DES MOINES — Gov. Kim Reynolds said Monday she expects a “tough” fiscal 2019 budgeting cycle but believes there will be income tax reductions if federal changes are enacted that create a revenue windfall via Iowa’s federal deductibility law.
Reynolds began the process of assembling her first state budget blueprint since succeeding former Gov. Terry Branstad last May by conducting hearings with state executive-branch agency leaders that will run into early December.
Agencies have requested about $7.306 billion for the next fiscal year, which would be about a 3.4 percent increase over the current-year level of $7.067 billion. The state Revenue Estimating Conference set a preliminary estimate in October of fiscal 2019 tax collections at $7.425 billion. The panel meets again Dec. 11 to finalize its predictions.
Most agency directors Monday made status-quo requests for the next fiscal year, which begins July 1. But big-ticket askings are expected for human services/Medicaid spending, and Reynolds plans to repay $111 million borrowed from the cash reserve to balance last year’s ledger. Also, K-12 education is among Reynolds’ priorities, with each percentage increase costing slightly more than $40 million, according to projections by the nonpartisan Legislative Services Agency.
“We’re anticipating another tough budget year, so we want them going into the next budgeting cycle being conscientious of what the environment looks like today,” said Reynolds. She said changes to Iowa’s collective bargaining law should give agencies more flexibility in managing spending.
Reynolds said her administration is closely monitoring a proposed federal tax reform package which could impact the state. Iowans can deduct federal tax bills from state returns. Lower federal taxes would reduce the amount they could deduct.
Cutting taxes is a key priorities for Reynolds.
“We’re monitoring the revenue, we’re seeing what that looks like but I think (tax reform) is really the next step that we need to take to make Iowa competitive, and so it’s my intent to continue to take a look at that,” she said.
“There are still a lot of variables out there that we are watching,” she noted.