On December 15, the Revenue Estimating Conference (REC) met to revise the revenue estimate for FY 2012 and set the official estimate for the FY 2013 budget. Under current law, the Governor and Legislature must use the December REC estimate when adopting a budget for the following fiscal year.
In October, the REC lowered the estimate to $5.974, or 1.3 percent compared to FY 2011. This was $17.5 million less than the adjusted March estimate. It also established the first estimate for FY 2013, $6.209 billion in net revenue, or 3.9 percent above FY 2012.
At the December meeting, the REC increased the FY 2012 estimate to $6.000 billion, or 1.7 percent compared to FY 2011. This is an increase of $25 million compared to the October estimate. For FY 2013, the REC set the estimate at $6.251 billion, or 4.2 percent compared to FY 2012.
For FY 2013, the Legislature has already appropriated $5.155 billion in general fund dollars, which includes fully funding 2 percent allowable growth for K-12, full funding of the property tax credits and 50 percent of the FY 2012 appropriations for most other line items in the budget.
LSA estimates it will take $295 million to fully fund the built-in expenditures. This includes $100 million more for Medicaid (which is already funded at 100 percent), $100 million for salary increases (which were not funded in FY 2012) and $30 million for mental health allowed growth.
LSA also estimates that it will take an additional $1.06 billion to increase all line current line items from 50 percent to 100 percent. If all line items are increased to 100 percent and if the Legislature funds all built-in expenditures at the current estimates, LSA projects a $115.6 million spending gap for FY 2013.
With net farm income up 28 percent to over $100 billion for 2011, it is obvious that the strong farm sector is driving Iowa’s economy. Whether or not this growth can be sustained is definitely a concern but for now it is a big bright spot for the state. For more on net farm income, click here:
House Republicans demanded last session that the one-time ending balance not be built into the budget and not used to fund ongoing expenditures. The news from the REC confirms that this is the right approach. House Republicans will continue to demand a conservative approach to budgeting, especially not knowing if the ag economy can sustain its growth and what cuts from the Federal Government will have to be covered.