DES MOINES — State revenue forecasters expect slow, modest economic growth and uncertainty due to issues surrounding the COVID-19 pandemic and gridlock over federal relief, but they hold out hope Gov. Kim Reynolds and legislators will have about $266 million more money to spend next fiscal year.
Members of the Iowa Revenue Estimating Conference on Friday revised upward their current fiscal year projection by about $65 million to nearly $7.97 billion, and set a 3.7 percent growth rate for the upcoming fiscal 2022 budgeting year that would total almost $8.27 billion in tax collections.
“I would describe our economy as walking to a level where we were prior to the pandemic, but eventually we need to be running to get to where we want to be,” said David Roederer, the panel’s chairman, who noted the ongoing recovery “is going to be more of a marathon than a sprint.”
Roederer, the state Department of Management director who will begin work with Reynolds in crafting a budget plan she will unveil next month, said there is considerable uncertainty and top economists characterize the current economic outlook as complicated at best.
“There’s no tested economic model that provides a hint as to what happens when a pandemic closes an economy, and as it opens and shuts down in parts, what the total impact is on a country. We know that we will come out of this — we’re seeing signs of that,” he told fellow panel members.
“We’re making progress; we’re making good progress but we are not back to the point where we need to be in order to get back where we were back in March,” he noted. “So the question really is, do we need economists or do we need psychiatrists to really help us determine what is going to happen because the economics may say one thing but it’s going to get down to whether or not people feel that the pandemic is coming to an end and whether or not they feel secure enough to invest their money into more goods and services.”
Panel member David Underwood said much rides on the soon-to-be-distributed COVID-19 vaccines and whether the rollout will take longer than hoped.
He predicted “it’s going to be very, very slow in the next six, seven months before we start to see a significant impact from the vaccine being deployed.”
Member Holly Lyons of the Legislative Services Agency said uncertainty over more federal stimulus money beyond the billions of dollars that already have propped up Iowa’s economy further clouds the economic outlook.
“I think all of us will be glad to see the year 2020 behind us, but this year more than ever, it’s hard to look ahead to the next year with any clarity,” she noted, adding that “the pandemic experience has likely changed us — the way we do business, the way we travel, the way we shop and the way we work.”
Lyons said events like a surge in the virus, the unknown timing of the vaccine rollout and gridlock on federal stimulus further muddy Iowa’s economic outlook.
“One thing we do know is that the COVID economic recession is quite different that previous economic cycles,” she said.
After the meeting, state Rep. Gary Mohr, R-Bettendorf, chairman of the House Appropriations Committee, said the uncertainty — even though Iowa’s budget is in good shape with a surplus — will cause majority GOP legislators to proceed with caution and “resist the urge to spend every last dollar that the state collects.”
State Rep. Chris Hall, D-Sioux City, ranking House Appropriations Committee member, also urged caution, noting that Iowa has regained only half of the jobs lost to the pandemic and that some individuals have dropped out of the workforce for reasons like child care or long term disruption to their jobs.
But Chris Hagenow, a former legislator who now works for Iowans for Tax Relief, said the state’s $300 million budget surplus and more than $700 million in reserves coupled with GOP spending discipline “provides an excellent foundation for the Legislature to move forward with additional tax relief” and he hoped lawmakers would “confidently seize the opportunity” during the legislative session that opens Jan. 11.
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