The Paulsen Perspective: Simple Math

SpeakerKP

The Revenue Estimating Conference met on March 19 for its required meeting during the legislative session. All three members of the REC said there had been little change in the economic factors since their last meeting in December. Economic growth in the US and Iowa remains solid, if at a modest pace. Iowa’s collections from income tax withholding remain strong. The average work week is now at 42 hours and wage growth is beginning to pick up in-state, even though is has yet to reach the level seen before the 2008 recession.

There is concern over Iowa’s ag economy. The state saw a loss of manufacturing and ag machinery jobs in the last few months and the Rural Main Street Index fell below neutral levels. The strong dollar is having an impact on export markets, which are a key part of Iowa’s ag economy. Average corn prices are still 43 percent below their 2013 highs with significant supplies still in the bins.

Even with these caution signs, Iowa’s farm economy is not in trouble. Income tax returns are showing farmers are holding their own or posting small profits from the last year. Ag debt levels are at a manageable level, since many of the purchases made during the last few years were with cash. Livestock producers continue to have solid prices. Input costs should begin to decline if lower oil prices remain during calendar year 2015, and the over-supply of corn should be reduced in the next two to three years. While the economic conditions in the state continue to hold steady, there is plenty of evidence that we need to budget cautiously.

The biggest discussion had by the REC was the reduction of the amount of new dollars the General Fund will have to spend in FY 2016 to $7.1755 billion.

FY16 New RevenueThe amount of new revenue available to be spent is the difference between the FY 2016 revenue forecast ($7.175 billion) and the FY 2015 budget ($6.9946 billion). The revised estimate means the state has $180.9 million of new money to spend in FY 2016. Prior to their meeting, House Republicans had been working under the assumption that the state would have $200 million of new money in FY 2016.

With the state now having $180.9 million in new revenue, it means Republicans committed over half of all new revenue to K-12 schools.

The rest of Iowans’ priorities like Medicaid, economic development and public safety have to fit within the remaining $80.9 million in new revenue. The increase in Medicaid alone is projected at over $200 million. It’s easy to see the math problem we have.

We made an effort this week to send both the school start date and school funding bill to the governor. The funding issue was rejected outright. The start date issue received overwhelming support of both the House and the Senate. However it will not be going to the governor’s desk yet because there’s been a procedural hold up placed upon it by Democrat leaders. All of this is unfortunate as administrators, teachers, parents and students are eager to know how much funding they will receive and when they can start school this fall.

As always, if you have any questions or concerns, please contact me at my office at (515) 281-3521 or by email at kraig.paulsen@legis.iowa.gov.

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  • Jason Kline

    We wouldn’t have had the school start date problem if there had been common sense on forcing the waivers. Instead of pushing it for the upcoming school year for which all districts already had a calendar (we plan almost two years ahead in education), Gov Branstad should have allowed for one more year of automatic waivers. But the lobbyists won and now we have a mess.

    It’s disingenuous to blame the other side for a delay in solving a problem Republicans caused.

Dansette