State Minimum Return Act of 1985

State Minimum Return Act of 1985 - Declares any State eligible for a positive reallocation of Federal expenditures in the categories of procurement contracts and need-based programs if such State has a Federal expenditure to Federal tax ratio which is less than 90 percent. Declares any State which has a ratio of between 90 and 100 percent eligible for a positive reallocation in the category of procurement contracts. Requires the Director of the Office of Management and Budget to determine a State's eligibility and to take into account subsidies for water and power programs through Government corporations.

Declares all Federal expenditures subject to reallocation except expenditures for: (1) subsidized water and power programs; (2) compensation and allowances of Federal officers and employees; (3) maintenance of Federal buildings and installations; (4) offsetting receipts; and (5) programs for which the Government assumes the total cost and in which direct payment is made to recipients other than governmental units.

Sets forth reallocation mechanisms under which each Federal agency shall ensure that each State receives an amount of Federal spending that is at least 90 percent of the amount of such State's tax payment by FY 1992.

Amends the Consolidated Federal Funds Report Act of 1982 to extend the reporting requirements of the Director of the Office of Management and Budget from 180 days after the end of FY 1985 to 180 days after the end of FY 1992.

Directs the Secretary of the Treasury to conduct and report to the Congress on a study on the impact of Federal spending, tax policy, and fiscal policy on State economies and the economic growth rate of States and regions.