The Revenue Estimating Conference projected additional revenue growth in the current fiscal year and the next at its meeting last Friday. The three-person panel raised their forecast for General Fund revenue in Fiscal Year 2021 to $8.0789 billion, which is a growth rate of 1.9 percent. For the next budget year – FY 2022 – the REC raised state revenue to $8.3856 billion or 3.8 percent growth.
In its review of the state’s economy, the panel said Iowa is “remarkably resilient” thanks to our largest sectors – ag, manufacturing, and financial services –being less vulnerable to impact from the pandemic. Employment in Iowa recovered swiftly last summer from the pandemic recession. But that swift recovery is now like a reverse checkmark, with employment growth slowing.
The panel noted that the Department of Labor’s household employment survey has found that currently there are 117,000 fewer Iowans employed than in January 2020. But this doesn’t mean employers aren’t looking to hire. In fact, Iowa Workforce Development’s database of available jobs has over 65,000 positions looking to be filled.
While the panel expects growth to continue, there are still potential speedbumps ahead. Inflation was mentioned as a possible problem. Some parts of the Iowa economy are already experiencing significant price hikes. In home construction, the price of the lumber in an average-sized new home is $24,000 higher than last year. Supply concerns are another issue, as manufacturers are dealing with shortages of all types of inputs due to production shutdowns last year and shipping issues.
The talk of federal tax increases on the horizon is also starting to impact people’s financial decision-making. The Biden White House has now started sending signals that it won’t just be the super-rich who get a larger tax bill. And maybe the biggest unknown is how will the economy react once the latest round of federal stimulus payments have ended. Will the Biden plan have primed the pump enough to keep the economy growing or will that growth fizzle out in the last half of 2021?
The REC also revised their forecasts for gaming revenue coming into the state. The panel increased their forecast for casino tax revenue to climb by $5 million in both years.
Where will Budget Bills Start?
Last week, an agreement was announced as to where each budget bill will start this session.
The House will start the following:
- Agriculture & Natural Resources
- Justice Systems & Judicial Branch
- Rebuild Iowa Infrastructure Fund
- Federal Block Grants
The Senate will start the following:
- Administration & Regulation
- Economic Development
- Health & Human Services
- Standing Appropriations
The release of where each bill will start is the firing of the starter’s pistol on this year’s budget process. Subcommittees will be starting their work on their spending proposals, with committee action to commence soon after.