IOWA LEGISLATURE

State panel sees stable Iowa economy, sticks with revenue projections

But growth could slow next year, given coronavirus impact

Members of the state Revenue Estimating Conference -- David Underwood (left), David Roederer (center) and Holly Lyons --
Members of the state Revenue Estimating Conference -- David Underwood (left), David Roederer (center) and Holly Lyons -- meet Thursday, March 12, 2020, in Des Moines to discuss Iowa's economic outlook and revise tax-collection projections for state budgeting through June 2022. (Rod Boshart/Gazette Des Moines Bureau)

DES MOINES — State revenue estimators took a measured view Thursday of the economy — the turmoil caused by stock volatility, an oil price war and a global coronavirus pandemic — before setting cautious projections for slow, stable economic growth in Iowa, at least in the short-term.

There’s fear, but there’s no need to panic, cautioned Holly Lyons, one of a three-member Revenue Estimating Conference that predicted state tax collections would grow by $76.1 million above the current expectation but would slow to 1.8 percent growth next fiscal year before rebounding to 4.1 percent in fiscal 2022.

While much of the news is not good, “I want to be clear that the sky is not falling,” said Lyons, fiscal director of the nonpartisan Legislative Services Agency. “It’s a little cloudier than usual, but Iowa currently has a stable albeit slowly growing economy and the state’s financial position is sound.”

Other REC members David Roederer and David Underwood agreed with her assessment but noted the panel should be ready to reconvene at an earlier-than scheduled time should worldwide events plunge the nation and Iowa into recession — a downturn that likely won’t show itself for six months or more.

“We’re really into uncharted territory,” said Roederer, the REC chairman who also is the state’s management head and Reynolds’ budget director. “Things have not settled in very well.”

The state panel met to assess the revenue outlook that the Legislature and Gov. Kim Reynolds will use to formulate a fiscal 2020-21 budget in the waning weeks of the 2020 session.

Revenue estimators bumped up their numbers by $76.1 million to nearly $8.091 billion for the current year, but slightly lowered the fiscal 2021 outlook to 1.8 percent growth — a nearly $8.237 billion total that was down $12.3 million from their December expectation.

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They also set their first fiscal 2022 growth projection at 4.1 percent — an $8.574 billion figure that would generate an extra $337.7 million.

“I wish I could suggest a good number for adjusting for COVID-19,” said Underwood, a retired Mason City businessman who noted a lot of fear and uncertainty among Iowans.

“I guess I’m very optimistic our numbers are pretty solid,” he said. “It’s how long is this going to last and who’s going to stumble in it? If it really becomes a pandemic in the United States, our numbers are going to be too high — at least for fiscal year 2021.”

Roederer said Thursday’s revised revenue estimates should not alter state budgeting plans nor dampen the outlook for proceeding with the governor’s Invest in Iowa Act.

“I’m pretty optimistic,” said Roederer about the prospects for the governor’s multipronged proposal that deals with tax policy, environmental, mental health and other policies.

The plan unveiled in January seeks a penny sales tax increase while significantly cutting income taxes by 10 percent, funding water quality work, and easing property taxes by shifting mental-health costs to the state.

Rep. Gary Mohr, R-Bettendorf, chairman of the House Appropriations Committee, said majority Republicans may have to adjust their fiscal 2021 state budget numbers slightly based on Thursday’s action, but “frankly we feel like we’re in good shape.”

“Conservative budgeting principles have paid off,” he said. “They’ve lowered the estimates for next year but all of our savings accounts are full and we feel very good about where we are right now.”

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However, Sen. Joe Bolkcom, D-Iowa City, ranking member of the Senate Appropriations Committee, said state officials have no idea at this point what the cost will be of the unfolding COVID-19 pandemic, which is still relatively new to Iowa with unknown ramifications for the future.

“I don’t think it’s time to raise taxes on people or cut taxes on people,” said Bolkcom, who urged his Senate colleagues to consider steps that might limit public access in the Capitol, give schools guidance on how to count days of instruction if they shift to online instruction and direct county auditors nervous about the June primary elections that may require mail-in balloting to minimize interactions.

Rep. Chris Hall, D-Sioux City, ranking member on the House Appropriations Committee, encouraged REC members to consider reconvening in four weeks to better assess the economic impacts of the coronavirus outbreak and the ongoing market volatility.

He noted the governor earlier this week suggested a minimum cost impact of $200 million because of the virus, which likely would not be fully covered by federal aid.

“We have to be very cautious and conservative,” said Hall, who also urged GOP leaders to drop the tax-cut ideas at this time, given the worldwide uncertainty.

Roederer said the COVID-19 outbreak has unleased shockwaves across the world economy but Iowa is taking a coordinated prevention and response plan and Iowans are using good judgment in approaching the outbreak.

“This is what our numbers show and, if that changes, we’ll have to adjust,” he said. “I think everybody in the world would like to know what the outcome is going to be but we won’t know.

“None of the indicators are deviating significantly from projections. I’m not saying that they won’t, but we’re still early in this event.”

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“It’s totally unreal what’s going on,” Lyons added. “It’s just going to take some time to let this work through. If Iowa can contain this pandemic, there should be just minimal economic damage.”

Comments: (515) 243-7220; rod.boshart@thegazette.com

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