Iowa earns praise for fiscal restraint as it prioritizes health and education spending

(The Center Square) – State spending is up in Iowa, even as lawmakers have embraced fiscal responsibility recently.

The Common Sense Institute observed how Iowa's state budget has changed over the past 25 years -- from Fiscal Year 2000 to Fiscal Year 2025.

The report found that Iowa has continually grown. It is now spending 11.21% more per resident than it did 25 years ago when adjusted for inflation; that is an increase of $2,883 per Iowan to $3,207. Additionally, non-appropriated federal funds increased by 122%, mostly due to Medicaid expansion.

"Rather than breaking spending out amongst the dozens of state departments, it condenses spending priorities into a few broad categories like education, healthcare, and agriculture to make the budget more comprehensible for Iowans," the CSI press release said.

Healthcare has been the biggest driver of spending increases in the 21st century. The state's healthcare spending increased by 155.37% over the last 25 years from $921 million to $2.35 billion; it went from 19.38% of the state's general fund budget to 26.37%. Plus, when combining state and federal healthcare spending, the figure has increased by 262% from $2.39 billion to $8.67 billion.

Similarly, Iowa has grown its Department of Education's general fund budget by 118% in the past 25 years. The state now spends about $4.5 billion on education after spending around $2.05 billion 25 years ago.

Iowa has had a budget surplus every year since 2018, the report said. Thanks to this, the state has $3.7 billion in its Taxpayer Relief Fund, $697.4 million in its Cash Reserve Fund, and $232.5 million in its Economic Emergency Fund.

Ben Murrey, director of policy and research at Common Sense Institute, praised Iowa for its fiscal restraint.

“This report mirrors CSI’s findings in our dynamic analysis of Iowa’s 2024 income tax reduction," Murrey said in the CSI press release. "Lawmakers’ balanced, conservative approach toward budgeting in recent years has allowed for record spending, record reserves, and record tax rate reductions all at the same time.”