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Release: March 12, 2001

Iowa Economic Forecast projects 3.7 percent state tax revenue growth

IOWA CITY, Iowa -- In its latest Iowa Economic Forecast, the University of Iowa Institute for Economic Research predicts state tax revenue will grow 3.7 percent for fiscal year 2001, which ends June 30.

The 2001 revenue projection is down from the Institute's November forecast of a growth rate of 5.9 percent for fiscal year 2001. For fiscal year 2002, which begins July 1, 2001, the Institute predicts 5.5 percent revenue growth, down from a 5.9 percent estimate made in November.

This forecast is substantially in accordance with the current official forecast of 3.5 percent issued in December by the State Revenue Estimating Conference, said Beth Ingram, Institute director and UI professor of economics. Actual revenue growth for the state stood at 0.3 percent through the end of February, which was affected downward by a larger than normal local options tax payout to local governments.

Ingram said the Institute's forecast was made with the belief that tax revenues will increase over the final months of the fiscal year. Tax collections also depend on income, and Ingram said the forecast is based on the expectation that income levels will not be lower than normal.

Each quarter, the Institute publishes the Iowa Economic Forecast, which contains quantitative forecasts of economic conditions and tax revenues for the State of Iowa. The Institute released its report Friday at the Iowa Economic Forecasting Council meeting in Des Moines. The report is also given to the Revenue Estimating Conference, which meets March 14 to advise the Iowa legislature on the state revenue situation.

There was a slight decline in the forecast for Iowa real personal income growth, falling from 3.3 percent in the November forecast to 3 percent in the most recent forecast.

"These figures do not shout recession," commented Ingram. "The level of real income in Iowa was actually higher than we anticipated in the third quarter of 2000."

However, she added that state income data for the fourth quarter of 2000 has not been reported yet, and could have an impact on the next forecast.

The Iowa employment growth forecast remained steady at 0.6 percent for 2001, with some growth seen in the retail and service sectors and a decrease in the manufacturing sector.