Revenues Holding Steady, State Economy Looking GoodFriday, December 11, 2020
Every year we talk about the way Iowa budgets. It all starts with the law that only allows the state to spend 99% of the money it collects each year. So if the state were to collect $100 - it would only be allowed to spend $99 and the last $1 would have to go to savings.
There is one small problem with that. The budget is signed into law before the state knows how much it has collected. To fix this, Iowa has a three-person "Revenue Estimating Conference," or REC for short, made up of economic experts. They meet quarterly to look at the state's revenues and the state's economy and put together their best guess on how much the state can expect to spend for the current year, and for the next year. If ever they find the state is over spending, the Governor (and maybe the Legislature if things are bad enough) will have to make decisions about cuts.
Luckily it looks like Iowa won't have to do that this year. The REC met today (Friday, December 11) to develop its December estimate. This is the estimate the Governor is required by law to use when putting together her budget for the next legislative session. The REC looked at the current fiscal year (Fiscal Year 2021) and next fiscal year (Fiscal Year 2022). FY 2021 started on July 1, 2020; FY 2022 will start on July 1, 2021 and is the budget year that the Legislature will be setting in the 2021 session.
The news was pretty good. It appears the state is on track to end the current fiscal year with $38.7 million more than is needed. The news is even better for next year (the budget that the Legislature will pass in their 2021 session). They are predicting 3.7% growth in FY 2022, resulting in an additional $296.4 million.
Since the Governor is required by law to use the December estimates in putting together her budget for the 2021 session, she will have almost $300 million more to use for Medicaid, schools, and other priorities. Since there is still a lot of uncertainty and fear about the virus and the vaccine, you can probably expect the Governor and legislators to be careful in spending these extra dollars, just in case something else happens.
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