Revenue Estimating Conference: Iowa taxes down $415 million

UPDATE:  Scroll to the bottom of this story to listen to an mp3 of the entire 23 minute meeting.

It is 12:55 p.m. on a Wednesday and people are slowly filling up the Supreme Court Chamber in the Iowa  Statehouse.  The ornate room has been converted into a meeting room and the Revenue Estimating Conference is scheduuled to meet at 1 p.m.  The three-member panel will set its official estimate of state tax collections for the current budgeting year.  It’s likely the governor will order an across-the-board cut afterwards, the depth of which will be determined by the estimate this three-member panel decides upon.

As blogged about yesterday, the three members of the panel are Legislative Services Agency director Holly Lyons; Department of Management director Dick Oshlo (the governor’s representative on the panel) and David Underwood, who recently retired from a firm in Mason City where he served as chief financial officer.

At 12:58 p.m., the governor’s staff sent out an advisory via email.  The governor will hold a news conference at 3 p.m. this afternoon to “react” to the decision made by the Revenue Estimating Conference.

Each seat is now full.  Phil Roeder, the governor’s deputy chief of staff, is standing in the back of the room, within arm’s length of a seated Chris Rants, one of the Republican candidates for governor.

The meeting opened with Oshlo being elected chairman of the panel and minutes of the March 20, 2009 meeting were approved by voice vote. 

“Obviously these are difficult economic times for the stsate and based on recent events….we have to review the current numbers and see if there are any revisions,” Oshlo said. 

Lyons said there is a “significant and severe recession not just for Iowa but for all states.  Since last year there’s been a loss of 50,000 jobs…unemployment is slowing, but likely to remain high….November of 2008 was the last month we saw true, positive revenue growth….Consumer confidence remains uncertain.”

Lyons quoted a report suggesting holiday sales will be one percent lower than last year.

Lyons said federal economic stimulus money was being spent in Iowa, but “the good news is that we haven’t felt the effects of the stimulus and the I-JOBS spending yet.”

Suggesting the next nuggett came from “the misery loves company department,” Lyons cited National Conference of State Legislatures data, indicating:  “state governments will face severe budget problems for 12-24 months after the recession ends.”

Underwood said “all of us” had been surprised by the “depth of job loss” in Iowa.  “None of the national forecasts came even close to the 50,000 level for Iowa…The impact to Iowa’s revenue…is probably somewhere in the $80 to $100 million range.”

“…Corporate profits continue to be an issue…I think that’s going to be a reality for us…profits are going to be down.”

Oshlo began speaking, focusing on corporate tax payments, saying the decline in September “was alarming.”  He is a low talker and people in the back of the room, including yours truly, cannot hear all of what he is saying.

Underwood takes the floor again.  He’s preparing to “resolve” the differences in estimates from the legislative and executive branches.  “It’s probably somewhere in the midst of these two,” he adds.

Lyons makes a motion, to reduce the personal income tax refund estimate in Oshlo’s estimate (the governor’s numbers) by about $32 million.  That’s the first reduction (with more to come) and it passes.  It means the TOTAL reduction is in the neighborhood of $414.9 million according to the math-proficient Lynn Campbell of IowaPolitics.com who is sitting to my left.  We’ll double-check with the mumbling people up front after the meeting concludes.  (UPDATE:  It was, indeed, $414.9 million.  That represents a reduction of a little more than seven percent.)

The three have now jumped to a discussion of FY 2011 estimates.  Since the current year estimates are of greater news value today, I shall end this blogging and prepare to ask questions of folks.

UPDATE:  Here’s the Radio Iowa story.  A variety of statements were issued, via email.  Read them below, in the order they were received.

(DES MOINES)—House Republican Leader Kraig Paulsen (R-Hiawatha) released the following statement regarding the Revenue Estimating Conference newest report on Iowa’s revenue.

“The news from the Revenue Estimating Conference, while troubling, is not surprising.  Gov. Culver signed the largest budget in the history of Iowa and his $1.7 billion borrowing plan has not worked.  The out-of-control spending and lack of fiscal discipline expressed by legislative Democrats has caused the economic mess Iowa is currently in. 

“Even though we face economic turmoil, House Republicans remain ready to offer cost-saving measures, oppose tax increases, and increase transparency in state government budgeting.”

DES MOINES – The nonpartisan Revenue Estimating Conference (REC) met today and released budgetary numbers stating that, as predicted, Iowa revenue numbers are down and will continue to fall.

Senate Republican Whip Steve Kettering (R-Lake View) released the following statement:

“The repeated irresponsible budgeting practices of Governor Culver and Legislative Democrats have placed Iowa’s budget on the edge of a financial abyss.  To spend more money than ever during the midst of a recession and then to wash your hands of responsibility is a terrible policy.  The Governor should admit to his addiction to spending.

