Last week, Jeff Robinson, senior fiscal analyst for the Iowa Legislative Services Agency provided his weekly revenue video memo for state lawmakers.
Therein, he reported that as of April 30, the state’s tax revenue was down hundreds of millions of dollars from that point in the year prior. He said that was due not to direct economic impacts from the COVID-19 pandemic, but to Gov. Kim Reynolds’ decision to push some payment deadlines to July 1 due to the pandemic.
“So, it’s still pretty up in the air,” said Iowa Sen. Pam Jochum, D-Dubuque, the ranking member of the Senate Ways and Means Committee.
Other lawmakers closely tied to the taxation and appropriations process also said there was a great deal of uncertainty.
“We don’t have any projections yet,” said Iowa Sen. Michael Breitbach, R-Strawberry Point, who chairs the Senate Appropriations Committee. “It’s going to be tough. There’s going to be some pent up spending, but then Iowans are pretty conservative.”
Breitbach said that while revenues are unknown, the legislature is going to have to look hard at every dollar for the Fiscal Year 2021 budget.
“It may force us as a state — something I’ve always said — to separate our wants versus needs,” he said. “But, what’s the function of government? There are some things we do that the state of Iowa pays for, where we need to look back and ask ‘Do we need to really have this department? Is this program really a need?’”
He said some things, like museums, had previously been funded privately but now received state funding. He also pointed at some appointed commissions and their work he thought might need scrutiny.
“Our government has gotten so big,” Breitbach said. “There are so many line items — with $50,000 here and $50,000 there. There are some groups that meet — take tobacco (the Smoking Cessation Program) — you have a director, an assistant, another person who works there.”
He said that while he would not bet on education increases being walked back, nothing is truly safe.
Iowa Rep. Andy McKean, D-Anamosa, sits on the House Appropriations Committee, but did not return calls for comment.
Jochum, though, questioned whether the Legislature should reconvene and pass a budget at all before they have a better idea of what revenue will be.
“It doesn’t make a whole lot of sense to figure out a budget when we don’t know what we have,” she said. “The resolution said whatever the departments were currently receiving, they will keep receiving until September. Even if we don’t go back in, state government can continue to operate until that point.”
If there’s any silver lining in the revenue situation, it could be that sales tax looks healthier than expected.
Iowa Rep. Lee Hein, R-Monticello, chairs the House Ways and Means Commission. He said he had recently talked to the state’s revenue projector.
“He’s watching the sales tax and he said 30% of sales tax payers pay 70% of the amount,” he said. “That’s the Walmarts, the Amazons, the HyVees. Those people are doing very well, so he’s not seen a big drop in sales tax yet.”
Hein said the Legislature did the state a big favor in 2018 by adding sales tax to online sales.
But, he said the revenue problems would influence the tax side of things when the Legislature reconvenes, as well.
“I don’t see any big tax cuts coming out of Ways and Means because we need to sit and watch due to the uncertainty,” Hein said. “We need to craft the budget and look at some policies, then get back home and watch what happens. I’m very concerned about what’s going on in the ag sector. There, we won’t know until later in the year.”
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Jochum said she had only heard that Senate Ways and Means would most likely agree to officially not tax pandemic-related federal financial assistance as income.
Hein also, however, praised the state of Iowa’s fiscal responsibility in recent years, as it had led to a lush reserve fund.
Marklein foretells ‘fiscal day of reckoning’ for Wisconsin
Wisconsin Sen. Howard Marklein, R-Spring Green, in his weekly newsletter, reported impacts to state revenues are uncertain, but will be major.
Tax collections in April were down more than $800 million compared with April 2019, he said. That was due in part to pushing income tax deadlines to July, like in Iowa. But, he said revenues would be down no matter what.
“An impact to state finances will touch every taxpayer-funded entity in Wisconsin,” he said. “It will impact local governments, public schools, universities, roads, hospitals and more. Already, UW-Platteville has decided to furlough 70 employees for three-months starting May 18.”
Marklein also said transportation projects scheduled for FY 2021 are expected to be delayed at best.
But, he lauded Wisconsin’s financial footing in terms of reserve funding.
“Fortunately, through a lot of very strong fiscal responsibility, Wisconsin has a Rainy Day Fund, also known as the Budget Stabilization Fund,” Marklein said. “The fund already has a projected balance of $655 million at the close of the 2019-20 fiscal year. We will probably not transfer these dollars and they will remain in the general fund.”
Poll finds Iowa’s 2020 U.S. Senate race even closer
Public Policy Polling — a Democratic national polling service out of North Carolina — found in a recent poll that incumbent Republican U.S. Rep. Joni Ernst was just barely ahead of Democratic primary candidate Theresa Greenfield in the 2020 race.
The service polled 1,222 Iowans, with a margin of error of +/- 2.8%.
Of those, 43% backed Ernst’s re-election bid. Those backing Greenfield marked 42%.
Greenfield has not yet locked in the Democratic nomination, though she leads in fundraising and all polls. She faces fellow Democrats Michael Franken, Kimberly Graham and Eddie Mauro until Iowa’s June 2 primary election day.
Endorsements
Influential Koch brothers’ super PAC, Americans for Prosperity Action, endorsed Iowa Rep. Ashley Hinson, R-Marion, in her Republican primary bid for the right to face incumbent Democratic U.S. Rep. Abby Finkenauer in November.
Calendar
8 a.m. Wednesday, May 13 — U.S. Sen. Chuck Grassley, R-Iowa, will provide an update on federal COVID-19 activity via Zoom, hosted by Dubuque Area Chamber of Commerce.