With two-thirds of the fiscal year behind us, the state is continuing to outperform last year.
Iowa’s revenue report for February has been released and the data revealed net General Fund revenue for the month was $35.9 million (5.7%) above the February 2022 net revenue level. When broken down by the three largest sources (personal income tax, sales/use tax, and corporate income tax), revenue compared to February 2022 is detailed below (directly from the LSA Revenue Memo):
Since month-to-month comparisons can be volatile, it may be even more important to consider year-to-date information, as well. Total net receipts YTD are 4.0% more than 2022, with growth in personal income tax, sales/use tax, and corporate income tax.
As the calendar turned over to 2023, some tax categories are predicted to bring in less revenue than last year due to multiple pieces of legislation passed during the 2022 legislative session, including the historic tax cuts. The State Revenue Estimating Conference (REC) met on December 14, 2022, to evaluate the current (FY23) and next (FY24) fiscal years. December REC meetings are noteworthy because this projection establishes limits that must be followed by both the Governor and by the Legislature in developing the State’s budget.
Given those legislative changes, the REC’s most recent projection forecasts a revenue decrease of -1.9% from last year. The year-to-date figures for the first eight months of this fiscal year are below (directly from the LSA Revenue Memo), along with the December REC forecast:
The FY 2023 REC personal income tax estimate represents a projected decrease of -3.5% compared to actual FY 2022. When looking at actual collections through February 2023, personal income tax receipts have increased 4.7%.
The REC estimate for FY 2023 sales/use tax receipts is a projected increase of 3.4% compared to actual FY 2022. The actual collections of sales/use tax receipts through February 2023 have increased 1.9%.
The REC estimate for FY 2023 corporate income tax revenue is a projected increase of 3.6% compared to actual FY 2022. Through February 2023, corporate income tax receipts increased 8.9%.
With two-thirds of the fiscal year behind us, the state is continuing to outperform last year. The personal income tax receipts for February were impacted by the income tax law changes per LSA. This is good news because it shows taxpayers are getting to keep more of their hard-earned money, yet the state is still in a solid financial position to fund its priorities.
The April and June revenue memos will include the first quarterly income tax payments and give a better picture of how the tax reforms are impacting revenue.
The next REC meeting is scheduled for March 10. The following chart illustrates total General Fund revenues on a month-to-month basis for fiscal year 2023.