A Look Into the Finances of Iowa’s Community Colleges

Federal, state, and local funding helps subsidize community college tuition costs.

As an agricultural state, Iowa has historically had a lot of ground to cover establishing institutions of higher learning. In 1950, only one-third of Iowans aged 25 and over had high school diplomas or more education. The most-recent data from the U.S. Census Bureau raises that figure to 93% of all Iowans.   The creation and expansion of Iowa’s community colleges certainly deserves at least some credit for much of this increase, yet few Iowans understand their funding and operations. To increase familiarity with the inner workings of these institutions, Iowans for Tax Relief Foundation investigated their relationship with taxation.


Local school boards established Iowa’s public junior colleges starting in 1918 with Mason City Junior College. In 1949, the Iowa General Assembly began providing state aid to these establishments, which offered only liberal arts programs until 1958, when Congress initiated financial support for vocational-technical training. By the 1960s, 16 public junior colleges and four post-secondary vocational and technical schools were in operation across Iowa.

In 1965, the 61st General Assembly of Iowa approved legislation creating a statewide system of post-secondary educational institutions under the direction of the State Board of Education. The existing schools merged to create the 15 community colleges in existence today, each serving a geographical district, as shown in the map below. Funding for these new area schools comes from a combination of federal, state, and local sources in addition to students’ tuition. The Iowa Official Register provides a brief history of the individual community colleges here.

Iowa Community College Districts

Community College Funding

By a narrow margin, the largest source of funding for Iowa’s community colleges is the tuition students pay for their classes and related services, as displayed in the pie chart below. Total revenue amounted to $1.2 billion statewide in fiscal year 2021 (FY21), which is expected to have increased by 5.5% for FY23. Over the last five years, only Indian Hills Community College showed declining revenue. Des Moines Area Community College (DMACC) has continued to be the largest college in terms of both revenue and enrollment.

While tuition and fees provided the most dollars to community college budgets, federal, state, and local funding helped subsidize costs, as well.  Following closely behind tuition, state aid was the second-largest source of funds, with local support, mainly comprised of property taxes, as the third-largest source. Federal aid showed significant increases during the COVID pandemic, but those funds are being phased out for an expected return to approximately 5% of total revenue.

The five-year trend presented in the following chart reveals debt proceeds (such as general obligation bonds) as the fastest-growing source of revenue, with a 588% increase from FY19. Separate from taxpayer-backed debt, community colleges’ tax collections have increased as a function of both property tax valuations and rate increases. Local support has increased by nearly 24%, amounting to $208 million in FY23.

Ending Fund Balance

Consistent with the practice at all levels of government, if a fiscal year ends with revenue exceeding expenditures, a fund balance surplus is recorded. If expenditures exceed revenue, the budget deficit requires the use of reserve funds or an increase in taxes to balance the budget. According to the Community Colleges Certified Budget Report linked above, “it has been common practice for colleges to gradually accumulate the fund balance up to some targeted amount that is a cushion to unforeseen future drops in revenues or increases in one-time expenditures.”

Prior to the pandemic, community colleges’ ending fund balances were approximately 40% of total expenditures systemwide. As the following chart shows, post-pandemic, the aggregate ending fund balance hit a high of 62% in FY21, with a projection of 49% for FY23.

Community College Expenditures

Iowa's 15 community colleges offer programs in three major areas of instruction:

  1. Adult education provides part-time programs for adult students that range from high school completion certificates to supplementary career and continuing education curricula.
  2. The preparatory career programs of vocational and technical education provide courses for immediate employment in a wide variety of careers, including nursing, paramedic, carpentry, welding, plumbing, and commercial driving. Many of these training programs require full-time instruction for periods between four weeks and two years.
  3. The college parallel program provides arts and sciences courses that may be transferred to other colleges and universities as the equivalent of the first two years of a four-year baccalaureate degree.

In total, spending to support these programs across the entire community college system is anticipated to be $1.3 billion in FY23, a nearly 30% increase from FY19. The largest expenditure most recently has been the physical plant, meaning campus facilities. The chart below shows the distribution for FY23.

Historically, the general institution category has been the largest area of expenditure, followed by vocational and technical. However, in keeping with the increase in debt-driven revenue, over the last five years, physical plant expenditures have enjoyed the largest increase, 97%, followed by student services and learning resources, at nearly 50% growth each, while administration costs have increased 45%.


The statewide system of community colleges began with slightly more than 9,000 students in 1965. Since that time, enrollment has increased almost every year, peaking in 2010, at 106,597 students. A gradual decline followed, with the COVID-19 pandemic causing a drop of more than 5,000 students between 2019 and 2020 alone.

While total numbers have recovered somewhat from the pandemic, enrollment is still not near its level of 15 years ago, and the student body is increasingly part-time. Part-time enrollment reached an all-time high in 2023, making up two-thirds of the total. During the same period, the count of full-time students dropped significantly.

Over the last five years, the DMACC has achieved the highest enrollment figures, at more than 20,000, while the next-largest school has been Kirkwood, at 12,000. The remaining 13 schools have an average enrollment of 3,700 students, with the lowest being Northwest Iowa and Southwestern.

Property Tax Levies

While they do not represent the largest funding source for Iowa’s 15 community colleges, property owners in all districts are paying taxes to these institutions. In addition to an unrestricted general levy, eight additional special purpose levies are available to the colleges. Six of the nine levies require simple board approval to be imposed; three others require voter approval in some form. The total property tax dollars collected by community colleges in FY23 amounted to more than $200 million.

The following table describes each levy, with details about how it is imposed and whether the state has capped its rate.

The table below shows the total levy rates for each community college over the last decade. Iowa Valley has the highest overall average tax rate, at $1.54 per $1,000 of valuation, while the DMACC has the lowest, at $0.67.

As of FY24, all community colleges in Iowa take advantage of five of the nine levies, while the Bonds & Interest levy is used by 12, and the Unemployment Compensation levy is used by seven. The Standby levy remains unused. All 15 colleges impose the maximum allowable rate for the Unrestricted General and Facilities/Plant Funds levies, along with the maximum voter-approved rate for Equipment Replacement.

Iowa’s property valuation growth over the last decade — the value of the real estate to which the rates are applied — has given Iowa’s community colleges a significant increase in property tax collections. All have increased their levy rates, as well. Consequently, over the last decade, total systemwide property tax collections have increased 76.5%, or nearly $100 million. Four of the colleges have seen property tax collections increase by more than 100% over that period.

Illustrating precisely why improved awareness about community college funding is so important in Iowa, some information and news sources have tended to include only the unrestricted general fund in reporting about property taxes. While the other restricted levies vary by college, they are nonetheless collected from Iowa property owners and form a crucial part of the community college funding story for residents and policymakers, alike.

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