DES MOINES — Iowa’s state budget has an unspent surplus of nearly $2 billion, Gov. Kim Reynolds announced Tuesday — 54 percent higher than last year’s record-breaking level.
That surplus comes on top of the $8.1 billion of state funding expended in the budget year that ended June 30, and represents an increase of $670 million over the previous surplus, according to figures from the governor’s office and nonpartisan Legislative Services Agency.
In addition to the general fund budget surplus, Iowa’s cash reserve fund contains $830 million and its taxpayer relief fund has just more than $1 billion.
Because the state received a net of over $700 million in corporate income taxes during the budget year — the total actually surpassed $850 million — the state’s top corporate tax rate was lowered from 9.8 to 8.4 percent, a 14.3 percent reduction. That new mechanism was included in state tax cuts enacted earlier this year by statehouse Republicans.
People are also reading…
Reynolds, a Republican facing re-election, celebrated the new surplus.
“Time and again over the last five years, we’ve ignored the self-appointed experts who insisted that tax cuts and economic prosperity wouldn’t be worth the cost,” Reynolds said in a statement. “In fact, as today’s budget numbers show, they were worth every penny. It turns out that growth-oriented policies and fiscal restraint are a powerful combination.”
Jennifer Konfrst, leader of the minority-party Iowa House Democrats, criticized the reduction of the corporate tax rate.
“Iowans are sick and tired of politicians who put corporations first and people last. Instead of lowering costs for Iowans and investing in our public schools, Kim Reynolds is celebrating another huge handout she gave to some of the biggest corporations in the world, like Amazon,” Konfrst said in a statement. “It’s more apparent than ever that Reynolds and GOP politicians in Des Moines are more interested in politics and rewarding special interests, not doing what’s best for Iowans.”
Similarly, Democratic state Senate leader Zach Wahls said his party believes the “economy must work for everyone, not just those at the top.”
“Since 2018, Iowa Republican politicians have showered tax giveaways on the ultrarich and big corporations while ignoring the rest of Iowa,” he said in a statement. “That’s why Iowa’s job growth is the 39th worst in the nation and our roads and bridges are the 48th worst.”
The budget surplus growing to $1.91 billion could give cover for statehouse Republicans to enact more state tax cuts during next year’s legislative session, should they retain their majorities in the Iowa Legislature and Reynolds win re-election in this fall’s campaign.
Reynolds is being challenged by Democrat Deidre DeJear and Libertarian Rick Stewart in the November election.
The tax cuts enacted this year — largely to state income taxes — eventually will result in $1.9 billion less in state tax revenue annually, compared with current rates. By 2026, a 3.9 percent “flat tax” rate will apply to all taxpayers, regardless of income.
The state has $8.2 billion budgeted for the current budget year, which started July 1.
“If there’s additional moneys beyond what we feel is reasonable for the state for next fiscal year, yes, we would love to reduce taxes again if the economy at the time warrants,” Rep. Gary Mohr, a Bettendorf Republican who chairs the House’s budget-writing committee, told The Gazette in July.
While Iowa’s budget year ends on June 30, the state spends the ensuing weeks completing financial transactions. The governor’s announcement Tuesday officially closes the books on the most recent state budget year.