Affordability 3/14
- Mariah Tang
- 3 days ago
- 2 min read
Unlike the federal government, Iowa has a constitutional requirement to enact a balanced budget. In recent years, this budget deficit has been offset by using Iowa’s emergency reserve funds. Reserve funds are a temporary one time fix and likely will be exhausted in the next few years, if revenues do not recover and expenditures continue to grow.
What does this balanced budget requirement look like “in action” from 2025 to 2026 and what is the forecast into 2027?
The Iowa Revenue Estimating Conference (REC) met on March 12. This group consists of 3 people that meet quarterly to estimate state revenues. The 3 members consist of Kraig Paulsen, Director of Iowa Department of Management (Republican-held executive branch budget office), Jennifer Acton, Director of the Fiscal Services Division of the non-partisan Legislative Services Agency (LSA), and a public member - Jeff Plagge. The public member is typically an Iowa business person. Paulsen and Acton are state employees.
The Iowa Revenue Estimating Conference projected Thursday that state revenues will decrease by 9.3% from fiscal years 2025 to 2026 — a larger drop than previously expected.
The last time the REC met, in December 2025, the panel estimated Iowa’s net revenues would decline by 8.8% from fiscal year 2025 to 2026, from roughly $8.94 billion to $8.16 billion. This figure was updated Thursday to project an additional loss of roughly $46 million, meaning a total 9.3% decrease in state revenues, an additional reduction of 0.5% in just 3 months.
This 2025/2026 “gap” between what Iowa spends (expenses) and what it takes in (revenue) will then consume Iowa’s emergency financial reserves to make up the difference and “balance the budget”.
Paulsen and Acton presented different estimates looking ahead at FY 2027. While both entities projected the state would see a revenue increase, the non-partisan LSA projected 3.1% growth, to a revenue of $8.36 billion, while the Republican-held state executive branch estimated a higher 5.8% jump to $8.58 billion in revenue.
For the official REC estimate for FY 2027, the REC members agreed to “split the difference” in making their projections for FY 2027, estimating a 4.4% increase to $8,471.6. billion. This is an increase from the December 2025 estimate of 4.2%. Both Paulsen and Acton pointed to the federal tax cuts and national and state economies as impacts to these latest estimates.
The current General Assembly will be setting appropriations for FY 2027. This REC estimate is the jump off point for creating legislative budget targets. View Iowa REC results.
Based on the results of the 2025/2026 projection resulting in a shortfall for Iowa, along with the continued instability being driven by the current President, the FY27 appropriation will likely result in a budget deficit when expenditures are set. This means yet another tap into Iowa’s emergency funding reserves to stay balanced next year.
Actions you can take:
Contact your Iowa legislators and insist that reserve funds NOT be used to balance the budget.
Also tell them to look closely at the private school vouchers and either cap or reduce those expenditures, which are on a pathway to bankrupting the state.
View contact info for legislators. Click Senate for Senators and House for Representatives.
Once budget targets are set, the budget bills for budget subcommittees will be drafted.
