Iowa's fiscal landscape is facing significant challenges as the latest revenue memo reveals a sharp decline in general fund revenue for fiscal year 2025. According to the April 2025 Monthly Revenue Memo presented by Eric Richardson, senior fiscal analyst with the Iowa Legislative Services Agency, net general fund revenue has decreased by $729 million, marking a 9.9% drop year-to-date as of May 2.

The memo highlights troubling trends across various tax categories. Net individual income tax has seen a slight decrease of 0.6%, while net corporate income tax has dropped by 6.9%. More alarmingly, net insurance and other taxes have plummeted by 75.5%, primarily due to a decline in pass-through entity tax (PTET) revenue. In contrast, net sales and use tax has shown a marginal increase of 0.1%.

The Revenue Estimating Conference's latest projection indicates that total net receipt growth, excluding transfer revenue, is expected to be negative 6.1% for the entire fiscal year. This projection underscores the ongoing struggle to meet revenue expectations, as year-to-date growth remains below necessary levels.

A deeper analysis reveals that while gross revenues have decreased by 6.8%, the net revenue decline is exacerbated by a 10.7% increase in tax refunds issued from the general fund. Additionally, transfers from the general fund to the school infrastructure fund have decreased by 1%, despite a slight increase in gross sales tax deposits.

The memo also notes that the overall revenue slowdown is largely driven by lower tax collections, particularly in PTET and individual income tax withholding. The recent tax rate reductions, including a flat individual income tax rate of 3.8% implemented at the beginning of the year, are expected to further impact general fund growth moving forward.

As tax processing for the 2024 tax year concludes in the coming month, stakeholders will gain clearer insights into the fiscal outlook for FY 2025. The findings from this revenue memo serve as a critical reminder of the financial hurdles Iowa faces and the importance of strategic fiscal planning to navigate these challenges effectively.