The Plan Falls Apart

Last week, we talked about the state’s Revenue Estimating Conference (REC), and how their projections give legislators a baseline for building the state’s budget each year. This week, let’s look ahead and talk about how the latest REC numbers affect the outlook of the Republican fiscal “plan.”

Some helpful context before you read on: Iowa’s Fiscal Year runs from July 1 to June 30 and state budgets are built for the upcoming year. So, during this legislative session, the legislature will work on the budget for Fiscal Year 2027, which runs from July 1, 2026, through June 30, 2027.

A Deficit Years in the Making

Last legislative session, Republican lawmakers passed a budget for Fiscal Year 2026 (the fiscal year we’re currently in) that spent roughly $9.5 billion. They did this despite knowing, thanks to REC projections available at the time, that state revenues would end up well below that number. They planned to run a substantial budget deficit – spending more than we took in. The most recent REC numbers fromMarch 2026 project revenues for FY26 to be in the neighborhood of $8.11 billion. Based on that number, we’re looking at a budget deficit for FY26 of over $1.3 billion.

Relying on Reserves to Close the Gap

Iowa law requires that the legislature pass a balanced budget, so, in order to bring that billion-dollar deficit to balance, the majority party will need to transfer money from state reserves. The two major sources of reserve funds are the Taxpayer Relief Fund (TPRF) and the surplus carryforward. Republican lawmakers have been hoarding taxpayer dollars in these reserve funds as a way to get us through their reckless budgeting until revenues rebound.

But that’s the problem: revenues haven’t rebounded. We’re looking at back-to-back years of unprecedented revenue drops – numbers we didn’t even see during the Farm Crisis in the 1980s. The “plan” is coming apart at the seams.

And still, Republicans in the legislature are seemingly intent on running budget deficits for the foreseeable future – knowing full well that they can’t rely on the reserves forever. At the rate they’re going, with no significant changes in policy or revenue generation, the reserves will run dry in less than five years. 

And then what? 

Scrambling for Short-Term Fixes

What’s frustrating is that Republican lawmakers seem to recognize, at least on some level, that the “plan” isn’t working as they’d hoped. But instead of fixing their mistake, they’re scrambling for ways to drum up new revenue at Iowans’ expense, make it easier to transfer larger sums from the reserves, or to drop this whole mess at the feet of a new governor – hoping you forget they created the mess in the first place.

SF 2464: Filling the Gap at Iowans’ Expense

In the last week or so, the majority party has fast-tracked SF 2464, a bill designed to start filling in the budget hole that THEY created by raising taxes on health insurance and forcing Iowans to pay the price – at a time when so many are already struggling to afford their healthcare. 

SF 2464 would also increase the amount they’re allowed to transfer from the TPRF, granting them more power to run deficit budgets while still claiming to have balanced the scales or carried over a surplus. The bill legislatively authorizes creative accounting!

Keeping the Plan Alive Through Procedural Moves

Just this week, legislative Republicans attached SF 2461 as an amendment to an altogether separate bill in the Senate State Government Committee to keep it alive through the second funnel deadline. This bill would allow legislators to pack their bags and head home for the year if they don’t want to negotiate a budget with a new, potentially Democratic, governor. It would authorize a “continuing appropriation,” or essentially locking in status quo funding for the next year, regardless of what the balance sheet looks like. They’d get to blame the new governor for a deficient budget even though THEY walked away from the negotiating table.

There are millions of Iowans who rely on the choices made at the Capitol, and this isn’t how a responsible legislature governs. It’s time for the majority party to admit their mistake, abandon this failed plan, and work to correct course for the people we all serve.