Iowa Senate begins budget action as property tax, eminent domain talks continue
Senate Republicans began moving budget bills this week, shortly after releasing a spending proposal for fiscal year 2027 that falls $47 million below Gov. Kim Reynolds’ target.
On Wednesday, the Senate Appropriations Committee approved Senate Study Bill 3186 and Senate Study Bill 3189 — the Senate GOP proposals for the state’s transportation budget and administration and regulation budget, respectively. Bills funding the state’s education system outside of K-12 schools, Senate Study Bill 3191; the state’s justice system, Senate Study Bill 3184, and judicial system, Senate Study Bill 3185, advanced out of subcommittees Wednesday.
The five bills largely reflect the governor’s budget, though lawmakers noted there are plans to amend them before they come up for floor debate.
There will still be discussion and debate on the final line items funded through these bills. For example, Sens. Dennis Guth, R-Klemme, and Janet Petersen, D-Des Moines, discussed looking into “transitional” funding for executive branch entities that will have newly elected leaders in office after the 2026 midterms, including the governor’s and state auditor’s offices. However, the Senate Republicans’ overall budget plan, sets the stage to begin negotiations with the governor and House in the coming weeks.
Senate Republicans released a $9.623 billion budget target this week for FY 2027, which begins July 1, 2026. This figure is below Reynolds’ proposed $9.666 billion budget. Sen. Tim Kraayenbrink, who chairs the Senate Appropriations Committee, said in a news release this proposal is a continuation of Republicans’ goal of setting a “responsible, sustainable budget,” as it would leave Iowa with a projected $4.8 billion in its ending balance, the Taxpayer Relief Fund, and other reserves.
Senate Majority Leader Mike Klimesh said in a statement the budget target marked the beginning of the end of session, and that Senate Republicans wanted to provide a path to “continue to conservatively fund the priorities of Iowans.”
“My focus is always on growth and ensuring we are passing policies to help our state grow and thrive,” Klimesh said. “A competitive tax policy and ensuring Iowans get to keep more of their hard-earned money is a crucial part of that goal. The next fiscal year will be our second full year with our historic flat tax for Iowans at 3.8 percent. In the coming weeks we are looking forward to continuing conversations on passing a conservative budget to fund priorities like education and public safety, is fiscally responsible, and keeps money in the pockets of Iowans.”
Budget plan borrows from reserves
The Senate GOP proposal is a 1.2% increase in funding compared to the current fiscal year — a total increase of $114 million in new spending, according to the release. Republicans highlighted that the budget included nearly $100 million in new funding for the state’s K-12 education system through the State Supplemental Aid (SSA) package signed into law in February, which set an 2% per-pupil funding rate for the 2026-27 school year.
While Senate Republicans have said the proposal reflects a responsible spending model, Democrats have criticized GOP priorities as state revenue has declined. The March Revenue Estimating Conference projected Iowa will face an estimated revenue decrease of 8.8%, with general fund revenues of $8.16 billion in FY 2026. Revenues are projected to increase to an estimated $8.5 billion in FY 2027. This means the budgets proposed by GOP lawmakers will spend more than the state is projected to bring in.
House Republicans plan to release their budget proposal next week, House Speaker Pat Grassley told reporters Wednesday. There are some subjects, like funding for paraeducator pay, that Grassley said will likely come up again during budget negotiations, but said that more specific items would be discussed in the coming weeks.
Overall, Grassley said House Republicans were focused on “fully funding Medicaid” and passing “a conservative budget that fully funds those priorities that we’ve laid out.” The state will be using money from the Taxpayer Relief Fund for the shortfall in FY 2026 Medicaid funding and increased premium taxes retroactively on health maintenance organizations to address projected shortfalls in the coming fiscal year, through a law signed by Reynolds last week.
Iowa lawmakers will stop receiving per diem expenses April 21 — the 100th day of session. While this is the traditional goal date for ending the legislative session, lawmakers are not done for the year until they fully pass a budget.
Property taxes, eminent domain still pending
In addition to negotiations on funding, lawmakers have not yet sent bills to the governor on two of the biggest issues Republicans said they wanted to address in 2026 — property taxes and eminent domain.
The use of eminent domain can force unwilling landowners to accept an easement on their property for projects deemed in the public interest. It has been a central conflict in the development of a carbon-capture pipeline through Iowa by Summit Carbon Solutions.
Last year, a group of 12 Senate Republicans refused to approve budget bills unless the chamber took up a bill related to eminent domain for carbon pipeline projects. This effort led to the Senate passing a bill on the issue that was ultimately vetoed by Reynolds.
After swift movement on the issue earlier this session, public discussions on the issue have stalled. The House in January passed House File 2104, a proposal to directly ban the use of eminent domain for carbon pipelines. When the bill was taken up during a Senate committee later in January, it was amended and replaced with language from Klimesh’s proposal, Senate File 2067, which still allows for the use of eminent domain by hazardous liquid pipeline operators, but only after the operator proves it had “diligently exhausted” other possible willing landowner easements within a widened corridor.
Klimesh told reporters ahead of the second “funnel” deadline of the session he and other GOP leaders have still been discussing eminent domain in private meetings.
It is unclear if there will be another push from Republicans interested in passing eminent domain legislation to force the issue to come up before session ends. Grassley said he did not want to make statements with “absolutes” about moving or not moving budget bills or other issues if the Senate does not bring eminent domain to a floor debate — but said the House remains ready to consider legislation from the Senate on the issue.
“We’re more than happy to consider a compromise if it has protections for the landowners that we’ve been asking for in this conversation,” Grassley said Wednesday. “Some of it has to be — can we find that level of agreement? And clearly, at this point, we haven’t been able to. But, you know, the House is all ears. If there is something that anyone wants us to consider, we’ll at least consider it. That doesn’t mean we’ll do it, but we would just love to see a piece of policy for us to negotiate.”
Finding a “compromise” is also goal for property taxes, as lawmakers and the governor aim to find a consensus on how to lower Iowans’ property tax burden. While House Republicans amended their proposal, House Study Bill 596, to include some components of the governor’s bill, the Senate GOP proposal, Senate File 2472, remains significantly different. The Senate bill proposes eliminating the “rollback” system for calculating property taxes, reversing some 2013 property tax cuts for multi-residential buildings like apartments, and eliminating property taxes altogether for Iowa homeowners older than 60 and indexing the state’s gas tax to inflation.
Grassley said keeping the 2% “set cap” — which cannot be adjusted based on inflation, as the Senate proposal would allow — is a major objective for House Republicans during negotiations on a final property tax bill.
Sen. Dan Dawson, the Senate Ways and Means chair, said in an “Iowa Press” interview that he believes the larger changes to Iowa’s property tax system proposed in the Senate Republican bill are needed to meaningfully address the issue of property tax costs.
“The door is wide open for negotiation,” Dawson said. “But what I would say is that we have to be able to bring something meaningful to Iowans at the end of this. No more Band-Aids, no more simple approaches. Either we go after the system head on, or we be honest with ourselves and say that we fell short.”
Related
State Sen. Dan Dawson discusses delivering on property tax relief during a legislative forum in Council Bluffs on Saturday, March 14, 2026.
