Capitol Update: Week 5

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House Budget Targets

The House has offered a realistic and responsible budget plan for the next fiscal year that makes meaningful investments and protects the hardworking taxpayers of Iowa. Nearly the entire increase is devoted to increases in Supplemental State Aid for K-12 schools.  As is the case every year, the level of the increase for school aid is tied directly to the level of on-going revenue brought in by the state.  The ending balance, the cash reserve and the economic emergency fund have no impact on school funding.

It is important to Iowans that we do not spend more than we have and live within our means. While standing by this principle for the last five legislative sessions, The House has found common ground with the Governor and the Senate.  We expect that to continue this year.  Living within our means is something the hardworking taxpayers of Iowa do every day.  Government needs to do the same.

The House budget plan spends 99.9% ($7.168 billion) of on-going revenue ($7.320 billion) ensuring that government does not spend more than it has and lives within its means. This is a 2% ($145.8 million) increase over FY 16.  In 2011 when I entered the legislature our budget was $5.9 billion dollars.  Medicaid and School Funding has been a major contributor to the increase.  The state has been able to handle this increase because of robust growth in the state’s economy.  However, even as our economy is stronger than other states our growth has slowed partially driven to the challenges in the Agriculture sector.  The legislature needs to be cognizant of this and to be fiscally responsible we need to continue to budget within our means.

Individual line-items in each budget subcommittee are being determined by each of the appropriate budget subcommittees. The Standings budget target includes Supplemental State Aid, Teacher Leadership money, and the backfill to local governments as a result of the property tax reform bill in 2013.

News from District 96

The Legislative process is speeding up this week. There have been subcommittee meetings going on all over the Capitol building.  Legislators are busy reviewing bills for next week’s funnel.

I was involved in some of these subcommittees and took the opportunity to watch a couple. There was a subcommittee meeting on HSB560 that I watched.  It is a bill to regulate dog breeders.  Monticello residents Carla and Gary Zumbach testified at the meeting about regulation in the dog breeding industry.  They did a great job and it was good to see them.

I was part of a subcommittee and voted to approve a bill on automatic wine and beer dispensers. These dispensers use CO2 to pressurize the bottle and keeps wine fresh.  This way a restaurant can pour a glass of wine and not ruin the entire bottle.  Currently to use one of these machines a restaurant needs to get a variance; this bill would make the use of the machines legal.

During an Ag Committee Meeting this week there was a presentation by a Kentucky farmer on the uses and production of Industrial Hemp. This is not Marijuana Hemp, but the kind of hemp that was used in the war effort during World War II.  He grows four acres and uses it for the production of flags, clothing, and shoes.  He also told us that there research being done on using Industrial Hemp for the making of plastics.  These plastics are supposed to be stronger than tradition plastics and could be used to make a dashboard in a car.  The 2014 Farm Bill legalized the production of Industrial Hemp, but it still needs state approval before farmers can grow it.

I also visited with Todd Hospodarsky this week. He came to the Capitol promoting social studies education as part of our public schools curriculum.

I also attended the Iowa State Legislative Reception and participated in the Iowa State Day on the Hill. I am always impressed with the university’s students and with the projects and research that Iowa State does.

As always if you have any questions or concerns please get in touch. My phone number is (319) 480-1997 and my email is lee.hein@legis.iowa.gov.   Have a good weekend!

Capitol Update: Week 4

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Senate Budget Targets

The Senate Majority released budget targets which spend about $70 million more than the state collects in on-going revenue. As a percentage, they spend 101.1% of on-going revenue.

The Senate did not release their plans on Medicaid savings or tax coupling or even a simple balance sheet which makes it difficult to see a complete picture of their spending plans.

As part of their targets they propose an early retirement plan that “saves” taxpayers $10.6 million. The House is extremely skeptical that is a reliable number.  Last session the Senate proposed a similar plan which resulted in zero savings.  It was rejected by the House budget negotiators.

The Senate are proposing a 4% increase in Supplemental State Aid for schools but the money necessary to fund that 4% increase is not included in their budget targets. To fund 4% they need to provide an additional $65.8 million in spending within the target for the Standings Bill.  But only $2.9 million more is provided.

