NEWS

The state's Revenue Estimating Conference (REC) met on Thursday to estimate how much money legislators have to spend in the next budget year (called Fiscal Year 26, or FY26). They found that the State is starting to see the drop in money being collected after several years

of income tax cuts. Fortunately the State has a lot of money in its savings accounts so we do not have to cut spending this year. Here’s a quick rundown:

• The Governor wants to spend $9.43 billion for FY26.
• Iowa will only collect $8.51 billion in FY26 (that’s a 6.4% drop, but they predicted this).

You probably notice that the Governor is spending more than incoming revenues. She is able to do that because the Iowa Legislature has been spending much less than 99% of the revenues. So we have a lot of money in our savings accounts and the Governor plans to use some of that to avoid budget cuts. Since education, human services and Medicaid make up 75% of the state’s budget, it’s important to avoid cuts!

Director of the Department of Management Kraig Paulsen said it best : “There are no surprises today...The spending discipline by our elected leaders…continues to put the state in a position where the needs of Iowans can be met and we can weather through this tighter time. The reserve funds are full at $961 million, the Taxpayer Relief Fund has a balance of over $3.75 billion, and the carry-forward from the previous fiscal year was $1.9 billion.” 

The next step in the budget process is for legislative leaders to set their own targets, which they will divide up among budget subcommittees. We should see those targets in the next two weeks.