Iowa general fund posts $232 million drop in July amid calendar and processing shifts, analyst says

Eric Richardson, senior fiscal analyst for the nonpartisan Iowa Legislative Services Agency, said in the agency’s July 2025 video memo that Iowa net general fund revenue for the cash year July 1–Aug. 1, 2025, decreased by $232,000,000, a 24.3% year‑to‑date decline compared with the same period a year earlier.

Richardson said income tax receipts fell $109,000,000 (about 24% for the period), which he said is likely linked to the change to a flat income tax rate of 3.8% that took effect Jan. 1, 2025. He said other taxes fell by about $106,000,000, a decline he attributed to calendar and deposit‑processing effects rather than immediate underlying economic activity.

The memo explained two specific timing factors that distorted July comparisons. First, several tax due dates, including monthly sales and use tax and motor fuel tax, were moved to July 1, 2024, because June 30, 2024, fell on a weekend; June 30, 2025, fell on a weekday, so only one month’s sales tax was deposited in July 2025 versus two months’ deposits in July 2024. Second, Richardson highlighted continued effects from a deposit‑processing change implemented by the state in November 2021 that at times leaves amounts temporarily held in a general‑fund suspense account while revenue types are clarified.

Those mechanics produced large swings in the suspense account on the first business day of fiscal years: a $71,000,000 positive balance on July 1, 2024, and a $126,000,000 negative balance on July 1, 2025, Richardson said. He described how the November 2021 suspense‑account process has contributed to volatility in early fiscal‑year gross deposit patterns since FY 2023.

Richardson also reviewed final FY 2025 performance against the Revenue Estimating Conference (REC) projection: he said FY 2025 revenue growth finished at negative 7.1%, below the REC projection of negative 6.1% for total net receipts without transfers as the cashier closed June 30. "While it does appear at this time that FY 2025 revenue growth remains below the REC projection made in March, final revenue calculations will not be available until October," Richardson said.

He added that the July figures show negative growth for the just‑started fiscal year 2026 but cautioned that some of that negative reading is rooted in how calendar dates fell between June and July 2024. Richardson said the August 2025 report should provide a clearer picture for FY 2026 analysis.

The memo noted that July 31 is the due date for tax returns for several tax types, including quarterly individual income withholding and monthly sales and use taxes, and that ongoing processing of FY 2025 deposits and refunds could affect final year‑end figures.

The Iowa Legislative Services Agency posted the video memo in late July and said it will release the next monthly video memo in early September.