DES MOINES — Gov. Terry Branstad and GOP lawmakers are looking to temporarily tap Iowa’s cash reserves to cover a projected state budget shortfall of $131.1 million. 

“Gov. Branstad and Lt. Gov. (Kim) Reynolds propose using our savings in the cash reserves, rather than additional budget cuts, to meet our current fiscal year needs,” administration spokesman Ben Hammes said in a statement.

“The state has already made cuts to the current fiscal year budgets, but with just over three months remaining in the current fiscal year, additional cuts are not feasible,” added Hammes, who said Branstad and Reynolds are committed to reimbursing the cash reserve account in the fiscal 2018 and 2019 budgets to be passed this legislative session.

Both Senate Majority Leader Bill Dix, R-Shell Rock, and House Speaker Linda Upmeyer, R-Clear Lake, said bridging the budget shortfall using money from the state’s $738 million “rainy-day” funds — $184.5 million in the economic emergency fund and $553.5 million in the cash reserve — appeared more viable than finding additional spending cuts with only 3 1/2 months left in the fiscal year.

“We must not cripple our schools, public safety and many other essential services with further cuts this year,” Dix said in a statement. “Our savings account exists for moments such as this.”

Hammes issued the response after the three-member Revenue Estimating Conference on Tuesday revised the current fiscal year growth estimate to $7.106 billion, a 2.7 percent increase that was $105 million lower than in December, creating a project shortfall for the current state budget of $131.1 million, officials said.

The estimators also reduced their fiscal 2018 revenue projection to about $7.365 billion, a 3.6 percent growth rate that will force the governor to revise the two-year budget plan he submitted this session that was based on tax collections that were nearly $191.8 million higher.

“Iowa’s economy is showing signs of weakness in some areas,” said conference member Holly Lyons of the Legislative Services Agency. “There is no indication that we are headed into a recession in the near term, but we are facing a difficult time.

“State revenues are still experiencing growth, just slow growth and unfortunately, at the present time, very, very slow growth,” she added. “It seems like we’ve bumped into some head winds in terms of lower than anticipated sales tax revenue, lower income tax estimated payments and potentially lower income tax filing payments.”

Conference member David Underwood of Mason City said farm income continues to lag below last year’s sluggish numbers, and lackluster sales tax receipts have been “perplexing” with some blaming online competition and weak retail sales.

“Iowans didn’t have the income that they did in the previous tax reporting year, which is kind of a surprise,” Underwood said.

Conference Chairman David Roederer, director of the state Department of Management and Branstad’s budget director, said “Iowa is still growing. It’s not growing at the rate that we had projected, at least back in December.”

Roederer said administration officials already are working on revised budget plans to reflect the new numbers for fiscal years 2017 and 2018. Panel members also made their first projections Tuesday for fiscal 2019 — expecting $7.626 billion in tax collections that would be a 3.6 percent increase and give budget-makers an extra $262 million in revenue to work with in fashioning the fiscal 2019 spending plan.

The governor likely will recommend legislators use cash reserve money as a stopgap measure to round out the current budget year, with the understanding the money would be paid back over the next two fiscal years, Roederer said. But he also did not rule out additional spending reductions still this fiscal year.

“It’s really hard to make dramatic cuts like that in the third quarter, so in conversations that I have had in this short, short time, I think we’ll probably be looking at other ways to close that gap for fiscal 2017 — probably using cash reserve or something like that and then refilling that because that’s really critical,” Upmeyer said in an interview.

Tuesday’s development made the Legislature’s budgeting process more difficult with less receipts to work with, “but it’s way better to know it now then trying to deal with it in the middle,” she said. The House speaker said lawmakers will make the necessary recalculations, set spending targets and proceed with the budgeting process.

“Refilling our savings account will be a top priority of Senate Republicans in our ongoing budgeting process,” said Dix. “We must also remain steadfast in our efforts to examine all state government spending, to include tax credits and streamlining state government services, as we prepare Iowa to become more fiscally sound and responsible.”

Rep. Pat Grassley, R-New Hartford, chairman of the House Appropriations Committee, called for revamping the way future state tax collections are estimated, given three consecutive downgrades in the current fiscal year. He also called for taking “a very hard look” at spending areas and said “every tax credit is on the table,” adding that “the sacred cows need to be re-evaluated to make sure taxpayers are getting a good deal.”

Sen. Joe Bolkcom, D-Iowa City, ranking member of the Senate Appropriations Committee, said GOP policies this session have been a “train wreck for working families.” He said minority Democrats are willing to work on “midcourse corrections” that invest in education and job-creation initiatives.

“Their agenda includes grossly underfunding our local schools; turning Iowa’s respected, state-run Medicaid safety net into a national disaster; weakening the rights of workers and driving down wages; and showering out-of-state corporations with an all-you-can-eat buffet of tax cuts and tax credits,” Bolkcom said in a statement.

Reach Rod Boshart at 515-243-7220;


News Editor

Load comments