By O. Kay Henderson (Radio Iowa)
Governor Reynolds and other Republicans say the latest state revenue projections show tax cuts are working as intended. Democrats say the data shows a looming crisis as the governor’s budget plan calls for spending more than the state will collect in taxes and requires using 900 million dollars in state reserves.
Kraig Paulsen, the governor’s top budget advisor, said there are “no surprises” in the numbers. “Between the tax cuts enacted and the economic headwinds that have existed for well over a year now, revenues have tightened,” Paulsen said Thursday. “However, the spending discipline by a our elected leaders — that is the governor and the General Assembly — continue to put the state in a position where the needs of Iowans can be met and we can weather through this tighter time.”
Paulsen and other members of the state Revenue Estimating Conference predict tax collections will fall well over 6% during the current year and drop nearly 7% the following year. “The tax cuts are having the intended effect,” Paulsen said. “They’re leaving more money in the pockets of Iowans and Iowa employers.”
Democrats say using one-time withdrawals for on-going state operations is bad budgeting. They point to long-term forecasts from the governor’s budget office showing “billions of dollars will be pulled from the state’s reserves” over the next five years to balance state budgets.
Paulsen said the state is not draining reserve accounts, Iowa’s economy is strong and the tax base is expected to grow in a couple of years.
“While inflation is slowing from its peak, it remains elevated. Mortgage rates have seen a slight decline in recent weeks, but interest rates are still at a level that is prohibitive for investors,” Paulsen said. “Obviously it will be helpful when these drop and there is certainty coming out of Washington, D.C.”
The other members of the State Revenue Estimating Conference cited concerns about tariffs that will raise the price of goods and services for Iowans and impact Iowa farmers and manufacturers.
