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State 'Optimistic' About 2019 Revenue, Tax Cuts Come Into Play Next Year

John Pemble/IPR file
Iowa Public Radio
Iowa Capitol in Des Moines

State analysts said Tuesday they are optimistic about Iowa’s economy and the amount of money coming into state coffers this year, but recent tax law changes could complicate things next year.

The three-member Revenue Estimating Conference projected state revenue will increase 4.9 percent this year, or nearly $360 million, compared to the previous fiscal year that ended June 30.

Department of Management Director David Roederer said he’s confident budget cuts will not be needed in the middle of this fiscal year, as they were in each of the last two years.

“The economy nationwide is improving and we’re seeing the same thing here in Iowa, but we also want to be cautious,” Roederer said.

Panel members listed Iowa’s labor shortage and uncertainty surrounding tariffs and soybean prices as factors that could limit the state’s economic growth.

Next year, state revenue is estimated to grow just 1.7 percent, about $130 million, because the Iowa Legislature passed tax cuts that are expected to reduce potential revenue by millions.

Sioux City Rep. Chris Hall, a Democrat, said any dip in the economy can threaten that estimate.

“$130 million in state budgeting is going to be eaten up in normal growth of costs, whether that’s Medicaid numbers, whether that’s public schools,” Hall said. “There are going to be some very hard decisions that have to be made in fiscal year 2020 because of the Republican tax cut.”

Republican leaders in the legislature say the revenue growth estimates show their policies are having a positive impact.

“Our tax cuts are working, our reserves are full, we are seeing an increased budget surplus, and our economy is growing,” said Republican Senate Majority Leader Jack Whitver in a statement.

Katarina Sostaric is IPR's State Government Reporter