Governor Kim Reynolds has announced that the state of Iowa ended the fiscal year that ended June 30 with a 1.238 billion surplus. Though the fiscal year ended June 30, it takes until late September to officially close the books. The surplus last year was $305 million.
There is some controversy over how much of the surplus is due to federal stimulus money that the state received. The state’s interim budget director said that the surplus was due to larger increases than expected in both sales taxes and corporate and individual income taxes.
We have had surpluses every year since the 2017 legislative session. I am pleased to be able to report that I have served on the appropriations committee during this time and have been a strong advocate for the fiscally responsible budgets that have led to these surpluses.
You may recall that earlier this year, we passed a bill that makes significant cuts in income tax rates and phases out what is left of the inheritance tax. We also shifted funding for mental health treatment from property taxes to the state. This should allow counties to reduce property taxes.
It will be interesting to see what effect this bill will have on revenue as we go forward.
In several recent newsletters I have been warning of increasing inflation. I see that the Federal Reserve Board is now realizing that inflation will continue. According to a September 22nd article in Time:
“The Fed’s rate-setting committee now says it expects inflation to reach 4.2% by year’s end. That’s up from a forecast of 3.4% in June and almost double the 2.4% inflation the committee predicted in March. If the outlook holds true it will be the highest annual U.S. inflation rate since 1991.”
As you know, there is continuing discussion in the U.S. Congress of passing a huge $3.5 trillion spending bill. We do not know at this point if it will pass, or even if it does not, if they will pass a smaller but still huge spending bill. Since they are already spending more that the revenue they are taking in, it should be clear that putting this much borrowed or printed money into the economy will only make the inflation problem worse. I do not believe the President’s assurance that the increased spending in the bill will be paid for by taxing “the rich.” Fortunately, there is some resistance to this bill and it may be that it will not pass.
We always must keep in mind that there is a difference between rising prices caused by shortages of a certain product or increased demand for another product, as opposed to a general increase in prices caused by an increase in dollars in the economy.
As always, please feel free to contact me with your ideas or concerns.