The three-member panel that estimates the amount of revenue the state will take in has upped their prediction for this fiscal year. The Revenue Estimating Conference (REC) says the growth will be just over 171-million dollars more than the six-point-three billion dollar estimate. REC chair, Dave Roederer, says the economy is staying strong despite some challenges.
“Agriculture is remaining relatively strong, the drought obviously created real concerns for us. Due to crop insurance and having a little better yield than first had been projected, it looks like it is not going to be an outstanding year, but it will be an okay year in agriculture,” Roederer says. He says the livestock side of agriculture is having a little tougher time. Roederer, who is also the director of the Department of Management, says the uncertainty over the federal budget is the one potential stumbling block to the state economy.
“We believe because of sequestration — which goes into effect January first if Congress does not act — we’ll have a combination of tax increases and spending cuts of 700-billion dollars,” Roederer explains. “That would be a gigantic jolt into the economy, which noone knows for sure what that would do.”
He says the uncertainty over the federal economy can already be seen in what he calls a freeze on business activity. “While they are doing okay know, they are not making investments. We also have a concern about the Affordable Health Care Act when that goes into effect. Business and industry is not exactly sure how that is going to impact them,” Roederer says.
“So when you have these big uncertainties out there, I don’t think we will see much movement on employment and expansion, at least until after the elections in November. The REC estimates the state receipts will grow by three-point-seven percent in the next fiscal year. State budgets are set based on the revenue projections, and when the actual input is above the projections, that sets off a debate about what to do with the extra dollars.
Roederer says the money should go back to the source. “It came from taxpayers, the extra money should go back to taxpayers. Others will argue that ‘no we should use that money on various programs.’ So that’s the discussion I think will happen during the election and after the election when legislators reconvene in January,” Roederer says.
A coalition of several Iowa groups called “Coalition for a Better Iowa”, issued a call last week for the governor and state legislators to use the state’s budget surplus to restore cuts made to public services during the recession. A spokesperson with Iowa Citizens for Community Improvement said he’s hoping lawmakers will direct some of that money toward improving infrastructure and public services.