The House and Senate both held floor debate last week, passing primarily non-controversial legislation to the other chamber. On Wednesday, Republican Blaine Watkins won the special election to fill House District 100 following the passing of Representative Martin Graber. Watkins won 52% of the vote, defeating Democrat Nannette Griffin to maintain Republicans 67 67-member majority in the Iowa House of Representatives.

Previously, Democrats had flipped former Republican Senator Chris Cournoyer’s seat in the Iowa Senate after she resigned to replace Adam Gregg as the Lt. Governor.

On Thursday, the Revenue Estimating Conference (REC) met to set revenue projections for the state for Fiscal Years 25, 26, and 27. Following the meeting, the Legislature must use the predictions for FY26 to set the budget before the end of the session, the Legislature is prohibited from spending more than 99% of available funds, which includes the previous FY ending balance.

The new estimates predict that Iowa will take in $8.51 billion in FY26 which begins July 1, $400 million less than Iowa’s current FY25 budget of $8.91 billion. Revenues are expected to begin rising again in FY27 to $8.96 billion, increasing by.5.3%.

"Regarding the negative estimates for fiscal year '26, this was expected with the enactment of the tax cuts that were passed last session," said Kraig Paulsen, director of the Iowa Department of Management.

Governor Reynolds has proposed a FY26 budget of $9.43 billion, leaving approximately a $900 million gap in budget compared to the projected revenues.

“We cut taxes to let Iowans keep more of their hard-earned money and that’s exactly what today’s REC numbers reflect,” Gov. Reynolds said. “With $2.05 billion in the ending balance, $961.2 million in reserve funds, and $3.75 billion in the Taxpayer Relief Fund, Iowa remains on a strong, fiscally sustainable path. In partnership with the legislature, we will continue our responsible budgeting practices and spending discipline. This is what responsible, growth-oriented fiscal stewardship looks like.”

“Unlike so many states, Iowa is in a great financial position," Iowa Department of Management Director Kraig Paulsen said.  "And because of our strong fiscal health, Iowa has the flexibility to address the priorities of Iowans.”

The March REC projections can be found here.

In 2024, the legislature passed a bill to regulate consumable hemp products. The legislation limited sales of THC-infused beverages to individuals 21 or older, limited the amount of THC that can be contained in a single serving, and made changes to the product labeling requirements.

This year, the legislature is expanding THC regulations to include consumable hemp products under the open container law, THC products are already included under the operating-while-intoxicated law. House File 181 would add THC beverages to Iowa’s open-container law, making it illegal to have an open drink in a vehicle for both the driver and any passengers. The Iowa House passed the legislation with an 86-1 vote on Monday; the Senate unanimously passed the legislation on Wednesday, sending it to Governor Reynolds to be signed into law.

House Study Bill 306  modifies the research and activities tax credit to reduce the credit claimed by companies who have claimed the credit and experienced layoffs of 500 or more. A House Ways and Means subcommittee advanced the legislation on Thursday with a 2-1 vote.

Senate File 166 creates new criminal offenses and establishes penalties for theft, forgery, and fraud involving a gift card. The bill passed the Senate unanimously on Wednesday and was sent to the House for consideration where a companion bill survived the first funnel and is eligible for floor debate.

House File 112 expands the annual gross income to qualify as a targeted small business from $4 million to $200 million. The bill passed the House Economic Growth Committee with a 13-7 vote.

House Study Bill 274 directs IEDA to create the  Iowa Rural Development Tax Credit Program to provide tax credits for specific capital contributions made to certified rural business growth funds. The House advanced the bill out of a Ways and Means subcommittee on Tuesday.

This week: Both chambers are expected to hold floor debate to send priority legislation to the opposite chamber prior to the second funnel deadline on April 4. Many of the Governor’s proposed bills are currently eligible for consideration on the House or Senate floor.