Although Iowa House officials have not decided whether the House will convene for a special session to address a budget shortfall, some officials say they did not believe a special session would be necessary.

When the 2002—03 Iowa State Legislative session came to a close this summer, representatives believed the state budget was balanced.

Instead, Iowa experienced an estimated $64 million shortfall in funds.

The state continues collecting tax revenues that count for the fiscal year’s budget after the fiscal year ends June 30, necessitating the government to estimate the amount of money it will receive after that date.

Overestimating the amount of tax revenues the state receives after the fiscal year can lead to shortfalls in funds.

Paul Coates, associate professor of political science, said the shortfall this year was caused by state financial experts’ expectations the economy would improve, boosting tax revenues.

“They just didn’t get the kind of revenue they thought they were,” Coates said.

He said although the economy is improving, it’s improving unevenly, making tax revenues difficult to predict.

While productivity is increasing, Coates said wages remain low and jobs scarce.

“The economy is sending out all kinds of mixed signals,” Coates said.

Cynthia Eisenhauer, director of the state Department of Revenue and Finance, said she did not believe a special session would be necessary to address the situation. “There seems to be a consensus that a special session isn’t necessary,” said Eisenhauer.

Eisenhauer said Iowa goes through three steps in order to predict tax revenue. First, the state seeks the advice of economic experts.

Then, the state consults the University of Iowa Institute for Economic Research, where a model is used to project the revenues Iowa will receive.

Based on the information from the first two steps of the process, members of the Revenue Estimating Committee reach a consensus about how much money the state can expect to receive.

Rep. Patrick Murphy, D-Dubuque, said the Iowa House unanimously passed a bill last session to reform how state revenues are estimated, but it got held up in the Senate Appropriations Committee.

Laughing, Murphy said considering current circumstances, “I’d be surprised if [the Senate] didn’t take it up.”

He said overestimation of state revenues has been a problem for the past several years, “but this year is the worst.”

Governor Tom Vilsack has the authority to transfer $50 million from the state reserve fund, created during the economic boom of the 1990s, to help reduce the shortfall. The remaining transfer must be approved by the legislature.

The next legislative session convenes in January, and there have been some concerns that waiting until the next legislative session begins would negatively affect the state’s bond rating.

Murphy said the shortfall wasn’t an issue for bond agents, so “everybody is willing to wait” until the Legislature convenes to remedy the shortfall.

Sen. Herman Quirmbach, D-Ames, said he believes tax revenues won’t increase by the time the Iowa Legislature convenes.

“I don’t have a good feeling about this,” Quirmbach said.

Quirmbach said he believes Iowa faces another tough budget year next session.

“There won’t be any program that doesn’t feel the pinch,” Quirmbach said.