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The Associated Press December 15, 2011, 5:04PM ET

Iowa budget experts say state revenue will grow

A panel of budget experts added $25 million on Thursday to its projection of how much the state will collect in taxes this year because the economy is slowly recovering. The Revenue Estimating Conference also increased next year's projection by $41.7 million.

"On the bright side, the economy has not slid back into recession," said Holly Lyons, a member of the conference from the Legislative Services Agency.

The three-member panel includes the governor's top budget adviser, the financial adviser to the Legislature and an independent member, Mason City economist David Underwood. It meets quarterly to project how much the state will collect in taxes, and the December projections are the most closely watched because state law requires the governor and legislature to use those projections as the base for writing a new state budget

The panel projected the state will collect just over $6 billion this year, a 1.7 percent increase over last year. For the budget year beginning next July, it projected tax collections will be just over $6.2 billion a 4.2 percent increase.

David Roederer, Gov. Terry Branstad's top budget adviser, said the farm economy continues to be strong with high commodity prices, but said many are worried about the fallout from the European debt crisis and uncertainty about how Congress will deal with the nation's deficit.

"It appears to me that the national and international concern is the one that's created the most uncertainty," said Roederer. He described the projection as "slight, stable growth."

"I just don't think things are going to turn nationally enough to make a difference," said Roederer. "At some point in time we will see bigger growth but we're not there yet."

"It's cautiously optimistic," said Rep. Scott Raecker, R-Urbandale, who heads the House Appropriations Committee. "The ag sector continues to be strong and there's a certain optimism there."

He said the modest economic growth means the state will be able to afford investments lawmakers made in education and health care last session.

"The good news about the estimate day is it is clear that we can fulfill the commitments we've made," said Raecker.

Senate Majority Leader Michael Gronstal said the projection shows that the Legislature has had some success in wrestling with a sour economy.

"Today's report of rising state revenues is another sign that our response to the national recession is working," said Gronstal, who said the economy will again be the focus when lawmakers convene on Jan. 9.

"It's time to roll up our sleeves and help working families," said Gronstal.

The Legislature is deeply divided, with Republicans running the House and Democrats controlling the Senate.

Senate Minority Leader Jerry Behn, R-Boone, said the relatively modest projection for growth in state tax collections was a signal that Republicans were on target in seeking to head off new spending that Democrats had pushed.

"Today's modest revenue estimates again highlight the need for responsible, sustainable and predictable budgeting that Senate Republicans strongly support and confirms that the Senate Democratic spending agenda would be reckless and put our state back in the red again," said Behn.

The Revenue Estimating Conferences was created during budget reforms in the 1990s, and is designed to force the governor, Legislature and an independent economist to all agree on how much the state will collect in taxes and use that as a base for a new state budget.

Underwood said little has changed since the panel issued its forecast in October.

"There are no real changes that we can see," said Underwood.

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