Forecast: Iowa gets extra spending money

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By Todd Dorman | Wednesday, December 13, 2006 1:16 AM CST | () comments

DES MOINES — Iowa’s slowing but still growing economy will hand state lawmakers an extra $370 million to fuel their spending priorities next year, a panel of budget experts predicted Tuesday.

The three-member Revenue Estimating Conference expects tax collections to keep growing despite concerns that Iowa’s economy is losing speed.

The panel’s verdict is important because the Legislature and Governor-elect Chet Culver must use the forecast to build the state’s $5 billion budget.

“There’s a lot of caution out there,” said council member David Underwood, a Mason City business executive, about the state’s economy. “I wouldn’t call it pessimism.”

For Statehouse leaders, there’s good news and bad news in the numbers.

On the plus side, state tax collections are on track to jump by $185 million in the current 2007 budget year and by $184 million in Fiscal Year 2008. That gives lawmakers almost $370 million extra for spending priorities.

On the minus side, past legislative actions leave lawmakers facing up to $600 million in built-in spending increases even before they take their seats. Spending on Medicaid health coverage, K-12 school aid and other programs is scheduled to increase.

“We continue to be encouraged, but the state continues to have pretty big fiscal challenges,” said Senate Democratic Leader Mike Gronstal of Council Bluffs.

That tough math may temper high hopes for new spending as Democrats take control of the House and Senate. Teachers, labor unions and other Democratic allies are hoping for spending increases for a broad array of programs after years of Republican legislative control. Gronstal concedes resources are limited.

“We’re going to have to find the ability to say no …,” Gronstal said.

Culver aide Charles Krogmeier declined to comment on the panel’s forecast.

Revenue Estimating Conference members said they expect healthy but modest growth in personal income, sales and corporate tax collections next year.

“I worry sometimes if we’re being too cautious,” said panel member Mike Ralston, president of the Iowa Association of Business and Industry. “We’ve had some pretty strong growth.”

Dennis Prouty, who heads the nonpartisan Legislative Services Agency, contended that caution is warranted.

“I think we’re slowing down,” Prouty said.

Todd Dorman can be reached at (515) 243-0138 or at todd.dorman@lee.net.

Money matters

$185 million

The amount Iowa state tax collections are on track to jump by in the 2007 budget year

$600 million

The amount past legislative actions leave lawmakers facing in built-in spending increases