Governor Reynolds says she’s again monitoring Iowa’s revenue growth in case of further cuts

DES MOINES - Gov. Kim Reynolds said Monday she would prefer to avoid cuts to K-12 education and commitments for local property tax relief if she and the Republican-run Legislature have to look at trimming spending this fiscal year due to continued weakness in the state's revenue growth.

'We've made a promise to them (K-12 schools) and they've built their budgets on that so I think we have to honor that commitment,” Reynolds said in an interview after Monday's Iowa Executive Council meeting.

Likewise, she said, cities, counties and school districts have built their current-year budgets on the state's commitment to fill in the projected loss of revenue tied to the 2013 legislation that reduced commercial property tax rates and made other adjustments impacting the fiscal year that ends next on June 30, 2018.

The possibility of a new round of state budget belt-tightening was raised last week when a panel that estimates the amount of tax revenue the state will collect in fiscal years 2018 and 2019 pared back current expectations by $133 million.

A revised fiscal analysis issued by the Legislative Services Agency said the downward revenue growth projections coupled with other adjustments would erase the $98 million ending balance the Legislature and governor approved in their $7.26 billion budget and create a potential shortfall of $34.6 million for fiscal 2018.

'It's a snapshot in time,” said Reynolds, who noted there remains 'a lot of volatility in the numbers” given the continued weakness in the farm economy and uncertainty over a number of national and international issues. She said her administration plans to closely monitor state finances, especially fluctuations in costs associated with Medicaid, going forward.

In the meantime, the governor said she wants to address barriers that are a drag on the state's economy such as a shortage of skilled workers to fill vacant positions and an income tax structure that is costing taxpayers and impeding business growth and expansion.

'Hopefully, we can continue to look for opportunities to grow the economy,” she said. 'That is what we ultimately have to do and that will help solve a lot of the problems.”

The state Revenue Estimating Conference is slated to meet again in December to revisit the projections and set a fiscal 2019 revenue estimate that will be the level the governor and Legislature will use for budgeting purposes during the 2018 session based upon the state's 99 percent spending limitation. Initially, the panel expects the state will take in $7.349 billion in fiscal 2019, which would be a 4.1 percent increase of $298.8 million.

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