Iowa

Iowa

Budget Cycle
Annual 
 
Governor Submits Budget
February 1 

Fiscal Year Begins
July 1
 
Governor Signs Budget 
May

Budget Links

FY2026 (proposed)
FY2025 (enacted)
FY2024 (enacted)
FY2023 (enacted)
FY2022 (enacted)
FY2021 (enacted)

Proposed Budget - Fiscal Year 2026

Iowa Governor Kim Reynolds released her fiscal 2026 budget proposal on January 14. The budget calls for $9.43 billion in total general fund appropriations, an increase of 5.4 percent from fiscal 2025’s revised level. The largest program areas include education (56 percent), health and human services (28 percent), and justice/judicial branch (9 percent). Fiscal 2026 total tax receipts are estimated at $10.22 billion, a 6.0 percent decrease from fiscal 2025’s estimated level. The decline in revenue is largely due to recently enacted tax cuts, including a new flat income tax rate that began on January 1. The budget assumes total reserve funds of $872.5 million, including a cash reserve fund of $654.4 million and an economic emergency fund of $218.1 million. In addition, the fiscal 2026 ending balance of the Taxpayer Relief Fund is estimated at $3.65 billion. 

Proposed Budget Highlights 

The governor said that over a few short years, Iowa has been able to cut taxes, shrink and align government, and turn the state into a national model for bold, get-it-done government. The governor added the recent change to a flat state income tax rate will be sustainable in the long-term due to efforts to cut government and change the way it interacts. The governor’s vision moving forward includes rebuilding communities; creating a student-focused education from PreK-12; building a strong, competitive Iowa; building on an affordable, reliable, and sustainable energy system; ensuring excellent healthcare for all Iowans; saving Iowans money; and creating a solid foundation for Iowa families. Highlights of her proposals include:

Rebuilding Communities

  • Adding to the Nuisance Property and Abandoned Building Fund
  • Extending tax exclusion to disaster assistance for housing developers
  • Adjusting insurance regulations to better protect consumers and homeowners
  • Modifying emergency funds transfer authority in times of disasters
  • Setting up the new Safeguarding Tomorrow Revolving Loan Fund
  • Fully funding disaster aid programs established in response to 2024 storms

Student Focused from PreK-12

  • Restricting personal electronic devices during instructional time
  • Addressing crucial gaps in math and civics education
  • Creating a pathway for a continuum of all-day care for four-year-olds
  • Strengthening the childcare workforce
  • Facilitating parental choice beginning in preschool
  • Improving the quality of preschool standards
  • Making technical improvements based on feedback from superintendents 

Building a Strong, Competitive Iowa

  • Removing the requirement for a paraeducator certificate
  • Adjusting restrictions related to the teacher intern pathway
  • Applying for a federal waiver to institute work requirements for able-bodied adults on Medicaid
  • Reforming Unemployment Insurance including through decreasing the taxable wage base by half; lowering the maximum tax rate to 5.4 percent; reducing the number of tax tables; and encouraging businesses to reinvest savings into their employees

Building an Affordable, Reliable and Sustainable Energy System

  • Creating a Nuclear Energy Task Force via executive order
  • Establishing a partnership between the Iowa Utilities Commission (IUC) and Iowa State University (ISU) to conduct transparent, independent load forecasting and energy assessments
  • Giving clear authority to the Iowa Department of Natural Resources to permit on-farm and near-farm anaerobic digesters
  • Granting the incumbent utility the Right of First Refusal (ROFR) on new electronic transmission line infrastructure projects
  • Modernizing the existing Energy Infrastructure Revolving Loan Program
  • Reallocating existing federal tax-exempt bond capacity for energy and water infrastructure

Ensuring Excellent Care for All Iowans

  • Investing into new unbundled Medicaid maternal rates
  • Working with CMS to implement a funding model to provide more Medicaid rate flexibility
  • Consolidating and more than doubling funding for student loan repayment programs
  • Establishing a Medicaid Graduate Medical Education (GME) enhanced payment
  • Streamlining the approval process to build new healthcare facilities or enhance current ones
  • Improving the Health Information Exchange network by authorizing HHS to competitively procure and manage it

Saving Iowans Money 

  • Issuing an executive order to create an Iowa Department of Government Efficiency (DOGE) task force
  • Recommends the demolition of the Wallace State Office Building and adjacent parking garage 

A Solid Foundation for Iowa

  • Proposes four weeks of paid leave for state employees who give birth; one week of paid leave for state employees who did not give birth; and four weeks of paid leave for state employees who adopt a child