State revenue growth fails to meet expectations

DES MOINES - State tax collections for the just-ended 2016 fiscal year came in $42.4 million below estimates, but it will take several months to determine whether surplus funds will be needed to cover the preliminary shortfall, officials said Friday.

Net state revenue taken in during the 12-month period through June 30 totaled $6.78 billion, a 1.6 percent increase that was below the projected annual growth rate of 2.2 percent set by the state Revenue Estimating Conference last March, according to the June report issued by the Legislative Services Agency.

While year-to-year collections grew by $106.5 million, they still came in about $42.4 million below the projections the Legislature and Gov. Terry Branstad used for budgeting.

'We did not make our estimate,” said David Roederer, the director of the Iowa Department of Management and leader of the three-member state Revenue Estimating Conference.

Final figures won't be available until fiscal 2016 accruals and reversions are tabulated this fall, so LSA senior tax analyst Jeff Robinson said there still is a possibility revenue could move closer to the 2.2 percent growth estimate.

'We're within striking distance,” he said. 'I don't expect to, but it's a possibility.”

LSA estimates pegged the state's surplus fiscal 2016 ending balance at $75 million after Branstad concluded budget work in May, and Roederer said he expected that figure to be in the $35 million to $40 million range once the books are closed in September on top of the state's combined $718.7 million cash reserve and economic emergency fund.

Overall, taxpayers contributed $8.26 billion in gross receipts to the state during fiscal 2016, but that number was reduced considerably when refunds and other transfers were factored in.

Robinson said timing issues and other factors caused volatile swings in the final three months of the fiscal year. The lower-than-expected yearly collections reflected lackluster farm receipts along with personal income tax collections and withholdings that were below the growth projection, Robinson noted.

'The tax return season for tax year 2015 was not as good as expected,” he said.

'It was expected that farm returns would be worse than the year before, but it seems to have gone beyond that to additional people not just farmers - worse than expected,” Robinson added.