Panel finds Iowa economy slowing
By Dan Gearino Journal Des Moines Bureau | Posted: Wednesday, October 10, 2007
DES MOINES -- The state economy is slowing from a sprint to a walk, a panel of budget experts said Tuesday.
The three-person panel, called the Revenue Estimating Conference, predicts that Iowa's net tax receipts will be $6.1 billion in the 2008-09 fiscal year, an increase of only 2.6 percent.
If the projection pans out, it would be the slowest growth in six years. More importantly, it would be a sign that the state economy has ended its brief surge.
The panel will meet again in December to release an updated forecast. The Legislature and governor are required to use the December numbers as a guide for writing next year's budget.
One reason for the potentially slow growth in 2008-09 is that current-year growth is expected to be large, which makes it a tough act to follow. The panel said Tuesday that 2007-08 revenues should come in at $5.9 billion, up 5.1 percent from the year before. Much of the growth is because of the $1-per-pack increase in the cigarette tax earlier this year.
Charles Krogmeier, Gov. Chet Culver's top budget adviser and a member of the panel, said the 2.6 percent forecast would leave the state roughly $200 million short of the money it needs to cover built-in expenses from previous years. But he noted that much of the shortfall would be covered by a projected budget surplus at the end of the current year.
"I've been meeting with the governor the last couple days to go over those budgets and see where we might make some adjustments to make up that gap," Krogmeier said. He said most state agencies are being asked to submit level-funded budgets for 2008-09.
House Minority Leader Christopher Rants, a Sioux City Republican, said the projections show that the economy isn't growing fast enough to cover reckless spending. He said this will invite tax increases from Democrats, who control the Legislature and the governor's office.
"They have a fiscal train wreck coming," Rants said. "The only question is when does it hit?"
But the political consequences may not be immediate. Sen. Jeff Angeloof Creston, the top Senate Republican on budget issues, said the slow growth probably won't be felt until after the 2008 general election.
The 2008-09 fiscal year doesn't begin until next July. "After the November election, the bill comes due and you're forced to cut promised spending to schools and governments," he said.
Senate Majority Leader Mike Gronstal, a Council Bluffs Democrat, said he will wait for the December forecast before making judgments about the economy. He said Rants is too quick to predict gloom and doom. "The sky is always falling with Christopher," Gronstal said.
Dan Gearino can be reached at 515-243-0138 and dan.gearino@lee.netIowa
Projected tax receipts
Year 02-03 03-04 04-05 05-06 06-07 07-08 08-09
Net tax receipts (in billions) $4.48 4.68 4.93 5.38 5.64 5.93* 6.09*
Pct. growth -4.2 4.5 5.2 9.2 4.9 5.1* 2.6*
*official projection from Revenue Estimating Conference
Source: Legislative Services Agency
The three-person panel, called the Revenue Estimating Conference, predicts that Iowa's net tax receipts will be $6.1 billion in the 2008-09 fiscal year, an increase of only 2.6 percent.
If the projection pans out, it would be the slowest growth in six years. More importantly, it would be a sign that the state economy has ended its brief surge.
The panel will meet again in December to release an updated forecast. The Legislature and governor are required to use the December numbers as a guide for writing next year's budget.
One reason for the potentially slow growth in 2008-09 is that current-year growth is expected to be large, which makes it a tough act to follow. The panel said Tuesday that 2007-08 revenues should come in at $5.9 billion, up 5.1 percent from the year before. Much of the growth is because of the $1-per-pack increase in the cigarette tax earlier this year.
Charles Krogmeier, Gov. Chet Culver's top budget adviser and a member of the panel, said the 2.6 percent forecast would leave the state roughly $200 million short of the money it needs to cover built-in expenses from previous years. But he noted that much of the shortfall would be covered by a projected budget surplus at the end of the current year.
"I've been meeting with the governor the last couple days to go over those budgets and see where we might make some adjustments to make up that gap," Krogmeier said. He said most state agencies are being asked to submit level-funded budgets for 2008-09.
House Minority Leader Christopher Rants, a Sioux City Republican, said the projections show that the economy isn't growing fast enough to cover reckless spending. He said this will invite tax increases from Democrats, who control the Legislature and the governor's office.
"They have a fiscal train wreck coming," Rants said. "The only question is when does it hit?"
But the political consequences may not be immediate. Sen. Jeff Angeloof Creston, the top Senate Republican on budget issues, said the slow growth probably won't be felt until after the 2008 general election.
The 2008-09 fiscal year doesn't begin until next July. "After the November election, the bill comes due and you're forced to cut promised spending to schools and governments," he said.
Senate Majority Leader Mike Gronstal, a Council Bluffs Democrat, said he will wait for the December forecast before making judgments about the economy. He said Rants is too quick to predict gloom and doom. "The sky is always falling with Christopher," Gronstal said.
Dan Gearino can be reached at 515-243-0138 and dan.gearino@lee.netIowa
Projected tax receipts
Year 02-03 03-04 04-05 05-06 06-07 07-08 08-09
Net tax receipts (in billions) $4.48 4.68 4.93 5.38 5.64 5.93* 6.09*
Pct. growth -4.2 4.5 5.2 9.2 4.9 5.1* 2.6*
*official projection from Revenue Estimating Conference
Source: Legislative Services Agency
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