A review of K-12 school funding reforms approved in the 2026 Legislative Session
The rising cost of property taxes has long been a top issue of concern for Iowans, and this past year the Iowa Legislature took historic, concrete steps to provide real property tax relief.
A major driver of property taxes in Iowa is funding for K-12 schools, accounting for over half of most Iowans' property tax bills. Iowa’s K-12 schools rely on a combination of funding from the state’s General Fund, comprised primarily of sales and income taxes, and from local property taxes. Decisions made by the legislature each year impact how much of that education budget is funded by the state and how much is funded by local property taxes.
Farm Bureau has long advocated for the legislature to reduce the reliance on property taxes for K-12 education and to replace that funding for Iowa’s schools with other revenue sources. The legislature delivered on this goal in several meaningful ways to reduce Iowa’s property tax burden.
$146 Million
Property Tax Replacement Payment savings this year
$42.2 Million
Budget Guarantee savings for 199 qualifying districts
$730 Million
Combined five-year savings from Foundation Levy and SAVE reforms
PROPERTY TAX REPLACEMENT PAYMENTS
The legislature approved Senate File 2201, which sets annual state aid levels for K-12 schools. The bill continues funding Property Tax Replacement Payments, which ensures any increases resulting from setting state supplemental aid are paid for by the state instead of being shared by the state and property taxpayers, saving property taxpayers $146 million this year – an increase of $8.7 million compared to the previous fiscal year. This funding mechanism has been in place since 2013 and cumulatively has resulted in more than $1 billion in property tax savings.
BUDGET GUARANTEE
The bill also took the unprecedented step to fund the K-12 schools budget guarantee from the state’s General Fund instead of from property taxes in affected school districts. The Budget Guarantee, which is part of the school funding formula, ensures that school districts receive at least 1% growth from the previous year’s budget despite having declining enrollment. This provision provides $42.2 million in property tax savings for 199 qualifying school districts.
Funding Property Tax Replacement Payments and the Budget Guarantee is passed by the legislature annually and will need approval in future legislative sessions to continue this property tax relief.
K-12 FOUNDATION PROPERTY TAX LEVY
The legislature also passed a comprehensive and historic property tax reform bill, Senate File 2472, which among several property tax saving reforms also addresses property taxes used for K-12 schools. The bill permanently reduces the K-12 Foundation Property Tax Levy rate, which is charged on all taxable valuation in the state. The bill reduces the levy from $5.40 to $5.10 in 2029 and reduces it further to $4.90 in 2030 and beyond – replacing this funding with state General Fund revenue while holding schools harmless.
The bill also reduces property taxes by gradually increasing the percentage of SAVE revenue transferred directly to property tax relief. The existing one cent statewide sales tax, referred to as the Secure an Advanced Vision for Education (SAVE), was created in 2008 to provide funding for both school infrastructure and direct property tax relief. Speeding up the percentage of SAVE used specifically to reduce K-12 property tax levies will provide significant property tax savings across the state.
The reduction of the Foundation Levy and increased percentage of SAVE used for K-12 levy reductions will result in $334 million and $396 million, respectively, in property tax savings for Iowans over the next five years.
"Iowa Farm Bureau has long advocated for property tax reform, and we’re pleased the legislature included several important policies our members advocated for. This reform will provide long term property tax relief for Iowa homeowners and farmers."
Iowa Farm Bureau President Brent Johnson
Find Savings in Your Legislative District
To view the property tax savings provided by these reforms in the 2026 legislative session, use the following drop down-menus to search by
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