Iowa

State Budget Practice Report Cards and Budget Resource Guide

Iowa was one of only six states to earn top A averages in legacy costs and budget maneuvers for fiscal 2017 through 2019.

In legacy costs, which include public worker pensions and other postemployment benefits (OPEB), mainly health care, Iowa funded 84 percent of pension obligations in 2018, 14 percentage points above the total for all states. It provides annual contributions to its three pension plans in line with actuarial recommendations and even exceeded that amount in fiscal 2018. Iowa’s OPEB liability was too small to play a role in its legacy costs grade.

The state received the budget maneuvers grade despite a revenue shortfall in 2017 that led to a transfer of $25.1 million into the general fund from other funds. Iowa received a B average in reserve funds. With $762.1 million put away in its two rainy day funds and clear policies for both use and replenishment of that money, it adhered to most of the best practices cited in the recent Volcker Alliance working paper, Rainy Day Fund Strategies: A Call to Action. The state missed getting an A because it does not consider revenue volatility in establishing goals for its reserve funds. The state’s lowest average was a C in budget forecasting. Iowa earned credit for using consensus revenue estimates. It failed to provide details to support growth projections and did not disclose a long-term revenue estimate covering more than two years. 

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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