Governor Kim Reynolds announced, Iowa will “end Fiscal Year 2020 with a balance of $305.5 million in its General Fund.” $21.5 million will be applied to the Taxpayer Relief Fund for future tax relief. Governor Reynolds and the Republican legislature have been following prudent budget policies. This has been especially difficult considering the COVID-19 pandemic and uncertainty in the agricultural markets.
Iowa’s budget was helped by the various aid packages passed by Congress. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was perhaps the most notable relief package passed by Congress. Iowa received $1.25 billion in CARES Act funds. It is estimated that Iowa has received $4.5 billion in total federal relief at this time.
Although federal relief has helped Iowa and other states it should not downplay the importance that Iowa was following conservative budgeting before the pandemic. As the pandemic started, Iowa’s fiscal house was in order and the economy was strong. This was essential in cushioning the economic impact of COVID-19 in Iowa. This is a stark contrast to our neighbors in Illinois, whose fiscal house was collapsing even before the pandemic, because of massive unfunded pensions combined with poor tax and spending policies.
“Fiscal responsibility has put the state of Iowa in a strong position despite some significant challenges ranging from a global pandemic to trade disruption,” stated Governor Reynolds. During the past legislative session, Governor Reynolds and the legislature continued to follow a cautious approach by passing a status quo budget for Fiscal Year 2021.
“Iowa is in a strong financial position due to responsible spending practices and our strong cash reserves of over $770 million,” said Dave Roederer, Director of the Iowa Department of Management.
The Council of State Governments recent report, COVID-19: Fiscal Impact to States and Strategies for Recovery reviewed the fiscal conditions of each state, and Iowa was one of the best states in terms of fiscal stability and resiliency. Truth in Accounting in their recent Financial State of the States 2020 report ranked Iowa in the top 10 states in regard to comprehensive fiscal health. Truth in Accounting evaluated the fiscal health of all 50 states based on their fiscal year 2019 comprehensive annual financial report (CAFRs). These reports demonstrate that because of Iowa following prudent budget policies the state was prepared for the COVID-19 triggered economic downturn.
In October, the Iowa Revenue Estimating Conference, will meet and provide an update on revenue projections. Iowa’s economy is starting to recover, but COVID-19 is still causing uncertainty. In January, when the Iowa legislature is scheduled to reconvene policymakers will need to continue to follow a prudent budget policy that is based on keeping spending low and avoiding tax increases.
Iowa is an example that fiscal conservatism in budgeting not only works but is the best policy. The fiscal policy principles of limited spending, conservative revenue estimates, and keeping tax rates low lead to responsible budgeting. These principles will not only generate economic growth, but they prepare the state for economic downturns and emergencies. Following these principles also place taxpayers first.