State may need to cut up to $90M by mid-year

DES MOINES (AP) — Mid-year spending cuts to state agencies are possible next session because Iowa’s revenue growth remains below initial projections, a key state official said Monday.
Department of Management Director David Roederer told reporters the state’s roughly $7.2 billion budget for the year that ends next June could be reduced between about $45 million and $90 million when lawmakers return in 2018. He said pending accounting will determine the extent of the shortfall.
Roederer’s comments came after a three-person panel known as the Revenue Estimating Conference presented its latest budget forecast. The panel, which includes Roederer, agreed to keep projections they reached in October, when they lowered the expected growth rate of incoming revenue.
“Iowa revenues, while still growing, are disappointing for the first five months of the fiscal year,” said Holly Lyons, a panelist and director of the nonpartisan Legislative Services Agency. “There is nothing however to indicate that the growth will turn negative, but growth is very slow.”
Roederer said Gov. Kim Reynolds, who is entering her first legislative session as governor, will have options in addressing the shortfall when she presents budget recommendations in January. Previous sluggish growth led lawmakers to reduce agency budgets and borrow from reserves. The state is already expected to pay back about $144 million to its emergency reserves over the next two years.
Reynolds’ press secretary said the governor is reviewing the numbers.
Democrats, who are in the minority and have little legislative power, used the latest forecast to criticize Republicans, who had a trifecta of control last session and ultimately determined the latest budget. But Republicans have countered that some budget issues stem from a time when Democrats were also in control. The issue is expected to be highlighted during the midterm elections.
“The state budget has become an embarrassment to all Iowans, regardless of their political beliefs,” said Rep. Chris Hall, a Sioux City Democrat who is a ranking member of the House appropriations committee, in a statement.
Rep. Pat Grassley, a New Hartford Republican who leads the same committee, said in a statement that a sluggish farming economy continued to play a role. One of the budget panelists also expressed concern about the farming sector, though a range of issues have been attributed to the budget constraints. That includes lower than expected taxes from personal income and the ripple effect of a gap in skilled workers.
“We will continue to live within our means and pass a responsible budget that funds Iowans’ priorities,” Grassley said.
The panel also slightly reduced its revenue expectations for the budget year that begins in July. They said factors like the pending tax overhaul legislation in Congress made such projections more complicated. Roederer added that while he expects hiring in manufacturing to improve, the panel’s projections can vary when they’re trying to determine things several months out.
“We’re very firmly on the side of we’re not sure what’s going to happen,” he said.