News from the Hill…
The Revenue Estimating Conference (REC) met this week and established new projections for fiscal years 2016, 2017 and 2018. The Legislative Service Agency (LSA) lowered their projection of revenue, the Governor’s Appointee raised his number, and the third member selected a number in between. So they all three agreed that they would keep the 2016 number the same as their December projection of 7.0456 billion dollars. While I believed they would lower the 2016 revenue, they believed that the revenues would pick up enough in the last four months to bring the overall growth up to current projection. Only time will tell. Fiscal year 2017 however is a different story. There was a wider spread between the LSA and Governors Appointee of 72.2 million dollars. The three collaboratively decided that the revenues were first lowered 46.4 million due to a down turn in the economy. However there were some changes in December to the Federal Tax Code which will increase Iowa’s income tax revenue 76.4 million dollars. So the net effect would be an increase to the State’s revenue picture of 30 million dollars. In addition when the Governor signs the coupling and supplies bill into law there will be another increase of 23.6 million dollars to fiscal year 2017 revenues. To make it even more interesting for numbers geeks like myself is that for the first time in six years the ongoing revenue, the amount the tax payers are sending the state is higher than the legal amount the state can spend. By State Law we are bound to the December estimate unless the March estimate is lower. When you compare the December estimate of 7.3274 billion dollars and then make the revenue adjustment of 76.4 million dollars due to the federal tax changes made in December the actual December estimate is 7.4038 billion dollars. The March estimate already accounts for the Federal Tax Changes with their new estimate of 7.3574 billion dollars, which is lower than the December estimate. So the new spending limitation for 2017 will be 7.3510 billion dollars which is 176.7 million dollars higher than what the state spent last year. While you can find good news and bad news within the REC projections the size of the pie is now known and appropriations can now be completed.
School Funding…
With the March REC meeting behind us, the legislature should now be able to come to an agreement with school funding which will permit the rest of the budgets to complete their process also. The amount of additional dollars for school funding at a 2 percent growth is 80.9 million dollars. Once again school funding will take precedence and receive a large percentage of the additional dollars the state can spend. I was under the understanding that the agreement on supplemental state aid was going to be reached this week. However, unless something changes today, it now appears next week is more likely. I know schools are anxiously waiting for the growth in dollars to be set to they can finalize their own school budgets. Time is of the essence and there needs to be an agreement sooner rather than later.
Ways and Means…
A developing and new technology is new uses from byproducts of bio fuels. The Iowa Economic Development Authority (IEDA) has stated the program works in a way that the industrial facilities around the state that are already producing products from renewable products also produce other co-products that can then be processed into higher value basic chemical compounds. These compounds could then be processed into other consumer products. The Renewable Chemical Production Tax Credit (RCPTC) is an attempt to incentivize the production of these high value chemicals which would in turn: create new opportunities for Research & Development, create a stronger market for these co-products generated by the State’s existing renewable fuels industry, support Iowa’s farmers, reduce carbon emissions and help maintain Iowa’s leadership position in renewables. This bill passed the Ways and Means Committee this week and heads to the House floor for debate. I believe this is a new and exciting technology that could benefit Iowans a great deal. However, the program uses some tax language that I am not so favorable about. I believe that the parameters and limitations with the sunset of the program in fourteen years will offset this. In addition this program will be under the cap that the IEDA is under so there is no additional fiscal impact to the state. If this industry grows it could actually raise Iowa revenue in the future.
“May the road rise to meet you. May the wind be always at your back. May the sun shine warm upon your face. And rains fall soft upon your fields. And until we meet again, May God hold you in the hollow of His hand.” – Irish Blessing
For more information on these and other bills: www.legis.iowa.gov
Until next time,
Tom Sands
This weekend’s Legislative Forum:
Saturday, March 19th
9:15-11:00 am West Burlington City Hall, West Burlington