DES MOINES — A House Appropriations subcommittee has greenlighted legislation majority Republicans say could eliminate the need for midyear budget cuts when revenues are less than projected.
House Study Bill 684 would create a Revenue Estimating Conference Stabilization Fund of up to 2 percent of state general fund revenues for lawmakers to tap to cover revenue shortfalls.
It would be filled even before the state Cash Reserve Fund and Economic Emergency Fund.
“This will provide stability in case the REC estimates are off,” Rep. Ashley Hinson, R-Marion, said, noting the state has faced revenue shortfalls twice in her first term.
However, Rep. Chris Hall, D-Sioux City, said the problems aren’t the result of “mistakes or poor judgment on the part of the REC,” but due to actions by the Legislature.
“If the Legislature in January creates a new tax cut or couples with federal tax code and takes $100 million out of our budget, that will affect what the REC includes in its March estimate,” Hall said. “If the Legislature continually throws a curve ball to the REC, it is unfair to blame the REC for missing on its swing.”
He understands what Hinson and majority Republicans are trying to do, but Hall doesn’t think the stabilization fund would have solved the problems that led lawmakers to approve midyear budget cuts.
“We have a lot of buckets in state government and creating more buckets doesn’t necessarily solve the problem,” Hall said. Already, 7.5 percent of state revenues go to the Cash Reserve Fund and 2.5 percent to the Economic Emergency Fund.
In addition, Hall said, state law prohibits the Legislature from spending more than 99 percent of available revenue.
Education interests at the subcommittee hearing raised concerns that in years when 2 percent of revenues are diverted to fill the stabilization fund, there would be fewer dollars available for schools and other priorities.
“You’ve done a good job of protecting K-12 during the deappropriation process, but this works in the opposite direction,” said Margaret Buckton, who represents the Urban Education Network and Rural School Advocates of Iowa.
There’s no similar bill in the Senate, but Senate President and Appropriations Chairman Charles Schneider, R-West Des Moines, said it could be part of the final budget negotiations.