{"id":38557,"date":"2023-02-09T10:56:26","date_gmt":"2023-02-09T16:56:26","guid":{"rendered":"https:\/\/itrfoundation.org\/?p=38557"},"modified":"2023-02-10T10:04:53","modified_gmt":"2023-02-10T16:04:53","slug":"the-2024-conservative-iowa-budget","status":"publish","type":"post","link":"https:\/\/itrfoundation.org\/the-2024-conservative-iowa-budget\/","title":{"rendered":"The 2024 Conservative Iowa Budget"},"content":{"rendered":"\n

Iowa\u2019s taxpayers deserve better constitutional protections against the unquenchable appetite for government spending. Stronger limits can ensure spending remains under control, especially when fiscally conservative policymakers are absent. <\/em><\/strong><\/p>\n\n\n\n

Introduction<\/em><\/strong><\/p>\n\n\n\n

Going into the 2023 legislative session, Iowa\u2019s fiscal foundation is strong. The Revenue Estimating Conference (REC), which is a three-person collaboration between the governor\u2019s office and the Legislative Services Agency, is tasked with the difficult job of coming to consensus on the projections the state will use for budgeting.<\/p>\n\n\n\n

In December, the REC estimated<\/a> revenue for fiscal year 2023 (FY23) at $9.6 billion. Governor Kim Reynolds used December\u2019s estimate to plan her proposed $8.5 billion FY24 budget<\/a>. Iowa\u2019s fiscal foundation remains strong despite the national economic uncertainty because of the state\u2019s fiscal conservatism and prudent budgeting.<\/p>\n\n\n\n

The benefits of this approach are clear<\/a>.  Iowa\u2019s anticipated $1.6 billion surplus for FY23 is nearly as much as the $1.9 billion surplus in FY22, with another $2.2 billion surplus expected in FY24. The state should have $895.2 million in reserve funds in FY23 and $962.5 million in FY24 \u2014 the statutory maximum for each year. Additionally, the Taxpayer Relief Fund is on track to increase by $1.6 billion, to $2.7 billion, in FY23, with another increase of $662.6 million in FY24, to $3.4 billion.<\/p>\n\n\n\n

In short, the state government of Iowa is awash in cash thanks to conservative budgeting. These policies must continue to provide substantial tax relief, and lawmakers can build upon their success by passing a state budget below the recommendation of the Iowans for Tax Relief Foundation (ITRF). Our 2024 Conservative Iowa Budget sets a maximum threshold for general funds of $8.8 billion, based on 7.4 percent rate of population growth plus inflation (see Figure 1<\/strong>). Governor Reynolds\u2019 budget proposal<\/a> meets this goal.  The House and Senate now must offer up their budget targets and then all three proposals will have to be meshed together.  Spending restraint when crafting the state\u2019s budget is always important, as it protects taxpayer dollars now and in the future.<\/p>\n\n\n\n

Figure 1<\/strong><\/p>\n\n\n

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Source: Condition of the State: Vision for Iowa, State Budget FY 2024, Governor Kim Reynolds and Lt. Governor Adam Gregg<\/a><\/em><\/p>\n\n\n\n

Going a step farther, the state should write the Conservative Iowa Budget principles into its constitution or statutory code. Thus, Iowa would assure residents and businesses that it will continue to improve as a place to live, raise a family, and start a business, which will in turn strengthen the state\u2019s trajectory.<\/p>\n\n\n\n

Recent Iowa Budget<\/strong><\/p>\n\n\n\n

In its Fiscal Policy Report Card on America\u2019s Governors<\/a> 2022, the Cato Institute ranked Governor Reynolds as the best in the nation. \u201cGovernor Reynolds has been a lean budgeter and dedicated tax reformer since entering into office in 2017,\u201d wrote Chris Edwards and Ilana Blumsack, authors of the report.<\/p>\n\n\n\n

Last year, Governor Reynolds and the Iowa Legislature continued to place a priority on prudent budgeting. The budget for FY23 was $8.2 billion, increasing by just 1 percent from the prior year.<\/p>\n\n\n\n

In 2022, Iowa also enacted the most comprehensive<\/a> income tax reform package in the nation \u2014 the largest in state history. Over four years, the nine-bracket income tax will transform into a flat tax with a 3.9 percent rate. The co rporate tax will also gradually shrink until it reaches a flat 5.5 percent rate and has already been reduced from 9.8 percent to 8.4 percent. These measures constitute a sound pro-growth tax policy that will create incentives to work, save, and invest. On the national stage, this tax reform will make Iowa\u2019s economy more competitive.<\/p>\n\n\n\n

Prudent budgeting is essential toward ensuring these income tax rate reductions can be responsibly implemented. Even with national economic uncertainty, Iowa\u2019s revenue continues to grow, reducing the degree to which the tax cuts must be \u201cpaid for\u201d through spending restraint.<\/p>\n\n\n\n

Governor Reynolds has reaped additional benefits from a fiscally conservative agenda with an executive order<\/a> imposing a moratorium on regulations. Furthermore, state agencies must begin reviewing existing regulations to determine their relevance and economic impact to ensure \u201cexisting rules \u2014 each and every one \u2014 are worth the economic cost,\u201d as Governor Reynolds stated. \u201cOnly those that meet this standard will be reissued. The rest will be repealed. When it\u2019s all said and done, Iowa will have a smaller, clearer, and more growth-friendly regulatory system.\u201d Agencies have four years to complete the review process. The governor is also proposing to rein in the administrative state by streamlining government, consolidating the 37 cabinet-level agencies to 16. The process has already begun, and the governor\u2019s office estimates<\/a> consolidating agencies and other administrative reforms will save taxpayers close to $215 million over the next four years.<\/p>\n\n\n\n