Heading into the 2020 legislative session, we said policymakers had the opportunity to speed up scheduled tax cuts, make it easier to enter new careers, guarantee support is given to those who are genuinely in need and increase the fiscal accountability of local governments.
ITR supported legislation that would allow Iowans to keep more of their hard-earned money and increase the freedom to make decisions without the government creating unnecessary barriers.
Now that the legislative session is over, what did lawmakers accomplish?
Legislative Success
Two bills that ITR supported were passed by both the Iowa House and Senate and will now be sent to the Governor for her signature.
Remove Excessive Licensing Regulations- HF 2627
Excessive occupational licensing regulations create barriers for individuals entering the workforce and increases costs for businesses and consumers. This important reform:
- Implements universal recognition, allowing new Iowa residents with an out-of-state license to use their skills and training in the same licensed profession here in Iowa without additional red tape
- Waives initial licensing fees for first-time applicants of families earning less than 200 percent of the federal poverty level
- Applies common-sense criminal justice reforms to the licensure process for those with a conviction history
- Adds provisions related to the COVID-19 pandemic and the Governor’s proclamations during the public health emergency allowing continuing education requirements to be fulfilled online
Gov. Kim Reynolds included this bill as one of several key pieces of legislation that “will help ensure every Iowan, regardless of their background or circumstance, has an opportunity to succeed.”
Senate Majority Leader Jack Whitver, R-Ankeny, believes the reforms will “bring more people who are able to work into the workforce…lowering barriers to work in some professions.”
Passing occupational licensing reforms will make it easier for Iowans to work and pursue career opportunities, especially as we move forward from the economic havoc caused by COVID-19.
We all know heavy regulations serve as a red tape tax that impacts Iowa’s working class. Occupational licensing laws make it more difficult and expensive for Iowans to earn a living and fill high-demand jobs. The changes passed by the legislature in House File 2627 put Iowans ahead of the special interests.
Two bills that ITR supported were passed by both the Iowa House and Senate and will now be sent to the Governor for her signature.
COVID Liability Protection – SF 2338
This legislation protects Iowa businesses and health care providers from many coronavirus-related lawsuits if they act responsibly and with caution.
House Speaker Pat Grassley, R-New Hartford, explained, “These Iowans should be protected for their heroism, selflessness, and for doing the right thing during an unprecedented and rapidly evolving situation. That’s what our COVID liability legislation is about. But if there were businesses who failed to keep their workers safe, they can and should be held accountable for their actions. Our legislation ensures that.”
State Senator Zach Whiting, R-Spirit Lake, the bill’s floor manager, said, “If you’re an employer or a premises operator or health care professional, and you did your best to keep your people and your property safe based on the public health guidance and best practices at the time, you’re OK, and you should not have the threat of litigation hanging over your head.”
Work Left To Do For Some Issues
Income tax reform was a topic of much discussion, but significant changes did not come to fruition. Governor Reynolds and State Senator Jake Chapman, R-Adel, should be given credit for introducing bills that would have re-shaped tax policy in Iowa and ensure a reduction in our income tax rates.
SSB 3116/HSB 657 – First, Governor Reynolds’s comprehensive Invest in Iowa Act would have reduced income taxes, reduced property taxes, increased the sales tax, shifted mental health funding away from property taxes, and funded the Natural Resources and Outdoor Recreation Trust Fund. Reynolds said, “It is now on the back burner” after the coronavirus paused the legislative session, “but it will be back in the future.”
ITR offered strong support for Governor Reynolds’s Invest in Iowa Act. You can find a good summary of that support in this piece published in the Sioux City Journal.
SSB 3202 – The second bill attempting to bring about major income tax reform was introduced during the final week of the session by Senate Ways and Means Chair Jake Chapman. It would have eliminated economic triggers from 2018’s tax reform and instituted the promised lower rates on January 1, 2023, without additional revenue hurdles. The bill passed out of subcommittee, but it did not advance further.
