DES MOINES, Iowa — In one of the several meetings that the state’s Revenue Estimating Conference holds every year, projections show that state revenue is set to decline again.

In FY24, the state brought in $9.75 billion in revenue, FY25 dropped to $8.93 billion and the projection from the meeting Thursday shows FY26 at $8.13 billion. That is a decrease in 9% from year to year. While that drop is expected, the state will be operating in a deficit, with funding for the next year sitting at almost $1 billion more than the revenue brought in.

“Is this where we want to be? Is this the most comfortable spot? No. But the state of Iowa is in a good financial condition,” said Director Kraig Paulsen of the Iowa Department of Management. “The revenue decline has been expected since Governor Reynolds signed a 3.8% flat income tax rate bill over three years ago. There were corporate income tax cuts also passed in that same year. The declining revenue has always been apart of the plan, and that is what comes with tax cuts according to Iowa Republican leadership.”

“Iowa is in strong financial position with a State General Fund ending balance of more than $1.88 billion, more than $4 billion in the Taxpayer Relief Fund, and full reserve funds. Now that Iowa’s 3.8% flat income tax is fully implemented, Iowans have more of their own money today than they did at this same time last year. As a result, the state’s General Fund revenue is down just as we projected and responsibly planned for, and just as it should be. Government should only ask from its taxpayers what it needs to operate effectively on their behalf,” said Governor Reynolds (R) in a statement.

Reynolds also added that the REC numbers from the last meeting in March to October, saw a decline of almost $375 million in FY26 projected revenue. She said that is mainly because of the tax cuts passed in the ‘One Big Beautiful Bill’ act passed last July.

Democratic Leadership is saying the opposite, calling the projected decline in revenue historic and calling for a change in tax policy.

“The billion-dollar hole they created in the state budget is ongoing, but reserve funds won’t last forever. How long will taxpayers be asked to foot the bill for the majority party’s economic mismanagement?,” said State Senate Janet Petersen, (D) District 18, from Des Moines.

“Iowa House Democrats have a serious tax plan next session that will propose responsible tax breaks that prioritize relief for everyday Iowans to help them during the ‘Republican Recession’ that our state is facing,” said State Representative Dave Jacoby, (D) District 86 from Coralville.

Paulsen added that FY26 will be the first fiscal year with the new individual and corporate income tax rates will not lower. The REC estimated that the state will see an increase in revenue of more than 3% in FY27. The conference will meet again in December to get a final look at number before lawmakers meet in January to pass the budget for the state for the next year.