Overview / Major Events
On Friday the Revenue Estimating Conference (REC) will meet and determine the revenue forecast for the remainder of the current fiscal year (FY18) and also for the next fiscal year (FY19). Based on the December estimate, the current state budget (FY18) needs a downward adjustment to be compliant with Iowa’s spending limit law. However, over the last few weeks it has become apparent that all parties are waiting on the March REC estimate in the hopes that better revenue numbers will minimize the need for additional mid-year budget cuts.
In regards to the upcoming budget year, state law requires lawmakers to use the December REC estimate as the benchmark and ONLY allows the use of the March estimate if it is LOWER than December. That said, if the March number is a significant improvement, don’t be surprised if there isn’t pressure to temporarily suspend the state’s spending limit law to allow use of some of those revenues for spending and tax cuts.
Eight months into FY 18 and Revenues are Growing by 7.4%
A report from Iowa’s Department of Management shows that through the first eight months of FY18, Iowa’s year-to-date revenue growth is 7.4%. This is DOUBLE the REC estimate for FY18 of 3.7% (and the FY18 budget was based on this estimate).
Why is this significant? If this growth trend stays consistent through the remainder of the current fiscal year (which ends on June 30)—or even stays close—it means Iowa could have an unexpectedly large surplus at the end of FY18 (each additional one percentage point of growth means an additional $75 million to the state). It is also significant in that this is the last revenue report prior to the March REC meeting and could influence the members to make an upward adjustment in the current estimate and help alleviate the need for FY18 budget cuts.
Year-to-date tax growth through eight months shows personal income taxes are up 8.6% (estimated at 4.2%), sales taxes are up 5.6% (estimated at 3.8%), and corporate income taxes are up 12.7% (estimated at 7.8%).
Senate Votes to Unmask Energy Efficiency Charges
This week the Iowa Senate approved a broad energy policy bill that included provisions related to energy efficiency programs administered by Iowa’s public utilities. In particular, Senate Republicans objected to current provisions in Iowa law that forces Iowans to pay into energy efficiency programs and PROHIBITS their utilities from itemizing those costs on their energy bills.
Up to nine percent of current residential energy bills are directly attributable to mandated energy efficiency programs. SF 2311 (passed 27-23 in the Senate this week) makes two important changes to current law:
Governor Branstad’s resignation to become our Ambassador to China uncovered some significant ambiguity in the Iowa Constitution and Iowa Code regarding the specific succession process and the Iowa Senate took a step toward resolving in it SJR 2006.
SJR 2006 passed the Senate 45-4 and proposes an amendment to Iowa’s Constitution that clears up a number of succession ambiguities and makes clear that the Governor has the authority to appoint a Lt. Governor should a vacancy occur in that office. This became an issue in 2017 when the Attorney General opined that Governor Reynolds did not have constitutional authority to appoint her successor. Lt. Governor Gregg currently serves in the role on an “acting” basis and is not in the official line of succession.