That means either they have cut another area included in the Standings Bill – such as property tax credits – or they are willfully underfunding their 4% SSA increase and instead forcing property taxpayers to pay more to make up for their lack of funding.

News from District 96

We had the shortest week I can remember here in Des Moines. Business at the Capitol on Monday was cancelled to allow the legislators to be home for the Caucuses. Then Iowa weather canceled everything on Tuesday.  Sometime I think the news media over does things.  My trip to Des Moines early Tuesday was uneventful.  The Wednesday morning commute was a lot more slippery and hazardous but really was just normal winter driving.  With that said, it is way better to error on the safe side.

As you are aware by now the House has passed the Section 179 Coupling Bill. However, the Senate has not taken it up yet.  As this issue continues to move forward I will keep you updated. The Senate has given no indication on their plan for tax coupling which complicates and slows down the budget process.

On Wednesday I had the opportunity to speak with the Iowa Cattlemen’s Association when they came to the Capitol for their Legislative Reception and they served a meal. I had a chance to visit with the Board President for the Cattlemen, Phil Reemtsma.  He is also a veterinarian from DeWitt, Iowa.  We discussed a code clean-up bill that pertains to the Cattleman’s check-off.

Also on Wednesday we had the Agriculture Committee meeting where we passed HSB 519. This bill will provide tax credits for renewable fuels.  From here this bill will go on to the Committee on Ways and Means.

During the meeting Spencer Parkinson of Decision Innovation Solutions also presented the Economic Study on the Impact of Iowa Animal Agriculture. He spoke briefly about how the pork, poultry, and cattle industry has affected Iowa economically over the past year.  Animal Agriculture and the businesses that support it is a huge driver in Iowa’s economy.

That evening I attended the Iowa Newspaper Association Legislative Reception. While I was there I had a chance to visit with Mark Spensley from the Monticello Express.  We had a good conversation about the Newspaper Association.

As always if you have any comments or concerns feel free to get in touch. My number is (319)480-1997 and my email is lee.hein@legis.iowa.gov

Capitol Update: Week 3

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House Passes Increased Funding for Education

The House this week passed a proposed increase of $143.1 million in state aid to schools for the 2016/17 school year. This is a 2% increase in the per-pupil amount sent from the state to school districts, increasing the state’s portion of the per pupil cost from $6446 to $6575, a $129 increase.

The House made these efforts in only the second week of the session. In recognition of the need for schools to set their budgets in the next few months, the Education Committee pushed the bill out of committee last week making it eligible for Floor debate on Monday.

The increase pushes the total state spending on K-12 education to just shy of $3.1 billion. Coupled with increases over the past 5 years, House Republicans have increased school aid by nearly $650 million.

The $143.1 million increase includes $53.4 million for the Teacher Leadership program, making it the second year in the 3-year ramp-up investment in this transformative reform initiative. It also includes $9.2 million meant to relief the pressure on property tax payers by having the state pick up the property tax increase that is part of the school funding formula.

Additionally, a 2% increase provides additional property tax relief by taking 38 districts off the Budget Adjustment, a local option property tax levy designed to help districts dealing with declining enrollment. This is a $4 million reduction in property taxes over last year.

The proposal on the table from the Senate is a 4% increase, which equals a $227.9 million increase in state aid. Available additional revenues over last year’s spending equal just over $153 million.  A 4% increase violates the budget principles the House has abided by since 2011, specifically spending more than the state takes in.

The Senate rejected the House’s 2% proposal after receiving it meaning the two chambers will come together in a conference committee to find a final consensus.

The Tax Coupling Bill

The tax coupling bill has an impact on the FY 2016 ending balance and the FY 2017 on-going revenue levels. Any agreement will impact discussions on school aid and budget targets.

The Governor has already recommended a plan for coupling that has a negligible effect on FY 2016 revenue while adding an additional $48.5 million to FY 2017.

One thing that can change the level of the state’s ending balance and the amount of on-going General Fund revenue is the coupling bill. The coupling bill updates Iowa law to conform with certain tax changes enacted by Congress.  It is always important that this bill is passed quickly as tax preparers and accountants need to know what deductions Iowans can take on their 2015 income taxes.

