The December Revenue Estimating Conference (REC) met this week to provide their latest economic forecast for the current fiscal year and FY 2018. The REC meets three times a year and makes projections about the state’s economy and tax receipts which serve as the basis for the legislature’s budgeting process. The panel consists of one individual from each of the following: the bipartisan Legislative Services Agency (LSA), the Department of Management, and the private sector. Together, these members consider many economic factors in different markets to estimate available General Fund revenue.
This month’s REC indicated the state’s revenue growth is leveling off primarily due to a downturn in the agricultural sector. As we all know, Iowa’s economy relies heavily on agriculture, which has a ripple effect by weighing down other sectors and industries across the state. Revenue continues to increase but it isn’t growing at the rate originally predicted this time last year.
In the end, the REC lowered their estimate for FY 2017 to $7.2119 billion. This is $96.2 million lower than the October estimate of $7.3081 billion for the current fiscal year. After the October estimate, LSA calculated that the state needed to find $14.6 million to balance the state budget. With the new updated figure, the state budget revenue shortfall is now projected to be $110.8 million.
Based on this data, the legislature will need to find a significant amount of savings during the upcoming session. Even though our budget balanced at the end of last session, including a statutory built-in cushion, actual revenue came in lower than expected.
Sweeping, across the board cuts to balance the budget should be avoided. Instead, we are going to work hard to find targeted areas where we can reduce spending and find efficiencies. Since taking the majority, House Republicans have resolved to find areas of duplication in government and streamline programs to reduce unnecessary spending. While this task is time consuming and requires going through the budget line by line, it is the best way to find the revenue necessary to fund our commitments and we are excited to get to work on it. Along with the Governor’s office, we have already begun taking a closer look at the budget to find potential cost saving options and areas where we can make targeted cut backs.
House Republicans will continue working to make sure all taxpayer money is spent wisely. We will avoid drastic, across the board cuts because we have lived within our means and will continue to do so. Had we not stayed true to our budgeting principles, we would now be forced into more difficult decisions.
Despite this slowdown in state revenue, our economy continues to grow and there is a positive outlook for FY 2018. Iowa remains a great place to live, work and raise a family.
Follow this link to see the Department of Management’s report in more detail.