Monday’s report from the Legislative Services Agency on General Fund revenue for the month of January may cause some concern among those looking for ways to dramatically increase state spending.
With state revenue being 1.2 percent below FY 13’s level through seven months, some policymakers are urging caution when considering state spending options and future funding commitments. While many are concerned about the lackluster growth in personal income tax revenue, sales and use tax have increased steadily. Corporate income tax, projected by the Revenue Estimating Conference last fall, has seen nearly double digit growth so far this year. And tax refund payments slowed dramatically in January, which is a significant shift from the previous six months. It is important to note that having a clear view on how state revenue came in during FY 2014 may not be possible until after the fiscal year has closed on June 30. The changes in how tobacco tax revenue and gaming receipts are accounted for will result in the General Fund being reduced in FY 2014. Other factors that impact overall revenue will be the increase in the Earned Income Tax Credit and the first year of the Taxpayers Trust Fund tax credit. These are a significant factor in why General Fund revenue is expected to be less in FY 2014. Last year’s federal tax changes also impact how state revenue figures appears each month.
With the expectation of the Bush-era tax cuts expiring, many Iowans paid certain taxes early to avoid higher rates. Once Congress came to an agreement on tax policy, other taxpayers (primarily farmers) were given a one-time extension on when they were required to file. All these situations created an unusual revenue flow for FY 13. This also makes it difficult to make comparisons with FY 2014. The net effect of all these factors is that it is difficult to forecast just how the fiscal year will end up. Such a blurry picture reinforces the need to keep FY 2015 spending below the projected ongoing revenue number, and it certainly serves as a warning against making major funding commitments in FY 2016 and beyond.
Condition of the Iowa National Guard. On Wednesday, we heard from Major General Timothy E Orr, who, in his opening remarks, stated the Guard is “Mission Focused and Warrior Ready”. He pointed out his troops are the most proficient, capable, accessible and battle-tested in the history of the state. Looking forward he stated the Guard faces three challenging transitions that will test their leadership and shape their future. First, the Guard has to transition from war, but in the context of an increasingly complex and competitive security environment. Second, the Guard will have to transition from abundant to constrained resources. And lastly, many active duty service members and their families will need to transition into civilian life, looking for meaningful professional opportunities and a quality way of life. Orr stated that more than 4,000 currently serving Soldiers and Airmen are combat veterans, nearly 45 percent of the force. After 12 years of war, all National Guard units serving in Iraq and Afghanistan are home and about 100 troops are deployed in other locations throughout the world. He did, however, note that two Guard units have received notification for potential deployments later this year. Over the next five years, as we continue to withdraw troops, several hundred thousand men and women from all services will be released from active duty and returned to civilian status. This may become a difficult transition, which provides the state of Iowa with a historic opportunity. Orr stated he was pleased that, through the Home Base Iowa initiative, those soldiers are encouraged and welcome to come to Iowa.
Transportation Legislation. This week we moved three bills through transportation subcommittees, which is the first step in the approval process. HF-2051 basically changes the definition of “motor vehicle” related to Iowa’s lemon law. With farm pickup trucks continuing to increase in size, the bill was written to increase the upper weight limit from 10,000 lbs to 15,000 lbs. HF-2059 better defines when vehicle permits are required to drive equipment on roads when that equipment is being used primarily for construction of permanent conservation practices on agricultural land. This clarification is needed due to recent citations being issued by the DNR for such practices. HSB-548 relates to defining the term “scrapping” vs. “recycling” vehicles for hobbyists. Even though it passed through the subcommittee, an amendment still has to be added.
State Rep. Brian Moore, R-Bellevue, represents District 58 in the Iowa House.