Iowa general fund receipts fall $816.6 million in FY2025; Revenue Estimating Conference to revisit forecasts Oct. 16

Iowa’s general fund net revenue fell by $816,600,000, or 8.4 percent, in fiscal year 2025 compared with FY2024, the Iowa Legislative Services Agency reported in a September video memo.

Eric Richardson, senior fiscal analyst for the nonpartisan agency, said the decrease reflects a mix of tax‑policy shifts and accounting timing. “General fund net revenue for the year decreased $816,600,000, or minus 8.4% compared to fiscal year 2024,” Richardson said in the memo.

The memo attributes much of the change to movements in pass‑through entity tax (PTET) activity and state tax law changes. Richardson said PTET‑related receipts in the “other tax” category fell by about $687 million year over year — from a net $862 million in FY2024 to roughly $175 million in FY2025 — and that PTET credits processed during FY2025 also reallocated revenue between tax categories. “After a credit is processed, there are dual entries in the state accounting system, decreasing other tax and increasing the relevant tax where PTET is finalized, largely individual income tax,” he said.

On a source basis, the memo reports that net individual income tax receipts rose modestly (about $43 million) in FY2025 and sales and use tax receipts rose by about $36 million, while corporate income tax receipts declined by roughly $40 million. Richardson also noted refunds tied to tax year 2024 were lower in FY2025 and that the timing of refunds and accrual accounting affected the year‑end net figures.

The memo flags recent state and federal tax changes as ongoing factors. It summarizes Iowa changes that reduced individual income tax rates in recent years and cites legislation that, in the memo’s terms, created a 3.8 percent flat tax beginning in tax year 2025. The memo also notes recent federal actions that effectively increased the state and local tax (SALT) deduction cap to $40,000 beginning tax year 2025 through 2029; Richardson said analysts will continue to study how those federal changes affect Iowa’s general fund.

Looking at the current fiscal year, Richardson said net general fund revenue through Oct. 1, 2025 showed a double‑digit percentage decline (memo reports an 11.1% drop) compared with the same fiscal‑year basis in FY2025, driven mainly by a reduction in net individual income tax receipts to date. He warned that withholding behavior tied to tax‑year 2025 could continue to slow receipts through January 2026 before stabilizing in February.

The Revenue Estimating Conference (REC) will consider the final FY2025 figures and produce updated revenue estimates for fiscal years 2026 and 2027 at its next meeting, scheduled for Oct. 16, Richardson said. The memo closes by noting the next monthly video memo is expected in early November.

Note: dollar and percentage figures in this article are taken from the Iowa Legislative Services Agency memo as reported by Eric Richardson; several line items discussed in the memo reflect accounting accruals and the processing of tax credits and refunds that reallocate receipts across fiscal years and tax categories.