The Governor’s plan is to not couple at all for tax year 2015. That means that taxpayers would not be able to take advantage of any of the tax extenders Congress just passed that have an Iowa component when they do their taxes this April.

On Thursday the House passed a plan couples with everything except bonus depreciation in tax year 2015. It also does not add the permanency of the Governor’s plan.  There is a $95.7 million impact on FY 2016 revenue/ending balance.  That money goes directly to taxpayers.  Additionally, $86.5 million is added to FY 2017 on-going revenue with roughly $55 million of that available for appropriation under the state’s expenditure limitation law.

The Senate has given no indication on their plan for tax coupling which complicates and slows down the budget process this session.

News from District 96

We’ve finished the finished the third week of the session and the last full week before the Presidential Caucus. Being in Des Moines this week I realize that the eyes of the nation and the world are looking at our state for leadership and clarity when we cast the first votes in the 2016 Presidential Election.  I encourage all of you to go out and Caucus this coming Monday and help Iowa have an impact on this year’s Presidential election.  If you’re reading this after Monday I hope that you took the opportunity to attend and participate.

One of the highlights this week included Major General Timothy Orr giving the Condition of the Guard Address to the General Assembly on Wednesday. During his speech he commented on how the Iowa National Guard has been involved in operations around the globe over the last 15 years.  He also touched on the Guard’s readiness to handle in-state operations and disaster relief.

This week I was also excited to be joined by students from the District and surrounding area. On Tuesday some students from the Monticello FFA and their Advisor Eric Schmidt came to the Capitol.  I spoke with them about the legislative process and how they can get involved.  Thursday I spoke with students from both Kirkwood Community College and Northeast Iowa Community College.  We visited about the Presidential Caucuses and how I became involved in our democratic process.

During the week I also spoke with various trade groups and associations. The Manitoba Pork Council General Manager, Andrew Dickson, and their Chairman, George Matheson, came to speak at the Agriculture Committee Meeting on Tuesday.  They were also joined by the Consul General of the Canadian Consulate in Minneapolis, Jamshed Merchant.  They spoke on Canadian Pork Production and the impact of trade between Iowa and Canada.

Tuesday evening I met with members from the Iowa Soybean Association at their legislative reception. Wednesday evening I attended a banquet for the Iowa Pork Producers and spoke with some of their members as well.  It was great to meet folks from the district who represent the commodities groups and discuss issues that are important to them.

If you want to visit with me back in the District there will be a couple of forums this upcoming week. On February 5th I will be at the Delaware County Economic Development Forum from 10:00-11:00 am at the Manchester Farm Bureau Office.  February 6th I will be the Jones County Farm Bureau Forum from 9:00-10:00 am at the National Motorcycle Museum in Anamosa.

As always if you have any comments or concerns don’t hesitate to reach out to me. My cell is (319)480-1997 and my email is lee.hein@legis.iowa.gov.  Happy Caucus!

Capitol Update: Week 2

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House Appropriations Begins Review of Standing Appropriations

A new subcommittee of the House Appropriations Committee began the task of reviewing the standing appropriations within the state’s budget. The Budget Review Subcommittee, led by Rep. Ken Rizer, will help set the foundation for the Standing Appropriations bill that will be started in the House this year.

Unlike other line items in the state budget, there are a series of state appropriations that are established in either the Iowa Code or Iowa Constitution. These appropriations are known as standing appropriations.  The largest standing appropriation – State Foundation School Aid – is reviewed every year as the Legislature sets the annual Supplemental State Aid figure for growth in school funding.  But most of the remaining standing appropriations continue to be funded every year without serious legislative review.

The Budget Review Subcommittee will spend the next few weeks reviewing many of the existing standing appropriations. They will work to identify what each line item does, reviews its level of funding, and determine if any efficiencies or reforms can be implemented to improve that line item’s function.

The review will begin with an examination of Legislative budget. Funding for the Legislature is set out in the Iowa Code, which grants the General Assembly a standing unlimited appropriation.  These funds are used to cover the costs of the House of Representatives, the Senate, and the central non-partisan offices like the Legislative Services Agency and the State Ombudsman’s office.  Next week, the subcommittee will move on to look at local grant funding in the Department of Cultural Affairs and tourism funding under the Iowa Economic Development Authority.  On Wednesday, discussion will turn to child development funding distributed to local schools by the Department of Education and non-public school transportation funding.

