State officials are nervously reviewing the data on state tax collections.
The state tax revenue that’s been collected through the past 11 months is $97 million below expectations.
“The budget is balanced, but it’s balanced on a revenue projection that at the moment is appearing to be too rosy,” says Jeff Robinson, a senior fiscal analyst with the Legislative Services Agency. “Therefore, we may end up the fiscal year with less revenue than the latest budget estimates.”
The state’s current budgeting year ends June 30, 2017. Unless there’s a remarkable turnaround in state tax collections during the next four weeks, Governor Reynolds may have to take extraordinary action to ensure the state budget ends the fiscal year in the black. Governors do have the authority to withdraw up to $50 million from the state’s cash reserve to cover any deficit.
Robinson says through the end of May, net revenue is positive, up by 1.2 percent, but the budget is built on a projection of 2.8 percent growth.
“While state revenue is currently showing to be below estimates, the state does have a good balance in its reserve funds,” Robinson says.
The director of the Iowa Department of Management says Governor Kim Reynolds will not be able to dip into the state’s cash reserve to cover a budget shortfall. Dave Roederer says that’s because state law requires a governor to order an across-the-board budget cut first, before a governor may draw upon any reserve funds to make the budget balance. Roederer says there’s not “sufficient time” left in the fiscal year to make an across the board cut.
“We’re exploring a limited number of options that may be available and the governor will, obviously, be discussing that with legislative leaders in the future,” Roederer says.
Income tax payments to the state have grown modestly in the past 11 months compared to the previous year, a roughly 2.5 percent increase. However, state sales tax payments have hardly growth at all. The increase over the past 11 months in state sales tax collections is just 0.4 percent.
(This story was updated at 2:37 p.m. with additional information)