DES MOINES, Iowa — Iowa lawmakers said they're bracing for a legislative session filled with tough negotiations over the state budget at a time when tax revenue is expected to grow, but at a relatively slow pace.
On Thursday, the three-person Revenue Estimating Conference forecast that the state would collect just over $6.2 billion in the budget year beginning July 1 — about $251 million more than the current fiscal year.
That estimate was rosier than previous forecasts, but it still leaves legislators with some difficult choices because laws already on the books will push spending up by $313 million next year unless lawmakers make changes. Toss in the fact that the House is controlled by Republicans and the Senate is led by Democrats, plus ambitious goals for changing Iowa's property tax system and election year politics, and it's clear the session could be tumultuous.
"We'll have some pretty significant contests on how much money to spend between the House and the Senate," said House Speaker Kraig Paulsen, R-Hiawatha. "We're going to have some struggles to get there."
Although a growing budget won't solve the expected disagreements, legislators said it certainly would help.
"It continues to show some guarded, modest improvement in the Iowa economy, and that's good," said Senate Majority Leader Michael Gronstal, D-Council Bluffs. "We have several job-creation bills that we can now afford to fund."
Paulsen also welcomed the growing revenue number, but he said Republicans remained focused on reducing spending rather than implementing new state programs.
"We believe we have a mandate from Iowans to look at every dollar and make sure it's spent in the most efficient way possible," said Paulsen.
In recent weeks, state department directors have met with the staff of Gov. Terry Branstad to offer their budget wish lists, and the governor has said he will offer his proposed budget to the Legislature by the end of January. He hasn't offered details of the plan, but the forecast by the Revenue Estimating Conference made clear spending would remain tight.
The group, made up of a private economist and budget advisers to Branstad and the Legislature, concluded that Iowa's economic recovery would continue, but at a slow rate.
As Holly Lyons, who represents the Legislature, put it, "On the bright side, the economy has not slid back into recession."
House Minority Leader Kevin McCarthy, D-Des Moines, said the forecast could make it a little easier to pass legislation dealing with commercial property taxes and Iowa's mental health system. There is broad agreement among Democrats and Republicans that changes are needed in both areas.
"It was good news, not great news," said House Minority Leader Kevin McCarthy, D-Des Moines. "By no means was there a windfall, but it makes things a little bit better."
Despite support for changing the commercial property tax system, no one expects it to be easy. Unlike residential and agricultural property, businesses are taxed at 100 percent of their assessed value, and most agree the taxes are out of line with neighboring states.
Lowering commercial property taxes means the state must come up with the money from other sources, cut spending or put more of a burden on residential property taxes.
"It's a very hard thing to do, but we're committed to working on it and trying to get something done," said Paulsen. "I am confident that we will address the issue, I am not confident this will be the last year we address it. It's a multi-year issue and we'll deal with some big chunks this year."
Paulsen said work could continue on the matter in 2013.
The proposed changes to Iowa's mental health system revolve around shifting control away from the state's 99 counties. Department of Human Services head Chuck Palmer has proposed creating regional service delivery systems, but that would increase costs by at least $47 million.
Heading into the session, key lawmakers said at least they haven't been surprised by the tax revenue they'll have at their disposal.
"I guess I'd say that the new resources are within what we had in our heads," said Gronstal. "This is about what we expected."
The legislative session will begin Jan. 9.