Iowa state revenues $200M less than projected for last budget year

DES MOINES — General fund revenue for the state budget year that ended in June was nearly $200 million less than projected by a nonpartisan state panel in March, according to final numbers published this week.

Iowa collected $8.8 billion into its general fund in the state budget year that ended June 30, according to final numbers published by the nonpartisan Iowa Legislative Services Agency.

That was $198 million less than what the state’s nonpartisan Revenue Estimating Conference projected in March.

The REC is scheduled to conduct its next meeting on Oct. 16.

The $8.8 billion in general fund revenue was an 8.1 percent decrease over the previous budget year, according to LSA’s figures. That reduction was driven largely by the continued phasing in of state tax cuts.

It also was less than the $8.9 billion that the Republican-majority Iowa Legislature and Gov. Kim Reynolds enacted for the budget year.

Iowa’s state revenues have dipped below spending levels as the full effect of recent state tax cuts — particularly to Iowans’ state income taxes — are being realized. In 2025, most Iowa workers paid the same 3.8 percent state income tax, resulting in a significant reduction in state revenue.

Republicans planned for what they believe will be a temporary dip in state revenues by creating a Taxpayer Relief Fund and using it to cover any state budget shortfalls.

As of July, the state’s general fund had a $1.6 billion surplus and the Taxpayer Relief Fund contained $3.6 billion, according to LSA. The state’s cash reserve ($637 million) and Economic Emergency ($212 million) funds also were full to their statutory limits.

LSA’s early projection of the next state budget year’s revenues shows another 5.2 percent decline to $8.4 billion.

State lawmakers react

Statehouse Democrats cast warnings about declining state revenues and criticized majority Republicans’ budget and tax cut policies.

Sen. Janet Petersen, of Des Moines, the top Democrat on the Senate budget committee, called the state’s latest revenue figures “worse than anticipated.”

“With revenues down nearly $200 million since March’s REC estimates, the governor’s five-year projections are looking pretty rosy compared to the state’s fiscal reality,” Petersen said in a statement. “The majority party is putting Iowa on a deficit spending road with no end in sight. …

“Republican lawmakers planned to spend more than we take in for at least the next five years. Our reserves won’t last forever. Just how much, or for how long, are they willing to deplete our reserves to cover their budget malpractice?”

Rep. Brian Meyer, of Des Moines, Democrats’ leader in the Iowa House, cited tax cuts, taxpayer-funded private school tuition assistance, and the agricultural economy as contributing to a “fiscal death spiral.”

“Handouts to big corporations and millionaires, runaway private school vouchers, and a struggling ag economy are driving the state into a ‘fiscal death spiral,’” he said in a statement. “State leaders’ mismanagement continues to cause Iowans to pay the price, including shrinking health care access, crowded classrooms, and rising property taxes.”

A spokeswoman for Iowa House Republicans agreed with Meyer on the agricultural economy, but little else when it came to assessing the state’s finances.

“You won’t be surprised to hear we’re not really interested in budgeting advice from the party that had to implement across the board cuts when they were in charge,” House Republicans spokeswoman Melissa Saitz said, referring to state budget cuts in 2009 in the wake of a national recession.

“Thankfully, Republicans took the majority of the Iowa House in 2010 and reined in Democrats’ history of reckless spending. This has made our state budget much more resilient while facing a tough time for the agriculture economy,” Saitz said. “While Democrats always call for more spending, Iowa House Republicans have been the adults in the room, proving that we can make the tough decisions necessary to fund Iowans’ budget priorities while delivering much-needed tax relief.”

Sen. Mike Klimesh, the newly elected Republican Majority Leader in the Iowa Senate, said Democrats are being hypocritical in criticizing Republicans’ management of the state budget, and claimed that Democrats during this year’s legislative session proposed “roughly a quarter of a billion dollars in extra spending.”

“They can’t have it both ways. This hypocrisy is exactly why Iowans have rejected their ideas and Iowans have chosen for a decade to put common sense conservatives in power in state government,” Klimesh said in a statement. “We budget carefully to ensure our state continues to be in a strong fiscal position and, with healthy reserve funds, are prepared for changing situations that may come our way.”

Gov. Kim Reynolds’ office did not respond to a request for comment. On social media this week, Reynolds touted state tax reductions and highlighted Iowa’s GDP growth in the second quarter of this year.

Comments: (515) 355-1300, erin.murphy@thegazette.com

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