Despite revenues that significantly lagged last year’s March estimate, the Revenue Estimating Conference revised its revenue estimates for fiscal years 2015 and 2016.
Those estimates will significantly impact the biennial budget the General Assembly will spend much of the remaining session formulating. But, as last year’s estimate showed, there is a lot of room for error.
Last March, the REC estimated General Fund revenues for current Fiscal Year 2015, which ends June 30, at $6.98 billion, an estimated increase of 4.5 percent over the FY 2014 estimate. The actual revenue for FY 2014, however, was nearly $400 million short of that estimate.
The new estimate for FY 2015 is $6.77 billion, an increase of approximately 4.3 percent over the actual revenues for FY 2014. The most recent previous estimate in December called for a 5.7-percent increase.
The latest REC is calling for $7.18 billion in General Fund revenues in FY 2016, which is roughly a 6.1-percent increase over the FY 2015 estimate. The new revenue estimate is a decrease of roughly $20 million from the December estimate.
The REC, which was established in 1987 in accordance with Iowa Code 8.22A, is meant to arrive at a consensus on General Fund revenue estimates to be used by both the governor and General Assembly for the budget process. It is comprised of the governor’s designee (currently Iowa Department of Management Director David Roederer), the Legislative Services Agency director’s designee (currently LSA Fiscal Services Division director Holly Lyons), and a third person agreed upon by the other two (currently David Underwood, retired CFO of AADG Inc. in Mason City).
The REC is responsible for providing periodic estimates of General Fund revenues available for the budgeting process. Those estimates are presented every year in March, October, and December.
Among the information that is included in those estimates are the cash tax receipts, other receipts to the General Fund, Lottery transfers and other transfers to the General Fund, accruals of tax receipts, other receipts, and transfer revenues associated with the fiscal year hold open period, refunds paid from fiscal year receipts, and School Infrastructure Transfers from fiscal year receipts. It is through the combination of those projects that the REC establishes an estimate of total net General Fund revenue.
The December estimate is used to establish the net General Fund estimate used by both the governor in developing his budget recommendation, and by the General Assembly in developing the final budget. They must use the lower of the December and March REC estimates to set the budget for the coming fiscal year.
Gov. Terry Branstad has until April 3 to present a revised budget recommendation to the General Assembly that accounts for the reduction in projected revenue. The legislature must approve a biennial budget by the end of the current session.