The Revenue Estimating Conference (REC) met on October 19 to revise their forecast for the current budget year (FY 2018) and make a preliminary prediction for the next budget year (FY 2019). The three-person panel includes members from both the public and private sector, and their findings play a pivotal role in the legislature’s budgeting process.
In their meeting, the REC concluded that state revenue continues to grow, just at a slower pace than previously predicted. All three members attributed this trend to a slow, but improving agricultural economy and a shortage of skilled workers. They also noted the declines in personal income tax and sales/use tax revenue as an area of concern, although retail sales have returned to a more normal pattern after being down last year. On the other hand, corporate tax revenue took a positive leap from a projected 4.4 percent decline in March to a 7.8 percent increase projected last month.
For FY 2018, the current budget which runs through June 30, 2018, the REC lowered their revenue projection by $127 million, which reflects a growth rate of 2.4 percent compared to FY 2017. This estimate puts Iowa in line with other neighboring states such as Minnesota and Missouri who are also experiencing similar economic trends.
Preliminary predictions for FY 2019 show a growth rate of 4.1 percent above FY 2018 levels which lowered the March REC forecast by $90 million. The REC meeting in mid-December will deliver a much clearer picture for the next fiscal year and will serve as the basis for the budget that begins July 1, 2018.
We remain optimistic that the state’s economy will continue to improve and revenue levels will become more stable and return to normal. But as we navigate the current budget challenges, House Republicans recognize the value of conservative fiscal management. We are in a much better position today because of our hard work to find significant cost saving measures and pass a balanced, responsible budget last session. We will continue to monitor the budget situation and are ready to make the tough decisions that responsibly fund Iowans’ priorities.