Iowa’s current budget

Governor Kim Reynolds released her FY 2026 budget proposal and gave the state of state address in January 2025. The FY 2026 budget was enacted in June 2025.

Iowa enacted its FY 2025 budget in May 2024. The budget reported $8.9 billion in general fund spending, an increase of 4 percent over the previously enacted budget. Iowa passed major individual income tax cuts in 2024, as well as major tax cuts in both 2022 and 2021.

Under the American Rescue Plan, Iowa received $1.5 billion in direct state fiscal aid and $952 million in local government aid from the federal government. As of January 2025, Iowa had allocated over 75 percent of its state ARP. States must spend the funds by Dec. 31, 2026.

According to the National Association of State Budget Officers (NASBO), Iowa’s total expenditures in fiscal year FY 2025 were $29.6 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2025 were $2.9 trillion, ranging from $5.4 billion in Wyoming to $413.8 billion in California.

According to NASBO, Iowa’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2025: $9.0 billion/$33.0 billion
• FY 2024: $8.6 billion/$31.6 billion
• FY 2023: $8.2 billion/$29.6 billion
• FY 2022: $8.1 billion/$28.5 billion
• FY 2021: $7.8 billion/$28.5 billion
• FY 2020: $7.8 billion/$26.0 billion
• FY 2019: $7.6 billion/$23.4 billion

For more on Iowa’s budget, see

• the Iowa Department of Management and
  
• Iowa Legislative Services.

Iowa’s budget institutions, rules, and constraints

Iowa uses an annual budget. The legislature is not required to pass a balanced budget, but the governor is required to sign one. Deficits may be carried over into the following year. Iowa also has an appropriations formula that limits spending growth, but the limit may be overridden by a simple legislative majority. There are also limits on total authorized debt incurred by the state but not debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Overview of Iowa’s state and local expenditure and revenue sources

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Iowa’s combined state and local direct general expenditures were $38.8 billion in FY 2022 (the most recent year census data were available), or $12,142 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $12,083.

Iowa’s largest spending areas per capita were public welfare ($2,630) and elementary and secondary education ($2,516). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Iowa’s combined state and local general revenues were $44.1 billion in FY 2022, or $13,791 per capita. National per capita general revenues were $13,619. Iowa uses all major state and local taxes. After federal transfers, Iowa’s largest sources of per capita revenue were charges ($3,098), such as state university tuition and highway tolls, and property taxes ($1,999).

Iowa’s economic trends

Iowa’s per capita income (per the Bureau of Economic Analysis) was $63,573 in 2024, ranking 38th among the states. It was below both the national average of $72,425 and the Plains regional average of $65,977. The state’s median household income (five-year estimate) was $75,059 in 2024, ranking 31st among the states and below the national average of $80,734. Iowa’s poverty rate was 11.1 percent in 2024 (five-year estimate), below the national rate of 12.5 percent.

Although Iowa’s averages tell a story about the entire state, Iowa is composed of diverse localities. For example, the city of Waterloo’s median household income was $57,480, and its poverty rate was 16.6 percent; the city of Urbandale’s median household income was $112,795, and its poverty rate was 6.8 percent.

Iowa’s unemployment rate has historically been below the national average, particularly following the Great Recession, and in recent years it has been among the lowest in the country.

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Iowa, the average unemployment rate in 2024 was 3 percent for white residents and 7.4 percent for Hispanic or Latino residents.

The major industries that contributed the most to Iowa’s gross domestic product (GDP) in 2024 were finance, manufacturing, government, professional services, and social services (i.e. health and education). Finance and manufacturing contributed more to Iowa’s GDP than they did to the nation’s and region’s GDP, while professional services and social services were less important to Iowa than they were to the nation and region in 2024.

Looking at more specific industries, among those that accounted for at least 1 percent of Iowa’s GDP in 2023, insurance carriers produced far more for the state than for the nation, contributing 9.6 percent to Iowa’s GDP and 2.6 percent to the nation’s. Other industries that overperformed in Iowa relative to national averages in 2023 were farms, machinery manufacturing, food and beverage manufacturing, and chemical manufacturing.

Iowa’s politics

Governor Kim Reynolds, a Republican, was elected in 2022 with 56 percent of the vote. The next gubernatorial election is in 2026.

Republicans control both the House of Representatives (64 Republicans to 36 Democrats) and Senate (32 Republicans to 16 Democrats). Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Iowa. All Iowa House seats are on the ballot in 2026 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2026, and the other half will be up for election in 2028.

Iowa’s demographics

As of July 2024, Iowa’s population was 3,241,488. That was up 6.3 percent from 2010. The state’s population growth rate was slower than than the nation’s 9.9 percent growth over the same period. The Urban Institute estimates the state’s population will increase 8.2 percent between 2010 and 2030, less than the nation’s estimated growth rate of 16 percent.

Additional resources

• The State and Local Finance Initiative’s Backgrounders explain the tax and spending issues highlighted in these briefs.
  
• The State Economic Monitor presents updated data and customized visualizations of state economic indicators.
  
• State and Local Finance Data: Exploring the Census of Governments allow users to sort, customize, and download the Census of Governments State and Local Finance series data featured in these summaries.
  
• The State Tax and Economic Review series provides quarterly reports on state tax collections and underlying economic trends in all 50 states.
  
• The Urban Institute’s State Tax Data Subscriptions provide access to up-to-date revenue data in all 50 states.