Iowa Legislature passes budget bill, adjourns with no property tax cut

Lawmakers worked through the night Wednesday to reach a budget deal after a contentious session went into overtime.

While most of us were sleeping, the Iowa Legislature adjourned — 13 days late. Legislators had to burn the midnight oil to close out a 123-day session and pass a nearly $9.4 billion budget.

Before the session started, Iowa leaders from Republican Gov. Kim Reynolds down promised property tax cuts this session. When all was said and done, however, none materialized.

Republicans hold commanding majorities in both chambers, but this budget’s passage was marked by a bitter internal dispute over carbon pipeline regulations and the stripping of civil rights protections from transgender Iowans.

“This was a session marked by division, special interest giveaways, and partisanship,” said Senate Democratic Leader Janice Winer of Iowa City in a statement. “There were limited occasions when the people’s interests were truly served in the Senate chamber.”

READ: Gov. Kim Reynolds full Condition of the State Address.

We’ve prepared an overview of what you need to know about this bill as the legislature departs  Des Moines.

First, the budget 

Iowa Republicans agreed to a fiscal year 2026 budget that will spend more money than the state takes in. The $9.43 billion dollar budget deal is a 5% increase on last year’s. And it will be $900 million more than the revenue estimators anticipate Iowa will bring in. This is the result of a series of cuts designed to flatten Iowa’s income tax rates, diverting a major source of state service revenue. 

This deficit spending was the plan all along. Back in March, Reynolds proposed dipping into the $3.75 billion Taxpayer Relief Fund to make up for lost revenue this year. 

“Some have claimed Iowa is facing a deficit. Let’s be clear: this isn’t a deficit—it’s the result of the state collecting more from taxpayers than it needed. Now we’re giving it back. That’s what the Taxpayer Relief Fund is for,” Reynolds said in a statement.

Democrat state Rep. Jennifer Konfrst of Windsor Heights said this is an unsustainable way to govern given that this one-time money will run out unless budgets shrink or other revenue sources are found.

Carbon pipeline fight roils Senate

The session’s final weeks were dominated by a bitter dispute in the state Senate over carbon capture pipeline regulations. Twelve Senate Republicans threatened to block budget bills until leadership allowed a vote on restricting eminent domain for pipeline projects.

The standoff culminated in a heated floor confrontation Wednesday between Republican Sens. Mark Lofgren of Muscatine and Dan Dawson of Council Bluffs, after Lofgren accused Republican leaders of “vengeful” retaliation. He claimed that Republican leaders were scraping his bills for holding up the budget. 

“I find this to be a very vengeful way of doing business, and I am sure the general public would be appalled that our state government is being run using bullying tactics and threats,” Lofgren wrote in an email to all legislators.

Removing civil rights from transgender Iowans

In the span of one week in February, Iowa leaders also took away civil rights protections from transgender Iowans. It was the first bill Gov. Kim Reynolds signed this session. 

The new law defines “sex” as “the state of being either male or female as observed or clinically verified at birth” and specifies that “gender” should be considered a synonym for biological sex, not gender identity. The measure — HSB 242 — goes beyond removing civil rights protections to also regulate the identification of sex on birth certificates. It also would erase the phrase “gender identity” in educational contexts and replace it with the phrase “gender theory,” prohibiting instruction about so-called “gender theory” in schools from kindergarten through sixth grade. 

It goes into effect July 1.

Other notes

Property tax cut promise unfulfilled – Heading into the session, Republicans identified property tax cuts as a major priority, one of few expressly stated. Yet, House Ways and Means Chair Bobby Kaufmann, a Republican from Wilton, told the Des Moines Register that the effort got pushed to 2026.

Gains in healthcare – The session created Iowa’s first paid parental leave program for state employees, giving four weeks for maternity leave. It also passed a bill aimed at creating 460 medical residency positions to address rural healthcare shortages.

Education: Lawmakers banned cell phone use during instructional time at school. They strengthened math and civics requirements and directed $14 million to paraeducator pay raises.