The monthly revenue report for July is out, telling Iowans that state revenue is up 7.5 percent compared to July 2013.
While that is good news after the way state revenue figures ended FY 2014, it should not be seen as a clear indication of strong revenue growth for the entire year.
Personal income tax collections only grew 1.7 percent for the month. That is below the 5 percent figure that the nonpartisan Legislative Services Agency says is the sign of sustained economic growth.
Sales and Use tax are up 12.8 percent, but that figure is somewhat misleading. Last July, there was a deposit issue with Sales Tax and Corporate Income tax. Sales tax was negatively impacted by $23.5 million then, while corporate collections were the beneficiary.
Much of the July 2014 drop in corporate collections is the because of last year’s situation. Even factoring in this anomaly, corporate tax revenues were still down compared to last year. Franchise tax collections were also down significantly compared to 2013, going from $5.2 million to just $0.2 million last month.
On the refunds side, the July report shows a major drop in school infrastructure payments to schools. Again, this is an accounting situation as the Department of Management started paying out these collections to school districts more quickly than they had in previous years. This gives the appearance of a major decline as we start FY 2015, but in fact it will be more accurate as we go along during the fiscal year.
So in light of these caveats, the strong revenue picture is not nearly as positive as one could assume.
The state needs strong revenue growth in FY 2015 to meet the forecast by the Revenue Estimating Conference.
Based on the preliminary closing numbers for FY 2014, LSA projects that Iowa will need to have 6.8 percent revenue growth for the year to meet the forecast. This may be a bit of a climb, as commodity prices — particularly corn — continue to fall based on the bumper crop projected by USDA.
It remains an honor to serve each of you in the Iowa Legislature. Thank you for the conversations we have had during parades and other summer events. I look forward to continued service to House District 27 and hope to see you again this summer and fall at events.