Legislature

Iowa facing more budget woes?

Revenue estimators meet Tuesday as end of fiscal year looms

A gavel sits on the desk of Senate President Pam Jochum at the State Capitol Building in Des Moines on Tuesday, January 14, 2014. (Stephen Mally/The Gazette-KCRG TV9)
A gavel sits on the desk of Senate President Pam Jochum at the State Capitol Building in Des Moines on Tuesday, January 14, 2014. (Stephen Mally/The Gazette-KCRG TV9)

DES MOINES — Gov. Terry Branstad and legislative budget-makers may have to confront options this week for balancing the state’s fiscal 2017 ledger that could include dipping into reserves as a temporary stopgap if projected growth in tax collections is downgraded again.

The state Revenue Estimating Conference — which already has lowered this fiscal year’s tax receipt estimates in October and again in December — is slated to convene Tuesday to decide whether its 4.7 percent growth projection for total net state tax receipts through June 30 is too optimistic.

The governor and GOP-controlled Legislature already made $117.8 million in midyear spending adjustments earlier this session that included $88.2 million in targeted cuts and $25 million in fund transfers to keep a positive ending balance of $$600,000 projected through the June 30, the end of the current fiscal year.

The adjustments were precipitated by lackluster revenue growth blamed on a sagging farm economy that threw out of balance the $7.2 billion spending plan put in place by the 2016 Legislature and Branstad.

Branstad said Friday the state faces limited options if further spending reductions are required, with just slightly more than a quarter of the fiscal year remaining.

“We won’t find out until Tuesday when the Revenue Estimating Conference meets, but it looks like it’s going to be somewhat short,” the governor said in an interview. “This is not going to be an easy situation because we’ve already done some de-appropriations and we’ll have to look at what our options are and how to best deal with the situation.”

According to the Legislative Services Agency, the state currently has $738 million in “rainy-day” funds — $184.5 million in the economic emergency fund and $553.5 million in the cash reserve. One option that might be explored if the conference lowers the revenue growth estimate would be to draw emergency funds to cover a projected shortfall and replenish them in the fiscal 2018 budget that lawmakers and Branstad have yet to negotiate.

“That might be one possibility,” the governor said.

“The question is could you do it in this fiscal year and then pay it back. We’re looking at all those options,” he said.

“Obviously, until we have the Revenue Estimating Conference number we really won’t know,” he added. “There’s not a lot left of the fiscal year. That makes it much more difficult. It limits our options somewhat at this point in time.”

Branstad said Iowa is one of 31 states facing the issue of eroding tax collections, but many have worse problems. He said the budget issues have been especially challenging for farm states and energy states.

Rep. Pat Grassley, R-New Hartford, chairman of the House Appropriations Committee, said he has been telling his GOP colleagues they may need to be prepared to confront more issues relating to the current-year budget once the conference members complete deliberations Tuesday.

“If there is an adjustment, I think that all options will have to be on the table based on where we are in the fiscal year,” Grassley said.

“But to presume that any of those things are what we end up doing before we see the estimate I think would be a little early, especially when we haven’t made that decision or had that conversation as a caucus,” he added. “I want to make sure that we have the actual numbers if there is an actual reduction, that we know what they are before we move on to make decisions what the solutions are.”

Jeff Robinson, senior tax analyst for the Legislative Services Agency, described the state’s revenue growth situation as “fairly grim” through February, but noted the biggest revenue month typically comes in May and some tax and refund issues are creating additional uncertainty.

Victoria Daniels of the state Department of Revenue said tax refunds are lagging this year due in part to taxpayers filing at a slower pace “because of the IRS refund delay, although that lag is starting to lessen as the filing season matures.

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“In addition,” she said, “the department is releasing refunds slower this year because of additional fraud checks that are being completed to protect state funds and taxpayers.”

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

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