Iowa reports 7.1% drop in general fund revenues for FY 2025

The June 2025 revenue report from the Iowa Legislative Services Agency reveals a concerning trend for the state's finances, with net general fund revenue decreasing by 7.1% compared to the previous fiscal year. This decline amounts to a staggering $629 million, marking the third consecutive year of negative revenue growth since the onset of the COVID-19 pandemic.

Key contributors to this downturn include a 5.7% drop in corporate income tax and a dramatic 54.9% decrease in net insurance and other taxes. The latter was significantly impacted by a 77.8% decline in revenue from the pass-through entity tax, which fell to $199 million in FY 2025, down $699 million from FY 2024. While individual income tax and sales and use tax saw slight increases of 1% and 1.5%, respectively, these gains were not enough to offset the overall revenue loss.

The report also noted that the fiscal year 2025 data includes an unusual accounting situation where 13 months of sales tax revenue were recorded due to timing differences in payment due dates. This adjustment strengthens the FY 2025 figures but still reflects a broader trend of declining revenue.

Looking ahead, the final revenue figures for FY 2025 will depend on the processing of additional tax payments and refunds over the next few months. The Revenue Estimating Conference had previously projected a negative growth rate of 6.1% for the fiscal year, and the current data suggests that actual revenue growth is slightly below this estimate.

As Iowa navigates these financial challenges, the implications for community services and state programs could be significant, highlighting the need for careful fiscal management in the coming months. The state will continue to monitor revenue trends closely as it prepares for the next fiscal year.