A three-member panel of financial experts has set an estimate of future state tax collections that essentially means the governor and legislators will have about $300 million more to spend in next year’s state budget. That’s nearly identical to the figure the state Revenue Estimating Conference set nine weeks ago and Legislative Services Bureau director Holly Lyons says it’s because the economy has been stable.
“Showing modest or moderate growth, a little on the lackluster or ho-hum side,” she says. “It’s not the bright, twinkly lights we like to see this time of year, but not much has changed since our October forecast and there’s nothing to be pessimistic or overly cautious about at this time when looking ahead.”
Lyons and the other two members of the Revenue Estimating Conference agree Iowa’s job market is “moving in the right direction,” with an uptick in overtime work.
“In Iowa, most of the economic indicators are positive and have shown slight improvement since last October,” Lyons says.
However, Iowa Department of Management director David Roederer is concerned about what may happen to Iowa’s economy if a proposed reduction in the federally required ethanol production level goes into effect.
“If, in fact, their rule goes in effect, I think that will suppress the production of ethanol which will also even push the corn prices probably down more than what we’ve seen,” Roederer says.
David Underwood, the retired chief financial officer of a Mason City firm, is the third member of the Revenue Estimating Conference and he warns there could be a “significant” downturn in the ag economy.
“Corn and soybean prices are continuing to decline,” Underwood says. “Input prices for the farmers for the crop year 2014 — every indication is that all those will be up.”
Underwood says weather conditions in 2013 prevented many farmers from harvesting a crop, which means those farmer will be paying less in state income taxes this March.
The three-member Revenue Estimating Conference predicts the State of Iowa will collect nearly $7 billion in taxes. That figure no longer includes the “sin” taxes on gambling and tobacco products, which are now deposited into separate accounts. That makes it difficult to compare overall tax growth this year compared to last.
AUDIO of REC meeting, runs 28:41