For Iowa’s GOP a bad budget spot is actually a good spot

So, Iowa’s state general fund revenues will drop by $805 million during the current Fiscal Year 2026 compared to Fiscal Year 2025. That’s according to the state Revenue Estimating Conference, which, as you might imagine, estimates future revenue.

The general fund pays for state universities, K-12 schools, the judicial branch environmental protection and the list goes on.

But what does the revenue drop mean?

“Is it the most comfortable spot? No,” REC member and former Republican Iowa House speaker Kraig Paulsen told reporters. “But we’re in a really good spot.”

Sure. Makes sense.

In his own way, Paulsen was correctly assessing the revenue drop. Republicans worked hard to make this happen.

For years, Republican lawmakers and Gov. Kim Reynolds have approved a series of income and corporate tax cuts along with other tweaks and exemptions the governor says will save Iowans $24 billion over the next decade.

On the flip side, less revenue will be coming in to pay for state functions.

That’s why the governor and Legislature have been squirreling away billions of dollars in budget “surpluses” while they underfund education, mental health care, environmental protection and other priorities.

So, this is a good spot as Republicans see it. Sure, an $805 million drop in revenues, primarily because of tax cuts, seems bad. But Republicans have surplus bucks, including $3.6 billion in the Taxpayer Relief Fund.

This was always the plan. Lowball the budget and save big surpluses to cover the cost of billions of dollars in tax cuts. That includes a 3.8% flat income tax.

Half of the flat tax relief goes to the top 5 percent of taxpayers, with an average tax cut of $23,471, according to the Center for Budget and Policy Priorities. Households earning less than $20,000 get 24 bucks. It pays to be in a “really good” spot.

But now the Iowa economy is lousy. And that could short-circuit GOP’s good spot manufacturing operation.

Tariffs are hurting farmers, manufacturing and other businesses that rely on open markets and the availability of imported components. China, the largest global buyer of American soybeans, has stopped buying from us.

Iowa has a workforce shortage. But mass deportations are in full swing and migrant farmworkers are targets. They are in a very bad spot. Iowa would not have grown in population in 2025 if not for immigrants.

We have a brain drain of young professionals leaving the state. Iowa is getting older, ranking second in the highest percentage of its population over 65, at 24.4%.

We have a shortage of doctors; birth units are closing left and right in small hospitals. Child care is too scarce and unaffordable. People are on waiting lists for mental health care. Waterways are polluted by fertilizer. Our leaders have targeted LGBTQ Iowans, putting out the unwelcome mat.

And yet, tax cuts have not made us a high-growth economic dynamo. Weird.

If any budget cuts are needed, I bet everything is on the table. Well, except for the $314 million budgeted for private school scholarships.

And what if the economy gets worse? Could we end up in a bad spot?

Uncomfortable Iowans should be shopping for a good spot remover in 2026.

(319) 398-8262; todd.dorman@thegazette.com