Iowa Gov. Reynolds proposes tapping reserves to fund $9.4B state budget

DES MOINES — Iowa would use some of its cash reserve accounts to help fund a $9.4 billion state budget proposed Tuesday by Gov. Kim Reynolds.

Reynolds made her annual budget presentation in coordination with her annual Condition of the State address to the Iowa Legislature.

Her proposed state general fund spending for the budget year that begins in July is more than the $8.7 billion the state is projected to take in as a result of the lower 3.8 percent flat state income tax now in effect, according to projections from the state’s nonpartisan Revenue Estimating Conference, whose membership includes a representative of the governor’s administration.

But the state’s general fund has an unspent balance of more than $2 billion, and a $2.1 billion excess in state reserve funds gives the state a spending allowance of roughly $10.8 billion, according to the governor’s office.

Reynolds proposed spending roughly 83 percent of those available funds. Her $9.4 billion budget proposal is an increase of $486 million, or more than 5 percent, over state spending in the current budget year, according to the governor’s office.

Reynolds’ proposal would leave nearly $1.8 billion in the state’s general fund balance, down from $2.1 billion; $654 million in the Cash Reserve Fund, down from $697 million; and $218 million in the Economic Emergency Fund, down from $233 million.

The state’s Taxpayer Relief Fund, created by Republicans to offset state spending shortfalls created by recent reductions to state income taxes, would be left with $3.7 billion, down from nearly $4 billion, under Reynolds’ proposal.

Reynolds’ plan is merely a proposed budget. The final state budget must be agreed upon by both chambers of the Iowa Legislature, as well as the governor. The 2025 session of the Iowa Legislature began this week.

Of the spending increases in her proposed budget, 95 percent would go to increases in education funding and Medicaid, according to the governor’s staff.

Of the proposed spending increases, $240 million would be dedicated to public and private education.

Of that, Reynolds’ budget proposes a 2 percent per-pupil increase in public education funding. She proposed $14 million more for the Iowa Board of Regents to run the state’s three public universities — far less than the $24.9 million the board had requested.

For the current state budget year, which ends June 30, Reynolds and Republican state lawmakers set $8.9 billion in state general fund spending.

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