Iowa's education savings account program entered its second year of universal eligibility in the 2026-27 school year, with all K-12 students in accredited nonpublic schools able to receive state funding regardless of family income. The ESA amount for 2026-27 is set at $8,148 per student, matching the state cost per pupil. The program, established by the Students First Act signed in January 2023, phased in eligibility by income over three years before dropping all income limits for the 2025-26 school year.
Participation has run well ahead of official projections. In the program's first year, 16,757 students used ESAs; the Legislative Services Agency had estimated about 14,000. Year two saw 27,866 participants against an estimate of 20,000. By year three, 41,044 students used ESAs, representing 99 percent of all nonpublic school students in the state. The LSA's fiscal note established a standing unlimited General Fund appropriation for the ESA Fund, meaning costs scale with participation without a statutory cap.
Participation and cost
The cost to the state has become a point of dispute. Iowa State Auditor Rob Sand reported that the ESA program cost $258 million, finding that 8,838 additional students attended private schools in 2025-26 beyond what pre-ESA projections would have predicted. The auditor's office said 78.5 percent of ESA users were students expected to attend nonpublic schools even without the program. The Iowa Department of Education responded that the report omits more than $37.9 million in categorical funding returned to public school districts for ESA students, averaging $1,656 per user. The two agencies disagree on how to frame net cost versus gross cost.
An independent analysis, not peer-reviewed, estimated ESA spending at $128 million in 2023-24 and $218 million in 2024-25, higher than the LSA's estimates of $106.9 million and $156.3 million for those years. The analysis noted that while ESA spending is small relative to total state public school funding of $3.85 billion in FY2025, it represents forgone per-pupil revenue that would have yielded roughly $451 more per public pupil had it remained in the public system.
Rural districts feel the squeeze
The impact is concentrated in rural and small-town districts. More than two in five students living in the Boyden-Hull district used ESAs in 2025-26, and at least one in four in MOC-Floyd Valley, Remsen-Union, Rock Valley, and Sioux Center districts did the same, according to the Des Moines Register. Public school enrollment has dropped 3 percent since the ESA program began, while nonpublic enrollment is up 22 percent. Four of every five public school districts have seen enrollment decline.
Districts are responding with cuts. The Boone Community School Board voted unanimously in January 2026 to cut $665,000 by eliminating its 100-year-old orchestra program, middle school family consumer science, and full-time elementary PE, art, and music positions, citing declining enrollment and insufficient state funding. Gilbert Community School District plans to cut seven positions, including three full-time teaching jobs, for an $800,000 budget reduction ahead of 2026-27. The superintendent there cited state aid increases of 2 percent against cost increases of at least 10 percent. Creston Community Schools reported losing three to five students per year to private schools, roughly $8,000 per student, while receiving categorical funding locked to specific uses that the district says it cannot redirect to behavioral or mental health needs.
Where ESA students live
ESA participation is spread unevenly across the state. As of October 2024, 44 of Iowa's 325 public districts had no resident ESA students, while 122 had between one and ten, 94 had between 11 and 99, and 65 had 100 or more. The Iowa Association of School Boards estimated that 281 districts had at least one resident ESA student generating state categorical funding, projected at $38.7 million total for FY2026 across Teacher Salary Supplement, Professional Development, Early Intervention, and Teacher Leadership categories.
- 44 districts (13.5%) had no ESA students
- 122 districts (37.5%) had 1-10 ESA students
- 94 districts (28.9%) had 11-99 ESA students
- 65 districts (20.0%) had 100 or more ESA students
Public school certified enrollment declined from 483,699 in 2023-24 to 480,665 in 2024-25, a drop of 0.63 percent. Nonpublic enrollment rose from 36,195 to 39,356 in the same period. The Department of Education noted that its own pre-ESA projections from May 2022 showed a downward enrollment trend continuing through at least 2026-27, suggesting that not all public school decline is attributable to the ESA program.
Official projections vs. actual uptake
The gap between projected and actual participation is notable. Actual enrollment exceeded LSA estimates by roughly 40 percent in each of the first two years. The standing unlimited appropriation means the state's financial exposure grows automatically with each additional participant, without a legislative cap.
The evidence on net fiscal impact is contested. The state auditor frames the $258 million as the program's cost to Iowans, while the Department of Education points to $37.9 million in categorical funding flowing back to public districts. The independent analysis, while acknowledging it is not peer-reviewed, notes that per-pupil revenue forgone from the public system would have totaled hundreds of dollars per public student. These figures measure different things: gross state spending on ESA awards, categorical payments to districts, and the counterfactual of what public schools would have received absent the program.