In the year 2030, Iowa will have a significantly older population with more seniors and fewer young people. This will have a financial impact on the state as state revenues and key categories of spending will be affected. In 2006, 83% of the state tax receipts came from individual income taxes and sales and use taxes, which accounted for 90% of general fund receipts. In the report, the authors focus on state Medicaid, K-12 education, and higher-education spending, which account for about two-thirds of the state general fund, as well as individual income and sales tax revenue. The aging of the population in Iowa means a smaller share of school-age children, however, the trend of more school-age children attending public schools is expected to continue, as well as a growing number of 18-24 year-olds attending post-secondary institutions. As a result, state education spending is expected to increase as a share of the Iowa economy despite a decline in young people as a share of the population.
Enrollment in elementary and secondary schools is expected to decline by 2.4% from 2007 to 2020, but per-pupil spending is expected to rise by 5.1% per year. As a result, state aid for K-12 schools is likely to grow by over 50% over this period, with a new statewide voluntary preschool program for 4-year-olds expected to rise from $15 million in 2009 to $109 million per year by 2014. State spending on higher education will grow along with the state economy, remaining about 0.62% of the state GDP. However, if cost and enrollment trends continue through 2030, the growing numbers of 18-24 year-olds after 2020 will push spending higher as a share of the Iowa economy, possibly as high as 0.70% of state GDP by 2030.
The aging of the population is often assumed to have a significant effect on state Medicaid spending, but the projected growth in overall Medicaid spending is largely due to rising healthcare costs in general and the growth of the number of children, adults, and disabled enrollees. In addition, the share of the population aged 65 and over who are enrolled in Medicaid is expected to decline from 12.2% to 10.0% by 2030, and spending per aged enrollee is expected to increase more slowly than spending per enrollee in other Medicaid categories.