Vander Linden Capitol Update – March 2, 2017
This week found the Capitol extremely busy yet again. Funnel week brought with it a lot of meetings and hard deadlines for many bills. House Republicans are pushing through legislation that will benefit Iowa as a whole. Below you will find some helpful information concerning some issues the legislature is addressing this session. Please contact me with any questions or concerns you may have.
Revenue Forecasts in Surrounding States Change, Provide No Clear Picture
As the March meeting of the Revenue Estimating Committee nears, many states are also in the process of adjusting their revenue forecasts for the current fiscal year and next year. The projections from a couple of neighboring states give a conflicting picture.
On Monday, the Nebraska Economic Forecasting Advisory Board met to review their projections the current fiscal year and the next two-year budget. For this budget year, Nebraska’s actual revenues are expected to come in $91 million lower than what the nine-member board had projected at its last meeting in October. The bulk of the reduction comes from income tax receipts, which are now expected to be $55 million lower for the current year.
As for the upcoming two-year budget, the Board changed its revenue forecast by lowering FY 18 revenue by an additional $51.2 million and FY 19 revenue by another $26.3 million. The Board found that while economic activity in Omaha and Lincoln are going strong, the condition of Nebraska’s agricultural economy is having a significantly negative impact on the rural parts of the state. While the Board believes commodity prices have stabilized, they still expect the negative rural conditions to become a drag on the state’s urban economy.
To the north, a significantly different picture emerged on Tuesday. Minnesota Management & Budget, the executive branch’s fiscal agency, released their updated economic and revenue forecast. The new projections showed Minnesota state government expecting an additional $274 million in income tax collections over the next two fiscal years, and an increase of $69 million in corporate tax collections.
What is the cause for the sunny outlook up north? Faster economic growth. In their report, Minnesota Management & Budget states “A robust demand for workers together with low unemployment has created a tight labor market, which when combined with confidence in the economy that leads businesses to expand, puts upward pressure on wages”. The forecast predicts that the personal income of Minnesotans will grow by 9.5 percent over the next two years.
As part of their report, Minnesota’s economic consultants, IHS Markit, made some projections on the national economy and what is expected to happen. The consultants say there is a 60 percent chance of the economy experiencing steady growth. IHS Markit said there is a 15 percent chance that economic performance is even stronger, driven by federal tax law changes, infrastructure investment and business de-regulation. But the prospects are not completely rose-colored, as the firm said there is a 25 percent chance that a possible trade war and lack of business confidence trigger a recession in 2018.