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UPDATED 9/20/17.  Iowa finished its budget year on June 30, 2017.  Early in July, the news reported that our state may have overspent by $110 million.  Governor Kim Reynolds is only allowed to transfer up to $50 million if the state comes up short - but that would have only gotten us only halfway to a balanced budget.  Her only other option in the face of such a large shortfall is to call legislators back for a special budget-balancing special session.   

Many of our readers have been wondering why it took so long to make a decision on whether or not to call a special session.  Governor Kim Reynolds answered that question on September 20 - there will NOT be a special session.  We wanted to let you know why Iowa was able to "find" $100 million to close that gap.

  • Early estimates did show a big shortfall, but the state does not officially close its budget year books until the end of September.  A surprising amount of money continues to flow in and out of the state budget in these three months.
  • Most Iowans have a part of their paycheck withheld to pay for state income tax. The money withheld in the last half of June isn't due until July 10 - so it was not included in the early estimates.  Some smaller businesses send in sales taxes quarterly, so they sent in three months of sales tax collections in July.  According to the Legislative Services Agency, there was a big bump in revenue from this payment period that wasn't included in early estimates.
  • Businesses collect sales tax, but those sales taxes do not have to be sent into the state until the end of July 31.  Likewise, these revenues were not included in the early estimates.  
  • Tax collections are only one piece of the state's revenue.  The level of tax refunds paid out also impacts the final fiscal position of the state.  The amount of tax refunds paid out has been lower than expected.  That also was not included in early estimates.
  • State agencies also slowed down their spending during the last part of the year, so they didn't spend as much as expected.  Unspent funds are returned to the state's general fund.  The state expected state agencies would underspend by $5 million - returning that money to the state budget.  This number was also much larger.

In the end, Iowa will need to borrow $13 million from reserves to balance the budget, something the Governor can do without legislative approval.  But don't start dancing a jig just yet - legislators are very concerned about the current budget year (which started on July 1).  That likely means more budget cuts when legislators come back into their regular legislative session on Monday, January 8, 2018.

Worried about funding for Medicaid or other state-funded programs?  Use our message worksheet to get started, get tips on advocacy here, and send an email to your state legislators using our Grassroots Action Center.