A Billion-Dollar Deficit with No End in Sight
Drey for Iowa
On January 12th, the Iowa Legislature will reconvene in Des Moines to begin the 2026 legislative session. Lawmakers will discuss and debate all manner of issues relevant to making life more affordable for Iowa’s working families, including property tax relief, housing Iowans can afford, reliable childcare options, public education funding, and much more. A critical factor in all those discussions, looming over everything we do this year, is the condition of the state’s budget.
A $1.26 Billion Budget Deficit for FY26
Last session, Republican lawmakers passed a budget for Fiscal Year 2026 (the current fiscal year, running from July 1, 2025, through June 30, 2026) that spent $9.425 billion. However, the latest estimates from the state’s Revenue Estimating Conference (REC) (which met on Dec. 11, 2025) project state revenues at $8.158 billion.
This means that, for Fiscal Year 2026, Iowa will spend $1.26 billion MORE than we take in, creating a massive budget deficit hole. In order to cover that hole, Republican lawmakers will need to transfer $633.4 million from the Taxpayer Relief Fund and $633.4 million from other one-time funds, breaking the majority party’s own rules about spending one-time money to cover ongoing expenses and spending more than the state takes in.
Deficits Aren’t a One-Time Problem
Unfortunately, we also know that this budget mismanagement is not a one-time blip. Five-year projections obtained from Gov. Reynolds in early 2025 show that the majority party plans to run these budget deficits through at least FY30. We also know that the governor’s estimates in her five-year projections have been off by roughly $1.36 BILLION. As Jon Muller, a former revenue forecaster for the REC, put it, “Iowa Republicans appear to be budgeting on pure hope.”
Why the Budget Should Matter to You
So, why should you care what the state’s budget looks like? Well, beneath all the numbers, what the state budget really represents is lawmakers’ priorities – toward which policy issues the Legislature chooses to allocate taxpayer funds. Simply put, it’s how we put your tax dollars to work. This budget, designed and implemented by the majority party, is not working for you.
Who Benefits vs. Who Pays
Instead of prioritizing the needs of Iowa’s working families – like housing, childcare, public education, etc. – the Republican budget prioritizes corporations and the very wealthy. Here’s a perfect example: according to the REC’s latest projections, between Fiscal Year 2024 and Fiscal Year 2027, the income tax corporations pay will have dropped by nearly $200 million while, during the same period, sales tax collections will have increased by over $350 million. In other words, you’re paying more for groceries and other goods while big corporations get a tax break.
Iowa Needs a Budget That Works for Working Families
For nearly a decade, Republican lawmakers have been overpromising on economic growth and underdelivering for Iowans. It’s time for a hard reset on the Legislature’s priorities, and time for Iowa’s working families to get a state budget that works for them.
