State revenue estimates revised downward

DES MOINES - State budget-makers are facing a potentially challenging fiscal 2016 cycle with revenue estimators downgrading their forecast Thursday after agency directors submitted new requests for at least $370 million in higher spending beginning next July 1.

'There is going to be the need for restraint,” said David Roederer, director of the state Department of Management and chairman of the three-member Revenue Estimating Conference which lowered its growth projection for the current fiscal year by $81.4 million at its Thursday meeting.

In March, REC members set an 8 percent growth rate for state tax collections for fiscal 2015, but sagging grain prices and other economic uncertainties prompted them to scale back their projections to $6.721 billion through next June 30, a slightly lower 6.7 percent growth rate.

'The big unknown seems to be the farm economy and the timing of the impact on state general fund revenues, particularly personal income taxes,” said REC member David Underwood of Mason City. 'The farm economy helped Iowa's general fund considerably during the last recession and as we came out of that recession, but now I think it's their turn to take a breather I think from providing growth in general fund revenues.”

REC members set a 5.2 percent growth projection for fiscal 2016 net tax receipts, or $7.073 billion, but they will revisit that forecast in December when they lock in the estimate for state tax collections that will become the official benchmark for the governor and Legislature to use in developing a state general fund budget for the next fiscal year.

Heads of state executive branch departments have submitted fiscal 2016 general fund requests approaching $7.05 billion, a 3.8 percent increase over current appropriations but a figure that does not include any new money in state aid for K-12 school and likely will see higher spending for prisons. Corrections officials submitted a status quo budget but added a $15.3 million wish list for more staffing and other needs associated with opening two new state prisons if general fund revenue is available.

Roederer noted the state still has multiyear commitments for property tax relief and education reform to factor into its fiscal ledger and increased Medicaid costs and federal funding shifts caused human services funding requests to spike by nearly $135 million. The state treasury still is in a strong surplus position, but a formula used to calculate tax cuts returned via the special taxpayer trust fund lowered projections from $67.5 million to $27.3 million for the next year compared to $87 million this past tax season.

Roederer predicted the fiscal 2016 state budget 'is going to be a challenge” when government agencies compete for a shrinking pool of resources. 'We can't take our eye off the ball even if we have a growing economy. We've got to make sure that government growth doesn't outpace the revenue coming in,” he said.

Bob Dvorsky, D-Coralville, chairman of the Senate Appropriations Committee, said the revised state revenue projections proved the state budget can be balanced while making investing in middle-class families.

'Our fiscal responsibility is paying off,” Dvorsky said in a statement. He expected Senate Democrats who push next session to continue the in-state undergraduate tuition freeze at state universities for a third straight year, invest more resources in community colleges to train Iowans for 21st Century jobs, and ensure Iowa schoolchildren 'get the quality education that they deserve.”