“Senate Republicans stand at the ready to again offer solutions to solving the worsening budgetary crisis facing Iowa.  We recently proposed a constitutional limit on state spending, a 2/3 supermajority vote of both houses of the Legislature to authorize new state borrowing, and a sunset on every state funded program so a thorough review of those programs can be conducted.  We offered the suggestions in an effort to incorporate responsible fiscal practices when it comes to the state budget.”

STATEMENT FROM LEGISLATIVE LEADERS ON STATE REVENUE DECLINE
 
Senate Majority Leader Mike Gronstal: “Iowa families, communities and businesses are still reeling from the economic earthquake caused by the biggest recession since the Great Depression.  It’s clearer than ever that the aftershocks of this deepening national recession will require quick action to balance the current state budget.”

House Speaker Pat Murphy: “As we’ve done over the last year as the recession has taken hold in Iowa, we will work together with Governor Culver to ensure a balanced state budget while still maintaining services that are provided to schoolchildren, older Iowans, unemployed workers and others.”

House Majority Leader Kevin McCarthy: “Unlike former Governor Terry Branstad, who raised taxes on all Iowans to balance the budget, I know Governor Culver will show bold leadership and act decisively with a swift and serious cut to keep our budget balanced.  We will continue to work with Governor Culver and take whatever legislative action necessary in January to ensure the state budget remains balanced.”

Senate President Jack Kibbie: “In the coming weeks and months, we remain committed to:
* Listening to our constituents;
* Working with the Governor, Lt. Governor and Republican legislators; and
* Laying the groundwork for passing another fiscally responsible state budget during the 2010 session that protects the progress we’re making on creating good-paying jobs, improving student achievement and teacher quality, and ensuring affordable health care.”

FARM BUREAU URGES GOVERNOR CULVER TO CALL SPECIAL SESSION TO SOLVE 2010 BUDGET SHORTFALL

WEST DES MOINES, IOWA – October 7, 2009 – Today’s Revenue Estimating Conference lowered state revenues by $415 million, illustrating a number of fiscal challenges ahead for Governor Culver in the 2010 budget, according to the Iowa Farm Bureau Federation (IFBF).  As a result, IFBF is urging the Governor not to order across-the-board cuts, but to look at all options, including a special session of the legislature so elected leaders can collectively make the best decision to solve budget issues.

“Across-the-board cuts reduce state spending, but unfortunately they increase property taxes on all Iowans,” said IFBF President Craig Lang.   “The funding of K-12 education is a partnership between state government and local property taxpayers, so when an across-the-board cut is ordered, the state’s share is reduced, which means property taxpayers have to pick up the shortfall.  An across-the-board cut of 7 percent to meet the decline in revenue could raise property taxes for Iowans by $195 million.  This is in addition to the increase taxpayers have already realized to pay for school, city and county government operations.  Because of recent property evaluations, we are already approaching an 8.5 percent property tax increase that will impact not only farmers, but homeowners and business owners,” said Lang.  

“Families struggling to make ends meet in this time of layoffs and foreclosures can’t use ‘across-the-board cuts’ to balance their personal budgets; it’s not like we can pay just 95 percent of our heating bills or 95 percent of our mortgage,” said Lang.  “Our families have to roll up their sleeves and make hard choices on where to cut to pay for our priorities. We expect our elected leaders to do the same.”   

 Farm Bureau members will also be asking Governor Culver and state leaders to work together during the 2010 session to redesign Iowa’s budgeting process and make the necessary changes to avoid budget disruptions that are currently plaguing our state.

AFSCME Iowa Council 61 Statement on Iowa’s Budget Projections

As we find out that revenue is once again lower than projected, it is time to start looking at both sides of the ledger when examining state finances.  Iowa is not alone in its hardship.  At least 48 states have addressed or still face shortfalls in their budgets for fiscal year 2010.  At least 36 states already anticipate deficits for 2011.  The combined budget gaps for all states in the next two years — state fiscal years 2010 and 2011 — are estimated to total at least $350 billion.

We believe that the state needs to look at the full picture and not only study efficiencies that can be made, but should also examine ways to close corporate tax loopholes and re-examine other tax schemes that have not shown evidence that they are growing the Iowa economy.  It is important to remember that Iowans still rely on the services that state government provides, and those needs only grow during these tough times.  Looking at cuts as the only way to balance budgets is short-sided and will only hurt Iowans during and after this recession.

Like all Iowans, AFSCME Iowa Council 61 members have made sacrifices not only during this recession, but have made concessions several times over the past decade.  State workers have faced cuts through the recession of the early 2000s, and once again we have stepped up to the plate taking wage freezes and many have faced layoffs.  Right now, state workers are already doing more with less.  Layoffs and cuts will exacerbate this problem, and those solutions put state workers in dangerous positions when they are understaffed at many facilities.   

