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Iowa general fund down $742 million through June 3; PTET decline and tax cut cited
Summary
Eric Richardson of the Iowa Legislative Services Agency reported the state's FY2025 net general fund receipts were $742 million (9%) below last year through June 3, driven largely by a fall in pass-through entity tax (PTET) revenue and lower income-tax payments; the Revenue Estimating Conference projects FY2025 net receipts down 6.1%.
Eric Richardson, senior fiscal analyst for the Iowa Legislative Services Agency, reported that Iowa's net general fund revenue through June 3, fiscal year 2025, was $742,000,000 lower than the same point in FY2024 — a decline of about 9% year to date. "The most recent revenue estimating conference estimate for total net receipt growth, excluding transfer revenue, for FY 2025 is negative 6.1%," Richardson said.
The decline is concentrated in pass-through entity tax (PTET) activity and income tax payments. Richardson told viewers that net insurance and other taxes fell by $729,000,000, driven by a drop in PTET revenue; PTET had been introduced retroactively to tax year 2022 during FY2024 and the processing and refunds of PTET returns materially affected FY2025 totals. Gross receipts through June 3 were down 7.3%, while a 0.7% rise in tax refunds pushed net revenue down further to a 9% decline. Refunds related to PTET rose sharply, Richardson said, recording a 477.6% increase in PTET refunds during FY2025.
Sales and use tax showed a modest improvement in gross deposits, increasing 0.9% through June 3 compared with a year earlier, but transfers from the general fund to the school infrastructure fund lagged: transfers out of the general fund to that fund decreased 0.7%. Since the May 2 calculation, Richardson reported a $73,000,000 decrease in individual income tax collections while individual income tax refunds fell $124,000,000, yielding a net positive movement for the individual income tax line during that interval. Over the same period, sales and use tax revenue rose $29,000,000 and PTET revenue fell $112,000,000.
Richardson outlined how current-year tax payments filed since early February account for $264,000,000 of the $742,000,000 reduction in net revenue, and that the combined total of payments with returns processed this spring accounts for $20,000,000 of the year-to-date shortfall. He also noted a structural change affecting receipts: income tax rates for tax year 2025 decreased to a flat 3.8% beginning Jan. 1, 2025, which Richardson said is reducing withholding and estimated payments and will continue to affect the general fund into FY2026.
The memo presented the fiscal-year-to-date picture Richardson uses for these monthly updates and emphasized that, while FY2025 looks weak compared with FY2022, it is not the weakest year in the decade-long series shown. He closed by noting that the situation will continue to be monitored and that the next monthly video memo is expected in early July.
