Strengthen the 99 Percent Spending Limitation

Fiscal conservatism has been a priority for both Governor Kim Reynolds and the legislature. Iowa’s historic income tax reforms were a direct result of conservative budgeting and restrained spending. Governor Reynolds and the legislature have demonstrated that the priorities of the government can be funded while allowing taxpayers to keep more of their income. 

That said, under current law, Iowa has a weak spending limitation in code. The legislature can spend up to 99 percent of estimated revenue. The fiscal year 2025 budget spends 95 percent of estimated revenue, which has been the highest spending in a few years. A future legislature could go further and spend 99 percent of revenue or even create a deficit situation.

Creating a stronger spending limitation would encourage fiscal conservatism. A future spending limit should be placed within Iowa’s constitution to make it more difficult for the legislature to undermine. 

The best approach is the example of Texas. The Texas legislature recently codified its spending limit, which holds state spending to the growth of population plus inflation. This metric is the most effective. Texas’s spending limit caps all general revenue spending and requires a three-fifths vote threshold in each chamber to exceed the cap. Colorado’s TABOR, or Taxpayer’s Bill of Rights, is another example of a state spending limitation. 

Other key principles to include in a strong spending limit include:

ITR Foundation research found that limiting spending to the growth of population plus inflation from 2013 to 2024 would have saved taxpayers an estimated $3,500 for a family of four. It would also have returned $2.8 billion back to the economy.