Iowa Budget Update — August 2023

The Greater Des Moines Partnership’s Public Policy team hosted Director Kraig Paulsen of the Iowa Department of Management for a state budget update webinar after the start of the 2024 fiscal year. The Iowa Department of Management is directly attached to the Office of the Governor and is responsible for leading budget, performance and accountability systems for Iowa state government.

Budget Process

In the state of Iowa, the fiscal year (FY) begins on July 1. For the current FY, the process for drafting the annual state budget begins in June of the previous calendar year. To illustrate, state agencies are currently putting together their budget requests for FY25, despite having just entered FY24 on July 1, 2023. All state agencies have until the end of September to draft their budget requests, which are due to the Iowa Department of Management by Sunday, Oct. 1. To have an impact on next year’s state budget, the time to get involved is while the agencies draft their respective budget requests in the June – September period.

From the time budget requests are submitted until the end of the calendar year, the Department of Management develops the governor’s budget recommendations to submit to the Iowa General Assembly. This process involves building out the “Budget-in-Brief" and the “Big Budget Book.” The proposed budget is typically released at the Condition of the State address, which takes place on the first Tuesday of the legislative session, but by law, the governor has 30 days to release the proposed budget. After the governor releases the budget recommendations, the appropriations process begins.

Throughout the budget and appropriations process, the Revenue Estimating Conference (REC) meets to determine revenue estimates for the state and to evaluate the fiscal and policy impacts of program and budget proposals. The REC is required to meet three times each year, usually in October, early December and March. The governor uses the December estimates to build out the budget, and the March estimates are used to confirm the proposed budget can be met. By law, the lowest estimate between the December and March meetings is used. Because of this law, the “real work” on appropriations bills begins after the March REC meeting.

Prior to and following the March REC meeting, the General Assembly reviews the governor’s recommendations and adjusts, all while in dialogue with agencies and the Governor’s Office. Appropriations bills are passed in late April or early May, usually within the last three days of the legislative session. For any bills passed during this three-day period, the governor has 30 days to review the legislation before signing, vetoing or line-item vetoing. For appropriations bills especially, the line-item veto may be used to strike lines or sections, but they may not change the context of the appropriations within the bill. Once the General Assembly appropriates funds and the governor signs the appropriations bills, agencies build out a spending plan for the following FY, starting on July 1, and the cycle starts again.

Because the state operates on a cash basis, July 1 is also the start of the hold-open period, which typically lasts a few months. During this time, the state accounts for any cash flows that may be attributed to the previous FY, such as delayed tax receipts, check deposits or withdrawals.

FY 2024

Gov. Kim Reynold’s budget for FY24 is broken down into four main expenditure categories: education, health and human services, judicial and social and other. The majority of state expenditures fall into the education category, which accounts for approximately 56% of expenditures or just under $4.8 billion dollars. These dollars will be spent on K-12 education, education savings accounts, community colleges, regent universities, Iowa tuition grants and the like. The next largest state expense for FY24 is health and human services. The $2.27 billion dollars in this category do not account for federal funding, which will supplement the remaining dollars spent on health and human services in the state. Additionally, $812 million will be spent on judicial and justice expenditures, and $674 million will be used for all other uncategorized expenses. A more comprehensive breakdown of the FY24 budget may be accessed on the Iowa Department of Management website.

A recording of the Iowa Budget Update Webinar is available upon request. Please contact info@DSMpartnership.com for more information.

The Partnership's Public Policy team engages with local, state and federal officials to create public policy that generates economic growth, business prosperity and talent development in Greater Des Moines (DSM). The Partnership is a nonpartisan organization.