Because AFSCME Iowa Council 61 believes that its members who work in state government every day are experts on how to make their workplaces more efficient, AFSCME Iowa members are looking at ways to bring cost savings to government through a wide variety of reforms that they can identify.  AFSCME Iowa Council 61 has formed several working groups to examine how their jobs can be streamlined to save money during lean times.  AFSCME Iowa Council 61 will work with all branches of government to continue to be a constructive part of finding solutions to the current budget problems we all face together.

ITA RESPONDS TO REVENUE ESTIMATING CONFERENCE

ITA Encourages Targeted Cuts in State Spending

The Iowa Taxpayers Association (ITA), the state’s leading nonpartisan business tax policy resource encourages Governor Culver to head back to the budget drawing board following today’s revised projections from the Revenue Estimating Conference (REC).
Because the REC estimates that the net General Fund revenues will be $414 million less in FY 2010 due to an 8.4% decline in revenue from last year, ITA believes that now is the time to make the difficult decisions on cutting state expenditures before the start of the 2nd session of the 83rd General Assembly.

“Given the REC’s best estimate and the recent decline in state revenue, the state is now in a position to have to make the same painful choices that Iowa businesses have had to make during the past 16 months” said Ed Wallace, President of the Iowa Taxpayers Association.

Wallace further stated that “Across the Board cuts may provide some relief, but the Governor alone does not have the ability to make targeted cuts.” Targeted cuts by the legislature may make the most sense provided that they would be able to reach consensus in a special legislative session”

Statement from (Board of Regents) President (David)  Miles on Report of Revenue Estimating Conference October 7, 2009

Today’s report of the Revenue Estimating Conference projecting a large decrease in FY 2010 State revenues is undoubtedly discouraging for the Board of Regents and Iowa’s Public Universities and Special Schools.  Any additional budget reductions that may result from today’s estimates would be a significant burden on our institutions. 

From the time that the global financial crisis first began to impact Iowa, Iowa’s Public Universities and Special Schools have responded effectively to the changing economic realities of our State.  This has included, over the past year, a series of several budget reductions which have posed tremendous challenges to our institutions.  The Board of Regents directed the heads of each Regent’s institution to address budget shortfalls strategically, to refocus and reposition the institutions not just to survive but to continue to prosper over the long term, and to invest in areas of excellence while allocating resources from other areas less central to the institution’s mission or of lower priority moving forward.  While a difficult fiscal task, our university presidents and special school superintendents have shown exemplary leadership by comprehensively reviewing their very complex operations, generating new ideas and approaches, and making difficult choices. 

As we face the likelihood of further budget reductions, our prior analysis and actions have prepared us to once again respond; however, any additional spending reductions would create further hardships for our institutions in providing programs and services for Iowans.  

As always, our first priority will be to assure continued access for Iowa students and to protect the quality of our educational, research and service activities.

Iowans for Tax Relief Update: State Budget $415 Million Short

The state Revenue Estimating Conference (REC) met today in Des Moines to revise the expected tax collections for the current budget year.

Ed Failor, Jr., President of Iowans for Tax Relief, said:
“Iowans for Tax Relief has stated over and over, it is horrible judgment to pass the largest budget in Iowa history when every sign indicated further decreases in government revenue.  It is irresponsible and lacked intelligent forethought by Governor Culver and his cronies in the Legislature to have made these decisions.”

What did the panel decide?
• The three-member panel forecasted state coffers will continue to see a drop in tax collections.
• For the current state budget year 2010, the state has a shortfall of $415 million.

What is the next step?
• Governor Culver is going to have to take immediate action on the state budget because the shortfall has occurred in the middle of the current fiscal year.
• Governor Culver has scheduled a press conference for Thursday, October 8, 2009 to announce his “quick-fix” for the sizable state deficit.

Please continue to check the ITR website at: www.taxrelief.org for updates on the state budget deficit.

The Bottom Line:
The largest budget in state history drove the State of Iowa further down an economic hole. Governor Culver and the Democratic-led Legislature spent too much and used your hard-earned tax dollars unwisely.

Your Iowans for Tax Relief Team will continue to urge lawmakers to keep spending in line with revenues. Now is not the time to hit already strained family budget with more taxes.

Statement from Christian Fong, Republican candidate for Governor

“Today’s news of a deeper dip in tax revenues than expected further shines the spotlight on Governor Culver’s runaway spending.   Yes, the national recession has hurt Iowa revenues, but the genesis of this budget crisis started when Governor Culver and legislative Democrats increased state spending by 21% over the last two years.  Governor Culver’s decision to look the other way when spending grew and grew is the real cause of the deficits we face today.   Iowans deserve a Governor who will cut spending, balance the budget and do so without raising taxes.”