Capitol Update

Economic Indicators, Revenue Give Mixed Signals on Regional Economy

In its latest release, the Department of Revenue’s Iowa Leading Indicators Index showed modest growth in December 2014. The Index rose to 109.4 for the month, a slight hike over November’s rating of 109.3. Six of the eight components making up the Index improved in December, including average weekly manufacturing hours, residential building permits, and the Iowa Stock Market Index. The Index had remained relatively stable for the last six months of 2014, with December’s figure being only one-tenth of percent below July’s number.

Pointing in the negative direction is Creighton University’s Iowa Business Conditions Index. This monthly indicator fell in January to 52.2, down from 53.4 figure reported for December. While any number above 50 is viewed as indicating economic growth, the Iowa index has fallen in six of the past nine months. Also raising concern are forecasts from USDA concerning farm income in 2015. USDA says that farm income will continue to fall from the 2012 highs, while input costs continue to creep up.

The conflicting economic forecasts and slow, but sustained revenue growth is not just isolated in Iowa. These conditions are also being experienced in a number of the neighboring states. In Missouri, lawmakers and Governor Jay Nixon are considering actions to take in light of slowing tax revenues. Nixon has stopped over $500 million of state spending in the current fiscal year and is proposing additional revenue streams to fund new spending for schools and health care.

In Wisconsin, legislators are faced with having to close a growing budget gap. Revenue in the Badger state is 2.7 percent below the previous year, and the tax collections are now projected to be $619 million below state appropriations. Governor Scott Walker is proposing a series of cost savings measures, including a $300 million cut to higher education.

To the west, Nebraska saw tax revenue fall in January. That state saw tax revenue fall 6 percent when compared to January 2014. For the fiscal year, Nebraska tax revenue was still growing by 1 percent.

The outlier of the group is Minnesota, as that state’s economy continues to exhibit solid growth. Revenue for November and December 2014 was 6.4 percent higher than what the state had projected at the start of November. For the first six months of the fiscal year, actual revenue had exceeded projections by 2.3 percent.

The economic forecast for all states in the region is complicated by factors that are benefiting other parts of the economy. The strength of the US dollar has made the price of imported products significantly cheaper. That strength creates headwinds for US exports, including agriculture products. The drop in exports has been a factor in falling commodity prices and layoffs at major regional manufacturers like Caterpillar and John Deere.

Zero-Based Budgeting Bill Passes House State Government

The House State Government committee voted earlier this week on HF 1; a bill requiring state agencies and departments, as well as the judicial branch to adopt a zero-based budgeting approach. The bill passed out on a party line vote 12-10.

Currently, state executive departments and agencies use estimates based on 75 percent of funding provided for the current fiscal year, and the form for budget submission is decided by the director. The judicial branch operates on the same procedure. With this bill, executive departments and the judicial branch will be required to use zero as their base approach when determining their budgets. Additionally, it requires the departments to prioritize requested expenditures, with support as to why every request is needed.

It is a useful tool to help the departments and agencies justify why they need the amounts they request, and also helps with the budgeting process by helping legislators identify the “low hanging fruit” should adjustments need to take place. It also prevents across the board cuts, and provides an open and transparent process throughout.

Opponents argue that this would place an undue hardship on departments and agencies, and it would take up a lot of time. Additionally, they argue this practice disrupts the legislative budgeting process, and the governor should have deference to decide what budgeting principles to use.

If signed, Iowa would join Georgia as the only two states following a true zero-based budget system; although both states are in good company as many other states use hybrids of several budgeting principles in their overall budget process.


On Monday, Anna Mary Rinikerand her daughter Elizabeth visited the Capitol. They both had the day off so they decided to come to Des Moines for the day and stop by the Statehouse. Elizabeth is a sixth grader at Anamosa High School. Elizabeth was very interested in the legislative process. We took a tour of the House Chamber, the Governor’s office, and went to the top of the dome.

Anna Mary Riniker (left), her daughter Elizabeth (center) and myself in the House Chamber.
Anna Mary Riniker (left), her daughter Elizabeth (center) and myself in the House Chamber.

Farm Bureau members from across the state came to Des Moines Wednesday to talk with legislators. I met with members from both Jones and Delaware Counties. We discussed the pending gas tax as well as other topics important to their members.

The gas tax bill passed out of Transportation committee on Wednesday. Since the bill deals with taxes and fees, it also had to go through Ways & Means committee. The bill passed out of Ways & Means on Thursday. It now moves to the House floor where we will likely debate it next week. The Senate has an identical bill. It passed out of their committees this week as well.

I wanted to give everyone an update on Lake Delhi. The Lake District Trustee Board met to review the recommendations made for awarding the Phase 2 project to General Constructors Inc. GCI was the lowest bidder and based out of the Quad Cities. According to the recommendation, General Constructors Inc. met all the technical and commercial requirements of the bid specifications. After discussion, the District Board of Trustees awarded the project to General Constructors Inc. whose low bid came in less than the original engineers’ estimate. Phase 2 will is scheduled to start in early March if the weather cooperates. The target date to start filling the Lake is October 23rd.

Friday morning I am speaking to government classes at Monticello High School and Kirkwood. I will be at the Jones County Economic Development Forum at the Lawrence Center in Anamosa on Friday the 20th at noon. I’ll be joining Lt. Governor Reynolds will be touring Orbis Corporation in Monticello on the 20th at 2:45.

If you have any questions, comments or concerns about these topics or any others please feel free to contact me by e-mail at or by phone at (515) 281-3221.


Rep. Lee Hein

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