A three-member panel of financial experts has just thrown the state budget into disarray. The group’s estimate of state tax revenue is used as the basis for the budget. Due to the panel’s action this morning, the current year’s state budget must be cut by almost $130 million.
Charlie Krogmeier, the governor’s chief of staff, says some of the federal stimulus money may be used to plug holes in education and health care spending. “So that may be one place to look as to how that might help cushion this, but it’s going to be a struggle over the next week or two to figure this out,” Krogmeier says.
The estimating group’s official ruling on state tax receipts for the next budgeting year will lead to layoffs in state government and deep cuts according to the governor’s chief of staff. Krogmeier says it may not be ’til this time in 2010 that the Iowa economy starts to rebound.
“We took the more conservative set of numbers today so if we erred — which I’m not saying we have, we erred on the low side, on the conservative side which I think is what we need to do now,” Krogmeier says. “…You can get different economists to give you different projections and different options, but there’s no question we haven’t bottomed out yet.”
Krogmeier is one of the three members of the panel which makes the official prediction of state tax revenue. “All of the information the three of us have received in the last couple of weeks from the various economists and the people we have talk to would indicate the bottom is probably about a year from now,” Krogmeier said during this morning’s meeting. “And so we’ll see unemployment keep ticking up over the next year or so and hopefully bottom out about a year from now and start to turn.”
David Underwood who retired last year after a career as the chief financial officer of a company in Mason City is another member of the group. “We’ve got a lot of resilient businesses in Iowa and I think we’re going to get through this,” Underwood said during today’s meeting. “(The recession) may be not quite as bad as we saw in the ’80s in terms of declining employment, and that’s probably the most important thing.”
A financial expert from the Legislative Services Agency says her read is that the Iowa economy hasn’t hit bottom yet and may not even be halfway through the recession.
The next state budgeting year begins July 1st and Governor Culver will have to revise the spending plan he submitted to lawmakers at the end of January — and cut out nearly $270 million. A statement from the top Democrats in the legislature acknowledgess tough decisions are ahead. You can read the prepared statement from Governor Culver as well as the one from Democrats on The Blog .
Click on the audio link below to listen to the opening comments from the three members of the Revenue Estimating Conference (Krogmeier, Underwood and Holly Lyons of the Legislative Services Agency).