Iowa revenue projections updated as lawmakers weigh budget, tax cut decisions

Iowa's revenue panel said Friday the state will see less money flowing in 2024, citing tax cuts' effect and setting the stage for lawmakers to make key decisions on the upcoming budget.

The three-member Revenue Estimating Conference forecasted that Iowa would take in about $9.63 billion in fiscal year 2024, which ends June 30. That represents a 2.2% decrease from last fiscal year and a slight downtick from the panel's December projections.

In fiscal year 2025, which begins July 1, the panel projected a 0.7% increase from 2024; and after extended debate, agreed on a projected 1% growth decrease in fiscal year 2026.

More: Iowa's revenue projected to drop, but Republicans say there's room for more tax cuts

Kraig Paulsen, the director of the Iowa Department of Management, said organic growth in the economy continues to make up for a dip in revenue resulting from Republican-led income tax cuts passed in 2022. He said the state was in an "incredibly strong financial position."

As GOP legislative majorities and Gov. Kim Reynolds signal a desire to further cut income taxes, Paulsen said he believed the state's revenues could accommodate.

"The spending discipline that has been displayed over the last few years, so I'm assuming that continues, really puts the taxpayer at the forefront and provides an opportunity to continue to look at reductions," Paulsen said.

Republicans tout agenda, look to additional tax cuts

The new projections come as lawmakers prepare to build out Iowa's annual budget, heading into negotiations with the state continuing to hold a budget surplus.

Both Reynolds and prominent lawmakers have introduced plans to further cut income taxes, citing that surplus.

The governor's plan would accelerate existing gradual cuts and bring Iowa's rate down to a flat tax of 3.65% in 2024. Another proposal from Republican tax-writing chairs would eventually eliminate Iowa's income tax entirely.

More: Iowa Gov. Kim Reynolds' tax bill advances, but GOP lawmakers keeping options open for cuts

"Iowa is a national leader in maintaining fiscal discipline, rewarding work and investment by reducing income tax rates, and cutting needless bureaucracy," Senate Majority Leader Jack Whitver, R-Grimes, said in a statement Friday.

Whitver told reporters Thursday that although additional tax cuts weren't absolutely required, he believed Republicans could move forward on them.

"Nothing needs to happen because we've done such great work over the last few years, but I think we have a real opportunity to expedite some of the cuts that we've made the last couple of years," he said.

Democrats criticize delays in school funding, call on budget for 'everyday Iowans'

Democrats argue that the state's surplus is an opportunity to further invest in areas of need, including education, and have criticized Republicans for delays in setting the annual school funding level.

"Republicans have been very behind on getting numbers to schools," said House Minority Leader Jennifer Konfrst, D-Windsor Heights, on Thursday. "That's the budget part that should be solved first, it hasn't been. So we're kind of flying blind."

Sen. Janet Petersen, D-Des Moines, criticized Republicans' budget process as having "no meaningful accountability, transparency or action,"

"We owe it to our constituents to fund our public schools, pass a balanced and responsible state budget, and then adjourn for the year," Petersen said. "Iowans aren’t asking for more politics and culture wars. They’re asking for a government that does its job."

Galen Bacharier covers politics for the Register. Reach him at gbacharier@registermedia.com or (573) 219-7440, and follow him on Twitter @galenbacharier.

This article originally appeared on Des Moines Register: Revenues projected as Iowa Republicans weighs tax cuts, state budget