On Friday, March 20 at 10 a.m., the Revenue Estimating Conference (REC) will meet to review and revise the general fund revenue estimates for FY 2009 and FY 2010. According to two members of the REC, the estimates for both fiscal years are expected to decrease. The Code states that if the REC downgrades revenue estimates after the December meeting, the Governor has 14 days to re-submit his budget to ensure it complies with the 99 percent expenditure limitation law. However, it appears that the House and Senate Democrats will not wait for the Governor to re-submit his budget recommendations. According to the House Appropriations Chair, the budget subcommittees will begin approving individual budget bills next week, with the goal of having them all out by March 27.
The REC projects a decrease of $28.2 million, or -0.5 percent compared to FY 08. Actual year-to-date revenue is off by $60.7 million, or -1.5 percent year-to-date. Combine further decreases in revenue with increases in tax refunds and the state has a perfect storm that could reduce FY 09 net general fund revenue by $100 million or more.
Both David Underwood (private sector member of the REC) and Holly Lyons (legislative appointee of the REC) have said publicly that the estimates are likely to decrease. Unfortunately, with only three months left in the fiscal year, there are not enough available funds to cut. The deficit in FY 2009 will have to be filled with the remaining $99 million in the Economic Emergency Fund (EEF). The current estimate for FY 2010 is -0.4 percent compared to FY 09. However, if FY 09 is decreased by $100 million and the percentage growth for FY 10 stays at -0.4 percent, it means that FY 10 is decreased by $100 million also. There is a chance that FY 10 could drop below -0.4 percent, which would further compound the problem.
At this point it is unclear how the Democrats intend to close the roughly $800 million budget gap but they have admitted they would use the federal stimulus money to backfill some of the cuts to education (K-12 and higher ed), Medicaid and workforce development in their proposed budget targets.
Republicans again this week expressed an interest in going through the budget line-by-line and finding potential savings. The Democrats have said they were going to do that also but have yet to take Republicans up on the offer to help them craft a fiscally responsible budget.
Republicans believe the Governor and Legislative Democrats should accept their share of the blame for the fiscal mess the state is experiencing. It is not entirely the fault of misguided federal policies, greedy Wall Street bankers or the natural disasters. We must be clear- when we left last May we had already had built ourselves a $563 million shortfall. We now face $800 million shortfall. Most of the shortfall was caused by a lack of discipline and a failure of foresight with Iowans' dollars-not by Washington or Wall Street or natural disasters.
Senate Panel Passes Biodiesel Fuel Mandate & Repeal of Biodiesel Retail Tax Credits Measure
On Tuesday, March 10, 2009, the Senate Transportation Committee passed a bill which became Senate File 408. SF 408 requires that any diesel fuel sold or advertized in this state after July 1, 2009, must be a biodiesel blend of at least 5%. On July 1, 2012, the threshold increases to at least 10% until July 1, 2015 when it must be at least 20% thereafter. The bill temporarily excludes certain non-motor vehicle diesel engines from this requirement until July 1, 2012.
SF 408 includes exceptions to the mandated minimum biodiesel level under which IDALS may issue a threshold suspension order. The first circumstance is when less than 5% of the biodiesel sold in this state under the applicable threshold is produced from nontraditional feed-stocks. The second situation is when no specification by the United States Environmental Protection Agency or A.S.T.M. international applies to the designated minimum biodiesel blend threshold fuel. In any circumstance, the minimum level of biodiesel can not be less than 5%. However, IDALS may issue a suspension order applicable to motors in a facility under the control of the federal nuclear regulatory agency if this agency has not approved the designated biodiesel fuel. In addition to IDALS suspension order authority, SF 408 grants the Governor power by executive order to adjust the biodiesel fuel designation if the Governor determines any of the following:
(1) a major price disparity between biodiesel and petroleum diesel, or
(2) either there is a significant shortage of biodiesel fuel supplies or a systemic market circumstance that will cause material economic harm to retail motor fuel vendors who advertize or sell such fuel in this state.
In any circumstance, the Governor's executive order cannot adjust the biodiesel fuel designation below 5% or above the applicable threshold level. SF 408 provides IDALS with explicit authority to craft emergency rules to implement a 5% biodiesel fuel requirement by July 1, 2009. SF 408 also repeals the existing biodiesel fuel retail tax credit upon enactment of the bill applicable to biodiesel sold or dispensed after the bill is signed by the Governor. The current biodiesel retail tax credit is 3 cents per gallon of biodiesel fuel that is at least 2% fuel-grade vegetable or animal oil. A retail motor fuel vendor gets the tax credit provided that at least 50% of the retailer's diesel sale each year is at least 2% biodiesel fuel. This tax credit is authorized through calendar year 2011 which ends December 31, 2011. Senate File 408 was referred to the Senate Ways & Means Committee for its consideration.
Question of the Week Do you support a proposed state mandate that would require all diesel fuel sold in the state of Iowa to increase their current blend to 5% bio-fuel by 2010 and 15% bio-fuel by 2015?
Please press control & click on this link to participate in this survey--
Visitors to the Capitol this week-- Son Michael "Pastor of the Day" & his wife Sara De Boef with their children Nathen, Jaxson, & Adelynn from Kansas City, Mo, Daughter Jennifer Grove with her children Nolan, Bryson, Myles, & Cael, Daughter-in-law Amy De Boef and her children Ben, Anna, & Emma, and her parents Charles & Ann Farley with 8 for the 10 Grandchildren leading the Pledge of Allegiance. Gerald Adams and his wife Sara with Poweshiek Co Mater Gardeners/ISU Extinction Service. Gary Bickmeier & Kay Witte with the Keokuk Extinction Service. Mark Taylor & wife Linda, with Network of Iowa Christian Home Educators their seven children.
I would appreciate your input. My phone number at the Capitol is 515-281-3221, e-mail me at