom and gloom of things, I don't think that helps anything,” he added. “I think it's really a low ball, not-very-optimistic prediction here.”

REC member Holly Lyons used an analogy that the Iowa economy is like a car with the clutch in ready to turn a corner but not yet accelerating. That boost likely will come later in the year as employment and consumer spending show improvement.

“We're just beginning to dig ourselves out of the hole and in this case, it's a big, big hole,” she said.

REC member David Underwood of Mason City said businesses he surveyed generally expect Iowa's economic landscape to be flat for the next six months and then begin to pick up a bit.

“There is some optimism on the horizon and it does feel like we've hit bottom,” he said.

Minority legislative Republicans cautioned that the Legislature should stick with the December revenue estimates as required by law and not increase spending just because a forecasting panel expected more tax receipts in the future.

“We still have the same problem we had coming into today,” said Rep. Scott Raecker, R-Urbandale, ranking member on the House Appropriations Committee. “We still don't have the problem under control and that's spending more than we take in.”

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