Iowa

State Fiscal Briefs

April 2021

Looking for Iowa data related to the pandemic? We have health, economic, and fiscal data on our new tool, How the COVID-19 Pandemic is Transforming State Budgets.

Iowa’s budget basics

According to the National Association of State Budget Officers (NASBO), Iowa’s total expenditures in fiscal year (FY) 2020 were $24.2 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Iowa’s combined state and local direct general expenditures were $32.2 billion in FY 2018 (the most recent year census data were available), or $10,239 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.

Iowa’s largest spending areas per capita were elementary and secondary education ($2,173) and public welfare ($1,973). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Iowa’s combined state and local general revenues were $35.4 billion in FY 2018, or $11,243 per capita. National per capita general revenues were $10,071. Iowa uses all major state and local taxes. Iowa’s largest sources of per capita revenue were charges ($2,495), such as state university tuition and highway tolls, and federal transfers ($2,055).

Iowa’s politics

Governor Kim Reynolds, a Republican, was elected in 2018 with 50 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (59 Republicans to 41 Democrats) and Senate (32 Republicans to 18 Democrats). Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Iowa. All Iowa House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2022, and the other half will be up for election in 2024.

Iowa’s budget institutions, rules, and constraints

Iowa uses an annual budget. The legislature is not required to pass a balanced budget, but the governor is required to sign one. Deficits may be carried over into the following year. Iowa also has an appropriations formula that limits spending growth, but the limit may be overridden by a simple legislative majority. There are also limits on total authorized debt incurred by the state but not debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Iowa’s recent fiscal debates

Iowa’s current budget

Governor Reynolds released her FY 2021 budget proposal in January 2020. The budget proposal included $8.1 billion in general fund spending, an increase of 4 percent from FY 2020. The proposal focused primarily on education and the governor’s tax reform plan to increase the sales taxes and decrease income taxes.

Iowa enacted its FY 2021 budget in June 2020. The enacted budget included $7.8 billion in general fund spending, a $300 million decrease from the governor’s proposal and a 1 percent decrease from FY 2020 spending. The enacted budget left a budget surplus of $311 million. It did not include the governor’s tax plan, though. Iowa used most of its federal CARES Act funds to support its Unemployment Insurance Trust fund.

Governor Reynolds released her FY 2022 budget and gave her State of the State address in January 2021. In the speech, the governor acknowledged the state faces a challenging fiscal environment but, because of previous spending cuts and reserves, said, “we aren’t looking at tough budget cuts and we’re certainly not looking at raising taxes.” The governor dropped her push for new income tax cuts because of the pandemic, but also called for speeding up previously passed income tax cuts—by removing “tax triggers” that require Iowa to hit revenue targets before they take effect. The governor’s budget proposes $8.1 billion in general fund spending for FY 2022, a sum larger than FY 2021 enacted spending but roughly equal to what she proposed for that fiscal year before the pandemic.

For more on Iowa’s budget, see