DES MOINES, Iowa (AP) - Iowa is taking in less revenue than expected and must address a new shortfall of about $131 million to its current budget, financial analysts announced Tuesday in releasing data that could spell deep cuts for the next spending year.
The news from the three-member Revenue Estimating Conference means Iowa will need to plug a deficit to the budget year that went into effect last summer and ends June 30. The governor’s office and at least one key Republican quickly endorsed tapping into cash reserves instead of cuts to state government - as long as the money was repaid.
“We must not cripple our schools, public safety and many other essential services with further cuts this year,” said Senate Majority Leader Bill Dix, R-Shell Rock, in a statement. “Our savings account exists for moments such as this.”
The possible dip comes after Iowa lawmakers approved reductions earlier this session of more than $117 million to the current budget. That included about $88 million in cuts to state agencies, community colleges and the state’s three public universities.
In its latest projection, the conference said Iowa would take in about $7.1 billion for the current budget year. It’s the third time the revenue forecast has been cut since last fall and continues a downward trend in tax receipts for Iowa. Analysts didn’t cite one key reason behind the decline, but pointed to reduced sales tax receipts and lower estimated revenue from income taxes. They emphasized that revenue growth for the state continues, just at a slower rate.
While Republicans have chosen to focus the blame on the continued effects of low commodity prices to the farm economy, Democrats in recent weeks have pointed to the state’s spending on tax credits. The credits are expected to take up about $430 million from the next budget. A new GOP-backed bill proposes capping and reducing those credits in the future.
Data from the nonpartisan Legislative Services Agency show the Legislature - which was split between the parties before Nov. 8 but now has Republican majorities in both chambers - also tapped into surplus dollars in recent years at a rate that’s left little additional money for budget shortfalls. That money is separate from the state’s two rainy day funds.
The commitment to quickly replenish any use from what’s known as the cash reserve fund -which has about $550 million - could spell uncertainty for next year’s proposed budget. The conference also predicted Iowa must cut about $191 million from that spending year, which begins in July.
Rep. Pat Grassley, R-New Hartford and chairman of the House Appropriations Committee, said the math translates into reductions. He declined to be specific but noted set spending for K-12 education and Iowa’s Medicaid health care program for poor and disabled people will mean other areas of state government will see cuts. He also said tapping into the cash reserve fund and the extent of that maneuver was not finalized.
“I can’t tell you where those specific cuts would come from,” he said of questions around the future budget. “But to fund the commitments that we’ve already made during this session, we’re going to have to find savings in the budget.”
Democrats criticized the news, though they have little legislative power to change how Republicans address Iowa’s current and future spending. They said in press releases that GOP leadership had made bad spending decisions in previous legislative sessions. Grassley refuted that narrative, arguing his party was fiscally responsible amid budget proposals from Democrats that would have led to further financial instability today.
Please read our comment policy before commenting.