Chapman said, “That is taxpayer money. More now than ever, we need predictability in our tax climate, we need to incentivize, not penalize, Iowans. This is the time to really get our economy back on solid ground. These are measures that I believe provide the stability we need to get that engine rolling again.”
Why is it so important to bring income tax rates down?
As ITR President Chris Ingstad testified in support of Senator Chapman’s bill, “Iowa’s income tax rates are still high in comparison to the rest of the country, and certainly within the Midwest. Of our neighboring states, only Minnesota has higher rates than Iowa. Lower-income tax rates, and increased certainty within the code, will make Iowa more attractive to people and businesses looking to move to our state. Reducing rates will also help encourage existing Iowans to stay here.”
Other Legislation Not Advancing This Year
The bills listed below were introduced, a subcommittee or committee approved some, and two were passed by one chamber but not the other:
- SF 2272 – Stopping Public Assistance Fraud (Passed Senate)
- HF 2030 – Stopping Public Assistance Fraud
- HF 2424 – Eliminating the Welfare Cliff (Passed House)
- SF 2395 – Taxpayer-funded lobbyist transparency
- SF 307 – Complete repeal of the state inheritance tax
- SF 2116 – Comprehensive review of all fees
- HSB 503 – Excluding charges for legal services from fees to examine or copy public records.
- HF 2060 – Limits the date of certain school bond elections to the regular school election date
- SJR 20 – Spending limitation amendment
- SJR 22 – Income tax supermajority amendment
- HF 2368 – Remove two existing state regulations when a new regulation is added to the Iowa administrative code
What Did They Do With Your Tax Dollars?
All the pieces have fallen into place, and legislators have finalized the state’s $7.78 billion budget set to take effect July 1. The budget surplus for Fiscal Year 2020 helped reduce the impact of COVID-19 on Fiscal Year 2021’s projected revenue. This has led to a budget that is $26.6 million more than last year.
Rep. Gary Mohr, Chairman of the House Appropriations Committee, said, ‘We expect to take in enough revenue to maintain the status quo and maintain our commitments to our schools and our health care system.”
While most state agencies and departments will work with the same funding level, a few will see changes.
Budget items receiving more funding:
- $100 million more for K-12 Education
- $32 million more for Medicaid
- $16.5 million more for HAWK-I children’s health insurance
Three areas will see a reduction in funding:
- $8 million less for the Iowa Board of Regents
- $500,000 less for the Judicial Branch
- $250,000 less for the Iowa Secretary of State
Senate Appropriations Chairman Michael Breitbach, R-Strawberry Point, said the state will have a $311 million cushion if revenue does not meet expectations before it would have to dip into cash reserves or the Taxpayer Trust Fund.
Breitbach added that some of the budget areas not receiving an increase in funding could get some supplemental money if the economy rebounds.
ITR’s Take
It is difficult to accurately estimate revenue in “normal” years. Just two years ago, mid-year budget cuts were needed because state revenue increased, but not as fast as anticipated.
For this reason, it was smart for legislators not to spend the maximum amount available to them.
State law allows spending up to 99 percent of estimated revenue, including any surplus carried over from the prior fiscal year. Iowa’s 2021 budget spends 96.7 percent of expected revenue (based on update projections set forth last month) and does not use any money from Iowa’s reserve funds. The only question remains, will those update revenue projections hold-up, or will the economic impact of COVID-19 go deeper?
Regardless of what the future revenues of the state look like, it is always wise to follow one of the budgeting principles of Thomas Jefferson. Jefferson shared his twelve canons of conduct in a letter to his granddaughter, including, “Never spend money before you have it.”
That is a good principle for individuals as well as any level of government to keep in mind when budgeting. Speaker Grassley offered these comments on the budget at the end of the session, stating that the legislature has:
“…enacted a cautious and conservative state budget that invests in priorities while respecting the hard-working taxpayers. While the COVID pandemic has strained other state budgets, resulting in cuts to key programs like K-12 education, health care, and worker training … Iowa is in good shape because of the forward-looking action we have taken in the past, and we will continue to be in a strong position moving forward.”