- Associated Press - Monday, December 12, 2016

DES MOINES, Iowa (AP) - A state panel on Monday lowered Iowa’s revenue projection for the current budget year by roughly $96 million, a deficit that will need to be addressed by Gov. Terry Branstad when the new GOP-controlled Legislature convenes in January.

The three-member group, known as the Revenue Estimating Conference, said in crafting its projection that Iowa will take in about $7.21 billion during the budget year that began in July. That’s down from a $7.31 billion projection in October.

Iowa Department of Management Director David Roederer, a member of the REC, said a range of issues are linked to the lowered revenue estimate, but he didn’t emphasize one key reason. He said the group’s projections are also complicated by factors such as federal taxes and corporate income taxes, which can fluctuate.

Roederer noted the state’s revenue growth is predicted to increase by 4.2 percent over the previous budget year.

“The economy is growing and the revenues into the state are growing,” he said. “They’re just not growing at the rate that the budget was based on.”

Still, Roederer acknowledged the severity of Monday’s news. Branstad will need to make recommendations early next year on how to address the deficit.

“I don’t in any way want to underestimate … the challenge that it will be when you cut $100 million out of the existing budget,” Roederer said.

Ben Hammes, a Branstad spokesman, declined to provide details on how the governor would address the REC’s deficit projection. Hammes emphasized K-12 school funding would not be cut.

“Gov. Branstad believes that, like hardworking Iowa families, we must remain responsible, frugal and diligent in crafting our budget,” he said in a statement.

The REC, which meets three times a year, also released its projection for the budget year that begins next July. It expects $7.55 billion in revenue for that period, a growth of 4.8 percent. Still, that’s roughly $50 million less than originally predicted.

State law requires Branstad and the Legislature to use the REC’s December estimate to draft the next budget.

Legislative leaders from both parties quickly responded to the REC’s latest projection. Bill Dix, the new majority leader in the Republican-led Senate, said the projection “underscores the need for economic growth and reform in state government.”

Dix, of Shell Rock, and House Speaker Linda Upmeyer, of Clear Lake, have indicated support for tax reform when the Legislature returns, though Roederer said any kind of tax cuts in this climate would be “a challenge.” He declined to be more specific.

Rep. Chris Hall, D-Sioux City and a ranking member of the House Appropriations Committee, released a higher deficit projection and said in a statement that Branstad, Lt. Gov. Kim Reynolds and House Republicans have stalled the state’s economy. He vowed that House Democrats would balance the state budget - the same promise made by GOP leaders.


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