State budget experts on Thursday lowered Iowa's revenue projections for the current fiscal year, citing a slowdown in agricultural income and economic uncertainty due to the divisive presidential race, interest rates and international trade.
The Revenue Estimating Conference predicts that the state will collect about $49.3 million less than it had anticipated last March.
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The panel now estimates the state will collect $7.31 billion in the fiscal year that began July 1. Although that would be less than had been projected, it would still be 5.6 percent more than was collected in the last fiscal year.
The group estimates that next year's revenue will grow 4.1 percent to $7.61 billion.
Iowa Department of Management Director David Roederer, one of the three REC members to study economic signs and come up with revenue estimates, said the impact of lower commodity prices for farmers remains unknown. Iowa leads the nation in corn, hog and egg production, and low prices mean farmers are earning less income on which to pay taxes. In addition, farmers aren't spending as much on tractors and other equipment, which cuts into income for companies like John Deere, resulting in a drop in corporate and sales taxes.
"We do believe that were starting to see the shortfall on the ag economy right now. How much that's going to play out into this current fiscal year we're not exactly sure yet," Roederer said. "There's enough of a warning sign there that extreme caution is reflected in our numbers here."
The state's largest source of income, by far, is personal income taxes, followed by sales and use taxes. Other sources of income include corporate income taxes, inheritance taxes and lottery receipts.
REC member Holly Lyons, director of the state agency that provides financial analysis of state spending and revenue to the Legislature, said Iowa's economic outlook also shows reasons for optimism.
Personal incomes have grown, but very slowly, and corporate income didn't fall as much as expected. Employment numbers remain strong and workers are receiving raises, she said.
"While we're in the 88th month of recovery from the Great Recession — the third longest post-recession recovery in U.S. history — the growth spurt has subsided and while growth continues, it is muted," she said.
The REC will update its estimates again in December. State law requires Gov. Terry Branstad and the Legislature to use the REC's December estimate to draft the next fiscal year's budget, unless the following March estimate is lower, in which case lawmakers would have to use that lower estimate.