State Revenue Estimates; Time to Start BudgetsFriday, March 19, 2021
Today the state's three-person Revenue Estimating Conference met to revise its estimates, which help state lawmakers develop the budget for the fiscal year that begins on July 1, 2021. Legislators by law have to use the lower of two estimates - December 2020 or March 2021.
As you may know, Iowa has a balanced budget law that requires legislators to spend only 99% of what they expect to bring in from taxes and other funding sources (revenues). The remaining 1% is put into a rainy day fund to help in bad economic years (like a global pandemic). Those savings helped Iowa avoid cuts last year, when many other states in the country have had to cut services or borrow money. These revenue estimates help legislators do that.
The good news is the economy in Iowa is doing really well, and was ranked the second lowest state in terms of COVID-19 impact on the economy. Iowa, along with Arkansas and Utah, were ranked the "lowest risk and most resiliant economies in the nation." The REC members stated they are confident and "cautiously optimistic" about Iowa's economy. That all said, Iowa has lost 110,000 jobs when comparing January 2020 to January 2021, but the state is adding about 6,500 per quarter. That means Iowa will be slow to replace all the jobs lost. The two unknowns are the impact of the last round of COVID-19 federal funding (American Recovery Plan Act) and how fast Iowans return to normal.
The bottom line is that the March estimates were much better than the December ones, but the state must use those estimates to develop next year's budgets. It does, however, mean there will be extra money (about $110 million) left over at the end of the current fiscal year. Legislators can spend those extra funds without "breaking the bank."
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