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Iowa Forecasters Estimate Slight Drop In State Revenue Amid Pandemic, Stalled Federal Stimulus

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John Pemble
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IPR file
The Revenue Estimating Conference acknowledged that federal aid to ease the financial pain of the pandemic has contributed to keeping the state’s economy and revenue afloat.

Iowa’s revenue forecasters are predicting the state will bring in just a little less money in the current fiscal year than in the previous fiscal year that ended June 30.

But the three-member panel acknowledged Tuesday that there is still a lot of uncertainty, and that federal financial relief previously provided to Iowa residents, businesses and governments because of the pandemic has contributed to keeping the state’s economy and revenue afloat.

According to Holly Lyons, the fiscal division director of the nonpartisan Legislative Services Agency, estimating state revenue is “nearly impossible” right now because of a lot of major events.

They include “a continuing pandemic with no definitive end in sight, drought in some areas of the state, an unusual and very damaging derecho in August, a highly contentious election season, and current political gridlock in Washington that has reduced the chance of another much-talked-about federal stimulus package from happening anytime soon,” Lyons said.

David Roederer, the director of the Iowa Department of Management, said Iowa’s economy is growing, but the growth is slower than he’d like to see.

“We believe we are on the rebound and heading in the right direction, it’s just, how quickly can we get there?” Roederer said.

Asked how revenue would be affected if no further stimulus comes from the federal government, Roederer said he believes a lack of additional aid would not affect the trajectory of Iowa’s revenue.

In the past several months, Iowans got additional unemployment benefits from the federal government, direct stimulus payments, business assistance, as well as other federal assistance distributed by the state.

The Revenue Estimating Conference predicted the state will bring in $7.91 billion in the current fiscal year 2021. That’s a 0.2 percent drop in revenue compared to fiscal year 2020, or a reduction of $18.9 million. The Iowa Legislature already approved a budget for this fiscal year when they briefly returned to the Statehouse in June.

The REC estimates state revenue will be $8.23 billion in fiscal year 2022, which begins July 1. That would be 4 percent growth compared to this year, or an additional $319.1 million.

In December, the REC will meet again to review and revise its estimates. The 2022 revenue estimate decided at that meeting will be what the governor uses to craft her budget proposal for the next legislative session.

Other states have seen major hits to their revenue during the pandemic. Iowa has ended recent fiscal years with a surplus, something the Republican leaders of the Iowa Legislature attribute to their “conservative budgeting approach.”

Lyons said the state’s finances are in a good position with the emergency reserves full, but said it remains to be seen if the federal aid that was already distributed is enough to support Iowa through these tough economic times.

“The Iowa economy won’t truly get back on track until the pandemic is over or at least until a viable covid vaccine or therapeutic treatment is available and widely distributed,” Lyons said.

The coronavirus is still spreading rapidly in Iowa, and hospitalizations have been record high in recent days.

Katarina Sostaric is IPR's State Government Reporter