Typically one of the first items on the legislative agenda is setting Supplemental State Aid (SSA) for K-12 public schools. However, due to the budget shortfall in the current fiscal year’s budget which was realized in the updated Revenue Estimating Conference’s (REC) December report, we were forced to take a detour from our regular course of action. In order to balance the budget this fiscal year (FY17), it was necessary to make adjustments — deappropriations — before we could get to work on the next fiscal year (FY18).
Regardless of the type of budget — family, business, or government — cutting back is never an easy (or popular) thing to do. However, when actual revenues fall short of what was initially projected, there is no other recourse than to tighten the belt.
Several have questioned why the need for a deappropriations bill when the FY17 budget was supposedly balanced at the adjournment of the 2016 legislative session. The answer is that it was balanced based on the estimate the legislature was given, by law, at that time. Due to a sluggish agricultural economy and the resulting ripple effect in other segments of Iowa’s economy, it was discovered that revenue growth is slowing and will not be as much as what was originally forecasted. Perhaps this is a good time to provide a refresher course on the REC.
The REC is required to meet on or before Dec. 15 of each year and once during the regular session of the Legislature. At the December meeting, the REC establishes the net General Fund estimate that is to be used by both the Governor and the Legislature in developing the state’s budget.
When the REC meets while the Legislature is in session (typically in March) and if the revenue estimate is lower than the one given in December, then the Governor and Legislature are required to use the new lower amount. However, if the REC raises its revenue estimate in March for the subsequent fiscal year, then the Governor and Legislature are to still use the lower amount which was given in December.
In addition to forecasting the revenue for the upcoming fiscal year, the REC also re-evaluates its past prediction for the current fiscal year to ensure that the revenue projection is tracking as was foreseen. If, in the reevaluation process, a shortfall is detected (as it was in December 2016) the incoming Legislative session will be tasked with making cuts to ensure a balanced budget.
Given the last few years of budget shortfalls, there has been concern about why the REC is unable to predict state revenue with a better degree of accuracy. In order to alleviate this in future budgets, the House will be looking at what steps need to be taken to improve their forecasting ability.
This coming Friday I will be holding town hall forums at the Last Chance Market in Russell at 8 a.m., Mosaics in Chariton 10 a.m. and the Knoxville Chamber Office at 5 p.m.
Until next time, God bless.
Contact Rep. Greg Heartsill
at 641-218-0185 or
greg.heartsill@legis.iowa.gov