Provided by PDI Lobbyist Craig Patterson
It has been about two and a half months since the Legislature paused the session on Monday, March 16th, due to the COVID-19 outbreak. The legislature will reconvene tomorrow, in a very different environment, navigating very different issues.
Second Funnel Week
When we paused, it was supposed to be the first day of the second funnel week. By the end of that week of March 16th, any policy bills that had not been approved by the relevant policy committee in both chambers was supposed to die for the year. When we restart on Wednesday, June 3rd, the Legislature will restart the funnel week, albeit with a much smaller list of potential bills.
After the abbreviated funnel week this week, the Legislature will work the week of June 8th with the goal of passing any remaining policy bills, a fiscal year (FY) 2021 budget, and adjourning for the year by the end of the week (June 12th or 13th).
A Budget Based on What?
The pandemic caused the closure of multiple businesses and public places which has dramatically reduced revenues coming into the State. To give the Legislature and the Governor as much guidance as possible about how much revenue they can safely allocate in the FY 2021 budget, the Revenue Estimating Conference (REC) held a special meeting on Friday, May 29th to update their March estimates.
Keep in mind that legislators can only spend 99% of estimated revenues, and the Legislature is bound by these new revenue estimates. The good news is Iowa has a healthy budget and strong reserves to help weather emergencies like this. Other states are not so lucky; some had a budget crisis way before COVID-19 arrived. The bad news is the REC acknowledged they will not have a strong fix on the actual impact until their October meeting, and there was a lot of discussion and disagreement about the FY 21 and 22 estimates. The results of the REC meeting:
Fiscal Year 2020 (July 1, 2019-June 30, 2020):
- Current year revenues dropped $149.5 million, for a total of $7.9412 billion.
- This represents an increase over FY 2019 of $82.4 million (or 1%).
- The adopted FY20 budget didn’t spend all available revenues, so there will still be a healthy $400 million surplus at the end of FY20.
Fiscal Year 2021 (July 1, 2020-June 30, 2021):
- Next year’s revenues dropped $360.1 million, for total of $7.8766 billion.
- This represents a decrease over FY 2020 of $64.6 million (-0.8%).
- This is the budget that the Legislature will need to address when they are in session the next two weeks.
- Keep in mind this reduction of $64.6 million does not include the roughly $100 million increase already approved for schools.
- Iowa has a healthy $800 million in reserves should a second wave of virus hit (the revenue estimates do not include a second wave of virus in calculations).
Gaming Receipts/Infrastructure Account Funds:
- Infrastructure funds (which are paid with money from gambling) are way down.
- FY 2020 receipts were reduced by almost 25% ($72.9 million, for total $220.7 million available).
- FY 2021 receipts go up a bit in the next fiscal year (to $268.6 million), but that is still $25 million below the original March estimate of $293.6 million.
- These funds pay for things like trails, environmental and water quality programs, REAP, university and state building renovations, and other special one-time projects.
Fiscal Year 2022 (July 1, 2021 through June 30, 2022):
- They will look more closely at this in their October meeting, so they left projected growth at proven historical levels (4.1%).
- The estimates will drop some because the growth will be factored off the revised FY 2021 estimates.
The Governor will release her revised budget this week - Department of Management Director Dave Roederer said to expect it right around the time the Legislature reconvenes on June 3. The final REC table can be found HERE and a summary analysis of the REC’s findings can be found HERE.
Other Tidbits from the REC meeting:
- Current unemployment is 14.7% and retail sales dropped 16.4%
- There are no economic models they can use for pandemic, so they are doing their best guesswork.
- Wage & salary data come in quarterly, so they are using only 8 weeks of actual data.
- Currently $2.2 billion in federal loans, PPP, and unemployment benefits have come into the state.
- Another $2.6 billion came into the state in the form of direct stimulus checks to taxpayers.
- Challenges in agricultural sector persist and were a problem before pandemic.
What About those Federal Dollars?
During Governor Reynold’s Friday press conference, she explained how the state plans to allocate the $1.25 billion in federal funding Iowa received as part of the coronavirus relief fund (the bulk of the $2.2 billion mentioned above). The Governor said the state is allocating $700 million toward relief efforts, but will hold the balance of the $550 million while continuing to monitor the status of Iowa’s unemployment trust fund and any additional unforeseen COVID-19 related expenses. Of the $700 million, Reynolds said she has allocated it in the following way:
- $215 million to provide relief for Iowa businesses and families, including the small business relief program, housing assistance, workforce initiatives and Iowa’s food banks.
- $100 million is going toward relief for Iowa Farmers.
- $125 million is going toward relief for Iowa Communities. Gov. Reynolds said the state is launching an online payment portal for cities and counties applying for reimbursement of COVID-19 related expenses.
- $50 million is going toward relief for Iowa health care providers, including home and community based providers, substance use providers, and mental health providers.
- $85 million is going toward expanding access to tele-work, tele-health and tele-learning. This includes broadband expansion and IT upgrades.
- $125 million is allocated to the state for COVID-19 related expenses, like the cost of PPE and overtime pay for frontline workers.