Iowa General Fund Net Receipts Fall $614 Million Through April 2; REC Lowers Fiscal Estimates

Eric Richardson, senior fiscal analyst with the nonpartisan Iowa Legislative Services Agency, said in a March 2025 video memo that Iowa General Fund net receipts decreased $614,000,000, or 9.5 percent, on a fiscal-year-to-date basis through April 2, 2025.

Richardson said gross revenues through April 2 declined 6.2 percent year to date, but net growth was weaker because refunds rose. "Through April 2 and on a fiscal year basis, net receipts decreased $614,000,000 and 9.5%," Richardson said.

Why it matters: the lower receipts and the Revenue Estimating Conference's (REC) March 13 revision change the state's near-term revenue outlook and inform budget decisions for the remainder of FY 2025 and planning for FY 2026.

Breakdown and drivers: Richardson reported small year-to-date increases in some taxes and steep drops in others. He said individual income tax was up 0.2 percent and sales and use tax up 0.1 percent for the fiscal year; corporate income tax decreased 18.5 percent and inheritance tax decreased 48.5 percent. "Other taxes have decreased significantly by 68.8% due to less pass through entity tax revenue," he said, referring to state receipts tied to the pass-through entity tax (PTET).

Richardson also reported that refunds increased relative to the prior report and reduced net growth: "Gross revenues through April 2 have decreased by 6.2%, but the growth in net revenue comes in at minus 9.5% due to an increase of 20.7 in the refunds coming from the general fund." The transcript does not specify whether the figure ‘‘20.7’’ refers to percent or dollar millions.

Policy changes affecting receipts: Richardson noted that a significant individual income tax rate reduction effective Jan. 1, 2025, is expected to slow individual income tax growth for the remainder of the fiscal year and beyond. He also said PTET activity, including retroactive collections in FY 2024 and subsequent PTET tax credit claims, reduced FY 2025 receipts compared with the prior year.

REC estimate changes: Richardson said the Revenue Estimating Conference met March 13 and revised its estimates. "The new REC estimate for the current year subtracted $19,000,000 from the level projected in December 2024," he said, adding that income tax was reduced by $25,000,000, sales and use tax by $88,000,000, refunds were increased by $57,000,000, while corporate income tax was increased by $72,000,000 and miscellaneous tax by $18,000,000. Richardson said FY 2025 net revenue was projected to decrease $621,000,000, or 6.4 percent, compared with actual FY 2024 net revenue.

Looking ahead: Richardson said the REC subtracted $218,000,000 from the December estimate for FY 2026 and that the new estimate called for a decrease of $627,000,000, or 6.9 percent, compared with the latest FY 2025 estimate.

Other points from the memo: Richardson reiterated that previously enacted tax rate reductions affecting inheritance tax, individual income tax, franchise tax and insurance premium tax are expected to continue weighing on general fund growth. He closed by directing viewers to the next monthly video memo in early May.

No formal vote totals or REC roll-call votes were provided in the memo; the transcript reports the REC's revised estimates but does not specify the REC's internal voting record or how individual members voted.