Iowa general fund receipts down $310 million through Jan. 2; Revenue Estimating Conference slightly raises forecasts

Eric Richardson, senior fiscal analyst at the nonpartisan Iowa Legislative Services Agency, said Thursday that net general fund receipts for fiscal year 2026 were down $310,000,000 (‑7.9%) through Jan. 2 compared with the prior year. “Through January 2 and on a fiscal year basis, net receipts decreased $310,000,000 and minus 7.9%,” Richardson said.

The decline largely reflects recent tax changes that took effect Jan. 1, 2025, Richardson said. He reported individual income tax receipts fell 15.2%, which he attributed primarily to the reduction in Iowa’s top individual income tax rate to a flat 3.8% beginning Jan. 1, 2025. Sales and use taxes, by contrast, rose 6.2% through December amid continued consumer spending, while corporate income taxes dropped 31.8% and franchise taxes were down 21.5% compared with a strong FY2025.

Richardson said gross receipts through Jan. 2 were down 9.9%, but net receipts were partially boosted because regular tax refunds declined (the memo reports a sizable reduction in refunds) and because transfers out of the general fund to the school infrastructure fund increased. He said individual income tax refunds have fallen by $129,000,000 so far in FY2026, partly because many pass‑through entity tax credit claims were processed in FY2025.

At its Dec. 11 meeting, the Revenue Estimating Conference reviewed and adjusted the state’s revenue outlook. Richardson said the panel increased projected net revenue by $23,000,000 for FY2026 and by $105,000,000 for FY2027 compared with October estimates. The conference’s December projection places FY2026 net revenue (including transfers) at a decline of 8.8% from FY2025, a $785,000,000 decrease; FY2027 is projected to be $341,000,000 higher (4.2% above the new FY2026 estimate).

Richardson also noted that a recent federal tax law the memo references is expected to lower Iowa’s general fund revenues because the state automatically conforms to federal taxable income, and that impacts tied to the OVA should begin to show up in refunds during the next tax filing season.

The Revenue Estimating Conference is scheduled to meet again in March to reassess revenue for FY2026 and FY2027. Richardson said the next monthly video memo will appear in early February.