CHICAGO - The Iowa Finance Authority today expects to price $9.5 million of revenue bonds to help four cash-strapped local governments trying to recover lost funds in the Iowa Trust scandal.

Also today, the state of Iowa is scheduled to price $375 million of tax and revenue anticipation notes to fund late state aid payments to school districts.

Ann Lowenthal, vice president and manager of the Plains region for Moody's Investors Service, said both issues will assist the recipients with their cash flow and financial operations.

The finance authority's issue is the first installment of $14.5 million of bonds it was authorized to issue by the Iowa legislature in February. The proceeds will be loaned to the municipalities involved in the Iowa Trust. The $9.5 million of municipal investment recovery. bonds are secured solely by loan repayments of the local government and agencies and are not an obligation of the authority or state.

The bonds are backed by a general obligation, unlimited tax pledge by the four governments - Cerro Gordo County, Clinton County, the city of Dubuque, and Dubuque County. Each participant, through its loan agreement, is obligated to annually levy sufficient property taxes to repay its loan.

Each of the participants, except the city of Dubuque, will use its loan to replenish general fund balances for, among other reasons, current cash-flow requirements. The city of Dubuque will use its loan proceeds to replenish pension fund assets.

The bonds, which mature between 1994 and 1997, are rated A by Moody's Piper Jaffray Inc. is the senior manager for the negotiated deal. Securities Corporation of Iowa is the co-manager.

The pricing for the remaining $5 million of the bonds authorized by the legislature is expected in about two weeks.

The four communities that will receive the bond proceeds are part of 88 local governments and agencies that pooled their cash in the Iowa Trust, an investment account handled by Institutional Treasury Management, the trust's investment adviser.

In December 1991, the Securities and Exchange Commission charged the firm with fraud after determining that $76 million was missing from the Iowa Trust's account. The Iowa attorney general has filed suit to recover the money from various banks in Colorado and California, and so far has recovered $43 million from a Lakewood, Colo., Institution, Jefferson Bank & Trust. However, a federal judge in Colorado has placed the funds in escrow until the bank can complete its appeal.

Tom Wishman, finance officer for Cerro Gordo County, expects to receive $2.7 million from the authority's bond proceeds.

"Our situation is not a crisis or desperate. We will need the funds for fiscal year 1993 to maintain operations at presently levels," he said.

Cerro Gordo County had invested $3.5 million with Institutional Treasury Management, Mr. Wishman said. He added that the county has recovered $800,000 of the funds.

Meanwhile, Iowa will issue $375 million one-year Trans after overcoming delays that forced the original July 1 pricing date to be rescheduled.

The Trans, which mature on June 30, 1993, are rated MIG-1 by Moody's and SP-1 plus by Standard & Poor's Corp.

The notes are payable solely from pledged revenues of the state, consisting of available general fund revenues and unexpended or investment earnings associated with outstanding notes. Iowa's constitution bars the state from issuing general obligation debt. The Trans are also payable from an irrevocable direct-pay letter of credit from Union Bank of Switzerland, individually and as an agent for National Westminster Bank PLC, Swiss Bank Corp., Commerzbank AB, and Dresdner Bank.

Short-term note traders yesterday said that the recent turmoil in Iowa finance has tainted the state's trading quality. Traders said that Iowa paper trades were about 20 basis points cheaper than the rest of the note market.

However, bolstered by letters of credit, several market players said the deal would be met with sufficient investor demand. Traders speculated that the deal would be priced to yield 3.10% or 3.15%.

Lack of a state fiscal 1993 budget by mid-June initially delayed the Trans sale. State Treasurer Michael Fitzgerald has said the state did not proceed with the Trans without a state budget because getting credit enhancement on the Trans would have been difficult. The $3.4 billion general funds budget was finally approved on June 30, a day before fiscal 1993 began.

A second setback occurred about two weeks ago when a taxpayers group filed a lawsuit that alleged the state's accounting system hides a long-term deficit. It also claimed that the state's issuance of Trans is effectively a refinancing of long-term debt and thus unconstitutional. The suit was dismissed July 10 by an Iowa District Court judge on procedural grounds.

William Smith, attorney for the taxpayers groups, has said he will appeal the suit to the state Supreme Court.

The preliminary official statement for the Trans says the suit was found to be without merit and that legal counsel has indicated that an appeal by the plaintiffs to the Iowa Supreme Court would not be successful.

Larry Thornton, deputy state treasurer, said the schools are expected to receive the proceeds from the issue by the end of the month.

Co-senior manager and bookrunner for the deal is Goldman, Sachs & Co. The other co-senior manager is Lehman Brothers. Davis, Hockenberg, Wine, Brown, Koehn & Shors, P. C., is the bond counsel.

Co-managers are Artemis Capital Group Inc.; Bear, Stearns, & Co.; Dougherty Dawkins, Stand & Bigelow Inc.; the Principal/Eppler, Guerin & Turner Inc.; Dickinson & Co.; First Boston Corp.; Dain Bosworth Inc.; Kirkpatrick, Pettis Smith Polian Inc.; and Norwest Investment Services Inc.

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