Iowa’s state revenue growth could slip by $50 million

DES MOINES - Gov. Terry Branstad's budget director said Friday that 'softness” in personal income tax collections could mean state revenue will finish the current fiscal year about $50 million below revised March projections.

'Based on what I've seen so far, I think we'll be down in the neighborhood of $50 million from what we had estimated,” said David Roederer, director of the Iowa Department of Management and leader of the three-member state Revenue Estimating Conference, which already downsized state tax receipt growth projections by $46 million at its March meeting.

'I hope I'm wrong, but that's what we're estimating right now,” Roederer said. 'We're still growing, but not at the rate we had projected.”

Earlier this week, the Legislative Services Agency put out an April revenue report indicating a deeper-than-expected drop in state tax receipts. Last month's $335.1 million in state general-fund tax collections was down 18.9 percent, or $78.3 million, when compared with April 2015.

That left year-to-date growth in tax receipts about six-tenths of 1 percent higher than the same 10-month period a year ago. That compared to the revised 2.2 percent growth estimate for this fiscal year ending June 30 that was set by the Revenue Estimating Conference.

'We've been cautious about the revenue situation all year because of the bird flu and farm income,” Branstad said Thursday.

Roederer said state revenue estimators had projected a drop in farm income and returns that were delayed this tax season because of legislative changes intended to 'couple” with the new federal tax code. 'came in less than what they were last year by a fair amount.” He also said softness in personal and subchapter S some corporate income contributed to a $73.5 million decline - or 17.4 percent - in that area of collections last month.

Roederer said Friday that the projected $50 million decline was preliminary and could change, but he doubted the administration would have to make any adjustment given that the Legislature adjourned at the end of April last month with an estimated $75.3 million surplus on top of the $718.7 million in cash and emergency reserves at the required 10 percent level for fiscal 2016.

Branstad has until the end of this month to take action on the $7.351 billion spending plan the Legislature sent him for fiscal year 2017 that begins July 1. It increases state spending by $104 million. Next year's proposed state budget would increase spending by $104 million and was $200,000 below the state's 99 percent expenditure limitation law with a projected at $80 million surplus by June 30, 2017, with reserves totaling $738 million at the required 10 percent level.