The subcommittee is comprised of Representative Rizer, Representative Sexton, and Representative Dunkel as the Democratic member. Meetings will be held on Monday’s in room 102 and on Wednesday’s at noon in room 304.

Remember—Military Pension Income Now Excluded from Taxes

Home Base Iowa was signed into law back in 2014. That legislation did several things including a provision that excluded military retirement benefits from Iowa income tax. This provision was effective for tax years 2014 and subsequent tax years.

The pension exclusion also applies to military survivor benefits received under 10 U.S.C. 1447 and can be taken by both residents and nonresidents of Iowa. It is not an age-specific benefit and can be taken by anyone receiving a military pension. The exemption is in addition to the general $6,000/$12,000 pension exclusion available for Iowa individual income tax for taxpayers 55 years of age or older. Taxpayers receiving a military pension may want to change or eliminate the amount of Iowa tax withheld from their pension.

After 2014 tax returns came in, the Iowa Department of Revenue determined that some taxpayers might have unintentionally included military pension income in their taxable income. The Department sent out letters to those people letting them know of the legislative change and advising them they have the right to file an amended 2014 return. More tax information for veterans and those serving in the military and their spouses is available on IDR’s website at https://tax.iowa.gov/military-tax-information

NEWS FROM DISTRICT 96

It was a short but busy week.  Because of Martin Luther King Day, we did not return to the Capitol until on Tuesday.  The Soil Conservation Commissioners were in town, I met with Bob Ballou of Monticello and Steve Supple of Cascade to discuss soil conservation issues.

Wednesday was Veterans’ Day on the Hill.  Ron Struble, a past Department Commander of the American Legion in Manchester, stopped by to visit.  I appreciate both his service and the service of all Veterans.  Jim Greif from Prairieburg was also at the Capitol with the Iowa Corn Growers.

Thursday morning I met with the Governor to find out more about his proposal to direct some of the increasing revenue from one cent sales tax that currently goes to fund school infrastructure and property tax relief to water quality issues. We had a good discussion and I got more detailed information on how the money would be spent under his plan.  He asked for input and I gave some of my concerns.  This is just the start of the discussion and there will be more information as the issue moves forward.

As always if you have any concerns or questions feel free to get in touch.  My cell phone number is (319) 480-1997 and my email is lee.hein@legis.iowa.gov.  I look forward to hearing from you.

 

 

 

 

 

Capitol Update: Week 1

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December Revenue Collections Slow 

State revenue for the month of December was down when compared to December in 2014. Much of the decline can be attributed to a timing issue that produced a stronger November.  For the month, state tax collections were down $25.7 million or 4.4 percent.  For the fiscal year, state revenue is up 2.0 percent or $66.6 million.  At its December meeting, the Revenue Estimating Conference revised its FY 2016 forecast to call for revenue growth of 3.8 percent for the fiscal year.

Personal income tax collections in December rose by just $4.9 million or 1.4 percent when compared to December 2014. For the year, this category continues to have strong growth.  Through six months, personal income tax revenue has increased $101 million or 5.5 percent.  The Revenue Estimating Conference projection for FY 2016 calls for 7.0 percent growth.

Sales and Use tax collections were down significantly in December, dropping $28 million or 12.9 percent when compared to December 2014. One of the major factors for this decline was the calendar.  With November ending on a Monday, revenue that normally would be deposited at the start of December came in on the last day of November.  For the year, sales and use tax collections are up $30 million or 2.1 percent in FY 2016.  The REC has called for growth of 3.1 percent in this category.

Once again in December, corporate income tax collections lagged behind last year’s number. For the month, collections were down $10.9 million compared to December 2014 – a drop of 16.2 percent.  For the fiscal year, corporate income tax collections are down 14.9 percent.  This is a slightly larger decline than the 13.2 percent drop projected by the REC.

One good bit of news from the report was a slowdown in the amount of refunds paid by the state. In December, refund payments were down $17.8 million when compared to December 2014.  This slowdown has continued in the first days of January, especially in the corporate income tax category.

