Iowa has earned a reputation for responsible budgeting and strong fiscal management, especially compared to states facing deep financial trouble. As tax relief continues and our economy grows, Iowa must ensure that future budgets remain just as stable and sustainable as today’s. Strengthening our spending limits is one way to protect taxpayers, preserve Iowa’s fiscal momentum, and keep the state on a path toward long-term prosperity.
Conservative budgeting is difficult public policy, but establishing a strong spending limitation or fiscal rule can help restrain spending. Iowa currently has a statutory 99% spending limitation, which means the legislature can spend only 99% of projected revenue.
The Iowa Constitution, in Article VII (sections 2 and 5), along with statutory provisions, requires the legislature to balance the budget. In 1992, to help accomplish this objective, the legislature established an expenditure limitation.
This expenditure limitation restricts the legislature to spending up to 99% of projected revenue. Iowa’s revenue projections come from the Revenue Estimating Conference, which usually meets in December, March, and October, and on special occasions if needed. According to the state, the “primary goal of the expenditure limitation law is to make certain that General Fund revenues exceed expenditures to help to ensure a balanced budget and to build sufficient cash reserves for cash flow and emergencies.”
Importantly, the legislature is not required to spend up to 99% of estimated revenue, and in recent years has spent below that level. Nevertheless, the 99% limitation is relatively weak. The most obvious weakness is that it can be easily sidestepped. Because the limitation is statutory rather than constitutional, the legislature could overlook or even eliminate it through legislation.
The limit can also encourage higher spending than what’s necessary. Legislators can simply spend up to the maximum allowed. Without a stricter spending rule, it becomes more difficult to restrain spending.
Several approaches could strengthen Iowa’s current limit. The goal of a strong spending limitation is to ensure that spending is both sustainable and responsible, and that it funds the true priorities of government. A spending limit also encourages conservative budgeting, improves legislative oversight, and pushes government to find efficiencies and modernize services.
Keeping spending limited also prepares the state for economic downturns or emergencies. Iowa’s fiscal position during the COVID-19 pandemic is a good example of how conservative budgeting can create a strong foundation. A spending limit should not only restrain spending but also help build reserves.
This is beneficial not only during economic uncertainty. A spending limit can help restrain growth so policymakers can responsibly pursue income-tax reform. Many states now use revenue triggers to lower income-tax rates, and a spending limit can help ensure those targets are met.
Iowa could strengthen the existing limitation by lowering the 99% threshold to 95% of revenue, but stronger options exist. One option is a spending limit based on population growth plus inflation. By tying spending growth to that metric, the goal is to prevent government from expanding faster than the economy and to avoid excessive taxation or debt accumulation that burdens taxpayers and hinders economic growth.
Colorado’s TABOR (Taxpayer Bill of Rights) is considered one of the strongest such limits in the nation. TABOR limits revenue growth for state and local governments and requires voter approval for tax increases. If the state collects more than allowed, the excess is refunded to taxpayers. As a result, Colorado kept cumulative spending $19.6 billion below what it otherwise would have been over the last decade.
Spending limitations should also be reinforced by supporting budget reforms, including:
Conservative budgeting lies at the heart of sound public policy. Iowa has made historic progress on pro-growth income-tax reform because of prudent budgeting, and that same approach helped Iowa maintain fiscal stability during the pandemic.
Other states, such as Illinois, Minnesota, California, and New York, demonstrate the consequences of uncontrolled spending and taxation. These states face fiscal crises driven by excessive spending and high taxes.
Conservative budgeting leads to economic growth, fiscal stability, and lower tax burdens. It respects taxpayers by ensuring that government does not grow faster than taxpayers’ ability to pay.
To continue tax relief, build the Taxpayer Relief Fund, and maintain healthy reserve accounts, conservative budgeting must remain a priority. President Calvin Coolidge said, “A good budget is among the most noble monuments of virtue. Economy in the cost of government is inseparable from reduction in taxes. We cannot have the latter without the former.”
Iowa’s conservative budgeting has already proven its value—protecting taxpayers, stabilizing state finances, and making historic tax reform possible. But continued progress will depend on keeping spending in check and strengthening the guardrails that prevent government from growing faster than taxpayers’ ability to pay. Holding the line on spending, combined with the benefits of the One Big Beautiful Bill Act, is a strong foundation for a brighter economic future. Iowa can ensure that state budgets remain sustainable and that families, businesses, and the economy continue to benefit from sound fiscal policy.
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