Iowa’s state spending will increase slightly in the coming year as revenues remain low because of GOP-backed tax cuts — leaving a $1.2 billion gap that lawmakers plan to fill using the state’s budget surplus and the Taxpayer Relief Fund.
The state’s Republican majorities approved the $9.65 billion state budget before adjourning the legislative session on May 3 after a marathon final weekend.
The budget for fiscal year 2027 represents a 1.43% increase from the $9.51 billion that the state is spending in the current fiscal year.
Iowa is expected to bring in $8.47 billion in revenue, thanks to recent income tax cuts — producing the $1.2 billion gap.
To cover the difference, the state is transferring $617.8 million from the Taxpayer Relief Fund to the general fund.
That will leave $2.57 billion in the Taxpayer Relief Fund at the end of fiscal year 2027, down from an expected $3.11 billion balance at the end of the current fiscal year on June 30.
The state’s budget surplus is also expected to drop by $648.4 million, from $1.52 billion at the end of fiscal year 2026 to an anticipated $870.1 million at the end of fiscal year 2027.
Republicans say they’ve long planned to use the extra funds to cover state spending until revenues rebound.
“When we gaveled in this January, we made a promise to Iowans that we would deliver another fiscally sound budget, put the taxpayers first, and make Iowa communities safer,” Speaker Pat Grassley, R-New Hartford, said in a statement after the session ended. “Standing here today, I can say: mission accomplished.”
House Minority Leader Brian Meyer, D-Des Moines, told reporters the “the budget as a whole is in serious trouble” while he said Republicans contend “this was the plan all along.”
“Well, that’s kind of scary because the economy in Iowa — and the farm economy especially — is not getting any better,” Meyer said. “So we really have to do something to address this problem moving forward, because those reserves will only last two to three more years.”
Gov. Kim Reynolds has yet to sign the new budgets. Governors in Iowa hold the power to veto specific line items included in budget bills so the final numbers may change slightly.
Here’s how Iowa will be spending its multi-billion dollar state budget, according to a Register analysis.
Standing appropriations, including K-12 education funding
Health and human services
Education
Justice system
Transportation
Iowa Judicial Branch
Infrastructure
Agriculture and natural resources
Administration and regulation
Economic development
Stephen Gruber-Miller is the Capitol bureau chief for the Des Moines Register. He can be reached by email at sgrubermil@registermedia.com, by phone at 515-284-8169 or on X at @sgrubermiller.
Marissa Payne covers the Iowa Statehouse and politics for the Register. Reach her by email at mjpayne@registermedia.com. Follow her on X at @marissajpayne.
This article originally appeared on Des Moines Register: Here’s how Iowa lawmakers are spending the state’s $9.6 billion budget
Reporting by Stephen Gruber-Miller and Marissa Payne, Des Moines Register / Des Moines Register
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