Staff Columnist

Bracing for COVID-19's Iowa budget hit

A man walks past a nearly empty parking lot in front of the Iowa State Capitol building, Thursday, March 26, 2020, in De
A man walks past a nearly empty parking lot in front of the Iowa State Capitol building, Thursday, March 26, 2020, in Des Moines, Iowa. Iowa leaders last week suspended the current legislative session in response to COVID-19. (AP Photo/Charlie Neibergall)

It won’t be long before we get yet another set of dismal coronavirus numbers. This time it will be falling state tax revenues.

April 10 is the due date for “large remitters,” as the fiscal experts call them, to send the state sales/use taxes and income tax withholdings collected for the period from March 16 to March 31. A few days after that deadline, we’ll get the first picture of how hard business closures, layoffs and other economic disruptions are hitting state tax collections.

“I would expect that to show a decline that could well be identifiable,” said Jeff Robinson, a fiscal analyst with the Legislative Services Agency in an email.

“Unprecedented” gets overused, but it may fit in this case. Scores of businesses are closed or are curtailing operations. Many retail outlets are dark. Thousands are unemployed. Fewer people are driving and paying gas taxes. Casinos are shut down. The state has delayed the deadline for paying state income taxes from April 30 to July 31.

All this closing, curtailing and delaying is, of course, the right thing to do in the face of a public health emergency. More will be needed as the crisis evolves. But the scope of potential budget issues spawned by the pandemic is daunting.

Other states are reporting big losses. New Mexico is expecting a budget hole approaching $2 billion. New York leaders expect a $15 billion shortfall as the state battles the pandemic. Ohio is contemplating 20 percent budget cuts. Indiana is preparing to use more than $1 billion from its reserves and Illinois is bracing for an $8 billion revenue loss.

I asked Gov. Kim Reynolds’ office what plans are being put in place to deal with the budget situation.

“The Dept. of Management continues to monitor this evolving situation,” spokesman Pat Garrett said in an email. “Iowa has been fiscally responsible over the last few years to be prepared. The state’s cash reserves are full. The budget is balanced with a significant surplus, and Iowa’s unemployment trust fund is strong.”

A spokesman for Republicans who run the Iowa House also cited GOP fiscal restraint. “While we don’t know what the full extent of the COVID-19 pandemic will have on the budget, smart planning will hopefully mitigate some of the negative effects,” Colin Tadlock said.

As a matter of math, Iowa is in better shape than many states. It has nearly $800 million in reserves, or roughly 10 percent of its general fund budget. Before they suspended the 2020 session, lawmakers gave the governor and the Legislative Council, a 24-member panel of top lawmakers, the power to spend dollars from one reserve account, the Economic Emergency Fund. Federal aid is incoming.

A Pew survey of state budgets shows that Iowa’s state government could run for 37 days on its reserves, above the national median of 29.7 days, and for 51 days if you add up all account balances.

That may not seem like a lot of time, but Illinois’ balances would last just 4.7 days.

Sadly, Republican fiscal acumen has not included a serious review of the hundreds of millions of dollars in business tax breaks we hand out annually, or the billions of dollars in tax cuts and exemptions approved over the past three decades. Instead, they’ve piled on more tax cuts.

And behind all of this math are Iowans — people who need health care resources, public assistance programs and many of the other services the state provides. That’s who will feel the pain if cuts come. They’ll come from dollars that help pay for public health services, public schools, public universities and public safety functions. Iowa’s budget already inadequately funds many of these priorities. Needs will only grow during a downturn, even as revenues fall.

The big question is how long will this last? Will this be a short-term drop or a long-term economic dive? Those are the numbers we won’t know anytime soon.

(319) 398-8262; todd.dorman@thegazette.com

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