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Capitol Digest

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A roundup of legislative and Capitol news items of interest:

REVENUES DECLINE: Iowa tax revenues have declined nearly 11% since the onset of the coronavirus pandemic, the state Legislative Services Agency reported Friday.

From March 19 through July 30 for calendar years 2019 and 2020, net state tax revenue declined $350.4 million and 10.7% year-over-year.

However, fiscal analyst Jeff Robinson cautioned that not all of the change is a result of COVID-19. Much of the significant decrease resulted “not from the business closures, job losses and other impacts of COVID-19, but instead from the tax due date delays” instituted by Gov. Kim Reynolds and the Department of Revenue.

It will not be until the delayed tax payments have been deposited that the economic impact of recent events can be reasonably calculated, he said.

Key data in the fiscal update included a decline of nearly 12%, or $154.6 million, in individual income taxes over that period. Corporate income taxes declined $43.3 million, or more than 12%, and sales/use tax revenue fell by $41 million, nearly 5%. Fuel tax revenue was off by 5%, or $13.1 million.

With casinos closed for much of that time, gambling tax revenues fell nearly 60% or $67 million, LSA said.

NO BAILOUT: Nine Iowa Republican legislators signed a letter from the American Legislative Exchange Council and its partners telling Congress the idea of the federal government “bailing out” states would be harmful to taxpayers, federalism and ultimately the states themselves.

“While economic conditions remain dire due to government-mandated business closures during the pandemic, federal lawmakers have already granted a general $150 billion COVID-19 relief fund, a $30 billion education costs fund, a $45 billion disaster relief fund and more for state and local governments,” according to the letter that was signed by more than 200 legislators.

“We feel a federal bailout of state budgets would be counterproductive — rewarding states that have made poor financial decisions at the expense of those that have been fiscally responsible,” the letter continued.

The Iowa legislators signing the letter were: Sens. Charles Schneider, Des Moines; Zach Whiting, Spirit Lake; and Zach Nunn, Altoona; and Reps. Phil Thompson, Jefferson; Joe Mitchell, Mount Pleasant; Linda Upmeyer, Clear Lake; John Wills, Spirit Lake; Skyler Wheeler, Orange City; and Jeff Shipley, Birmingham.

GOOD BUDGETING: A study conducted by the accounting firm KPMG of the fiscal risk and resiliency of each state in dealing with the coronavirus pandemic found that Iowa is the most fiscally sound, most resilient state in the country when it comes to battling through COVID-19.

The study, commissioned by the Council of State Governments, weighed a number of factors, including percent of GDP by industry in each state, the expected reduction of state revenues, balance in each state’s rainy day fund, each state’s debt to income ratio, the solvency of each state’s pension system and each state’s unemployment trust fund, as well as each state’s cost per enrollee in Medicaid, and growth in K-12 education funding since the Great Recession.

The full report can be found at https://web.csg.org/COVID19/fiscalimpact/.

The findings validate the conservative budgeting practices Senate Republicans have implemented over the last four years, Senate Majority Leader Jack Whitver, R-Ankeny, said. The findings should make Iowans confident of “stable and predictable funding under Republican leadership,” he said.

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SPRINGFIELD — Gov. JB Pritzker said Monday that Illinois would face the prospect of having to make deep spending cuts over the rest of the fiscal year if Congress did not pass an economic relief package that helped states make up for the massive loss in revenue they’ve seen since the start of the COVID-19 pandemic.

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