REC Drastically Reduces Revenue Estimates, Democrats Release New Budget Targets

From this week’s House Republican Newsletter:

On Friday, March 20, the Revenue Estimating Conference (REC) met to review and decrease the general fund revenue estimates for FY 2009 and FY 2010. In percentage terms, FY 2009 was decreased from -0.5 percent to -2.6 percent and FY 2010 was decreased from -0.4 percent to -2.8 percent.

The REC decreased FY 2009 by $130 million compared to the December estimate. The estimated ending balance after the deappropriations bill was $60 million so majority Democrats will need to make up at least $70 million through transfers or reductions in spending. One idea thrown out by the Governor’s appointee was reducing the Medicaid spending in FY 09 and replacing it with federal stimulus dollars.

For FY 2010, revenue was decreased by $270 million compared to the December estimate. The Governor wanted to decrease the estimate by $220 million but David Underwood, the private sector REC member favored a decrease of $320 million. The trio split the difference and set the decrease at $270 million. Since Underwood was correct in wanting the REC to lower its projections by another $100 million in December, chances are he will end up being right about this estimate too.

On Monday, March 23, the Democrats released new joint budget targets for FY 2010:

Budget Subcommittee Revised FY 2009 * Original Target New Target
Administration and Regulation $97,529,560 $90,046,929 $85,994,817
Agriculture and Nat. Resources $51,531,372 $41,208,431 $39,354,052
Economic Development $48,247,125 $47,157,837 $45,035,734
Education $1,270,701,283 $952,651,471 $909,782,155
Health and Human Services $1,224,553,322 $1,431,889,922 $1,367,454,876
Justice System $685,916,322 $695,884,218 $664,569,447
Unassigned Standings $2,670,302,840 $2,817,882,640 $2,691,077,922
Total for General Fund $6,049,302,840 $6,076,721,448 $5,803,269,003

The global Democratic target of $5.8 billion represents a 4 percent reduction compared to adjusted FY 2009. However, the 99 percent expenditure limitation only allows spending of $5.7 billion so they will need to do at least $105 million in transfers or tax increases in order to balance the budget.

Even with these new numbers, consider that the two budgets Governor Culver and the Democrats have already approved are the highest spending and second highest spending budgets in the state’s history.

The original and revised FY 09 budget is the first budget to exceed the $6 billion mark. The budget that Gov. Culver and the Democrats will approve this session will be the third highest spending budget (not counting the stimulus money) and will be almost a half a billion dollars more than the last budget approved by Governor Vilsack and House Republicans.

House Republicans remain committed to eliminating wasteful spending, reducing the size and scope of government and focusing state government on its core functions.