ALTOONA — Two top state officials Thursday pointed to the uncertainty caused by international trade talks and the depressed farm commodity prices associated with them as the main factors currently preventing Iowa’s economy from achieving its growth potential.
Escalating costs, lost market share and declining exports associated with tariffs and trade-war talk between President Donald Trump and other nations are the major cloud in an otherwise optimistic economic outlook, according to Debi Durham, director of the Iowa Economic Development Authority.
“We need to work through this trade thing because I think that’s the only thing that is holding us back,” Durham told those at the Iowa Taxpayers Association annual meeting. “This is the one that keeps me up at night.”
Durham delivered an upbeat message that Iowa has a number of opportunities that it can capitalize on in areas of biochemicals, medical-device manufacturing, educational technology and sustainable energy to create new “economic platforms” that will promote growth in jobs and income.
Some impediments that need addressing are a shortage of skilled workers and rural broadband, aging housing stock and quality-of-life amenities that will make communities more attractive to companies and young people.
“We are a manufacturing powerhouse, and we’re seeing that coming back,” Durham said. “There are some ‘but fors’ that could stall some of that growth,” but she said she believes proposals dealing with housing and broadband rural connectivity issues — included in a soon-to-be-released Empower Rural Iowa initiative — may help address problem areas.
Durham credited the rise of microbreweries, distilleries and rural areas building tourism activities as a good starting point in addressing quality-of-life concerns.
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“We know how to ferment in Iowa, and we do it really well,” she said. “If you’ve got a bike trail and some kind of spirits at the end of the bike trail, you are golden.”
Durham said she sees some growth potential in bringing medical-device manufacturing close to the University of Iowa’s prototype lab and educational technology start-up companies but indicated it was premature to forecast any announcements.
She also said converting ethanol and renewable energy, biomass and bio-based chemicals into an “economic platform,” for things like vaccines and immunotherapy and precision and digital agriculture, is “a space that Iowa should own.”
“We want the building-block chemicals coming from ethanol. We want to think like a petroleum company, and we want value-added products,” she told the meeting in making a pitch for Iowa to retain its research activities tax credit program.
“Renewable fuels separate Iowa in a competitive world. This is a calling card that separates us,” Durham said. “This is a game changer, and we need to make sure the world knows that.”
The other Reynolds’ administration officials lamenting trade and farm commodity price concerns was Iowa Department of Management Director David Roederer, the governor’s budget director who is beginning to formulate his ninth state budget plan that the governor will unveil Jan. 15.
Roederer, who also serves on the three-member Revenue Estimating Conference that meets Dec. 13 to finalize forecasts that will set the money available for state budgeting in fiscal 2020, said the state’s finances overall are stable and the outlook is optimistic.
“It’s generally positive. We still have some areas of concern, primarily in the agricultural area,” Roederer said in an interview, adding he expects the new two-year budget plan will include modest growth in government spending in priority areas like education, health services, justice systems and public safety.
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“We’re going to have to keep spending in check, but I think it’s probably going to be potentially one of our more healthy budgets than we’ve had,” he said. “Legislators aren’t going to be coming back looking at how much they need to cut, so that’s a positive.”
Roederer said Jan. 1 will signal the start of state income tax reductions passed and signed last session. It also marks expanded sales tax collections on Iowans’ online purchases, aided by a favorable U.S. Supreme Court ruling that allows states to capture more sales taxes on online purchases.
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