The Iowa Revenue Estimating Conference was established in Iowa Code as a way to arrive at consensus General Fund revenue estimates to be used by both the Governor and Legislature for the budget process. They met this week to determine the newest state revenue estimate and announced very troubling news. The March REC estimates shows state revenue is expected to fall short of the previous expectations by nearly $131 million for this current budget year. This is in addition to the $118 million projected decrease announced in December. In short, for the current budget year the total estimated decrease is almost $250 million.
After the shortfall was announced in December, the Legislature immediately went to work on cutting the $118 million from the current budget. This was a very difficult process because we only had six months left in the budget year to make cuts. In January, we made the necessary cuts to ensure we kept a balanced budget in Iowa.
The news this week was worse for two reasons. First, it was an even larger decrease than the first cut we made to the budget. Second, we only have three months to cut the budget as opposed to six months from the earlier estimate. For this reason, the Governor and Senate and House leadership determined it was best to use the cash reserves to address our financial dilemma. Cutting the state budget by $131 million this late in the fiscal yearwould be devastating for departments, state employees and our schools. We are committed to replace the money in the cash reserve fund as soon as possible.
The REC news is troubling, but not surprising. For the past several years, I have consistently raised concerns with spending levels in our state budget. We saw this coming. This is why we came into the 2017 session with a pro-growth agenda focused on creating an environment that will create jobs and grow the economy.
We have passed several meaningful reforms in these first 10 weeks of this Session- legislation that will spur an economic uptick. It is important we do not lose focus in the coming weeks, and instead continue to work on other measures to grow our economy by reducing burdensome regulations on job creators.
Now that the REC estimates have been revised, budget subcommittee chairs and the Appropriations Committee are developing budget targets.Their task could prove quite challenging in crafting the FY 2018 budget.
In addition to lowering the estimate for the current budget year, the REC also reduced the estimate $191 million for FY 2018, which are working on right now. This will make for a very difficult budgeting process this session.
One of the main reasons the state revenue is not growing as fast as expected is because our manufacturing sector has decreased considerably. This is why we came into session with a pro-growth, pro-jobs agenda. We have spent a large part of this session on major reforms to make Iowa a better state to create jobs and grow business. This is vital for the long-term success of Iowa.
Senate Republicans ran for office stressing the importance of a smaller, smarter, efficient government. As we deal with our budget shortfalls, efficiencies must be considered. This is no longer just a message or talking points on the Senate Floor or in our forums. It is our reality. We are ready step up with solutions and lead. We will continue to be focused on a pro-growth agenda to move Iowa forward and help us navigate these choppy w