Federal Tax Extenders and Iowa Coupling

It seems to have become the norm for numerous tax incentives to expire at the end of the year and then be resurrected (retroactively) at the last minute the next year. It is something that accountants and lawyers have been forced to endure. Who knows how useful incentives like the research and development credit and depreciation provisions would be if they were law for more than 10 days a year? Maybe taxpayers and businesses would actually be able to plan ahead to take better advantage of those incentives.

This could finally be the year that things change. Although 2015 was no different than most years in that the tax extender bill was passed with only a few days left on the calendar—it did come with some permanency.

The bill that was finally signed by the President made the research and development credits and the enhanced section 179 deductions permanent for businesses. Additionally, the enhanced child tax credit, American Opportunity tax credit, teacher supply deduction, and some charitable giving incentives were also made permanent for individuals.

The legislation did not make bonus depreciation permanent however—gradually reducing it and eventually phasing it out completely by 2020. The bill also only extended film and television incentives and tuition deduction through 2016. The cost of the federal tax extender bill is estimated to be about $622 billion over the next ten years.

The story does not end with the federal tax extender bill however—Iowa will have to decide which provisions of the federal bill to couple with and which ones to disallow. The Governor’s plan on coupling according to his Fiscal Year 2017 budget is to not couple at all in tax year 2015. That means that taxpayers would not be able to take advantage of any of those tax extenders that Congress just passed that have an Iowa component when they do their taxes this April.

The Governor then recommends permanently coupling with the Internal Revenue Code in tax year 2016 and moving forward with the exception of Section 179 expensing or bonus depreciation. The Governor’s plan would permanently not couple with those provisions. Section 179 expensing is an accelerated depreciation mechanism for business purposes and bonus depreciation is something similar to that except for larger expenses. The Governor’s recommended coupling provisions are estimated to reduce FY 2016 revenues by $2.1 million and FY 2017 by $27.2 million.

Whatever Iowa decides to couple with or not couple with will be for the legislature to decide—but accountants, lawyers, and businesses want to know as soon as possible.

News from District 96

Well, the legislative session is underway again. It was the usual first week filled with speeches and organizational meetings.  Next week we will be getting down to business starting with committee meetings.

On Tuesday morning Governor Branstad gave his Condition of the State Address. If you would like to watch it the video is available on Iowa Public Television’s website.  That evening I spoke at the Land Improvement Contractors Association and gave a couple of legislative highlights.  The following day Chief Justice Cady gave the Condition of the Judiciary.  Wednesday evening I attended the Iowa Association of Business and Industry and met with local members of the Maquoketa Valley REC Board and Tom Yeoman, owner of Yo-Ho.

I always enjoy receiving visits from folks back home. If you have any questions or concerns don’t be afraid to get in touch with me, I’m always happy to help.  You can contact me at lee.hein@legis.iowa.gov or on my cell (319) 480-1997.

 

 

Capitol Update for December 2015

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I cannot believe we are just a few days from Christmas.  It seems like I was just writing my wrap up for the end of the session.  During the interim I was name the Agriculture Committee Chairman.  I have been busy meeting with different agriculture groups to discuss policy.  It has been a learning experience.  I met with the Turkey Federation to hear about Avian flu.  I also discussed water quality with the soybean and corn growers.

After the holidays, the start of the session will quickly be upon us.  January 11th will be the opening day of the session.    The budget will be the main focus of the session.  We will try to set school aid funding early on and then build the rest of the budget around it.

Budget

The House Majority is going to continue budgeting like Iowa families. Our budgeting principles have served the state well and created stability and predictability for those that rely on state services.

The State’s economy is strong, but growth is slowing. There is no economic emergency, but with slow growth we are going to have to be very strategic with the commitments we make.

The Revenue Estimating Conference (REC) set the official revenue estimate that will serve as the basis for the General Fund budget deliberations next session.  The REC determined that General Fund revenue for FY 2017 will be $7.3274 billion.

The FY 2017 projection anticipates additional growth in Iowa’s economy, just not at the level some were hoping for.  The estimate of $7.3274 billion means that the state would have $153.1 million in revenue above the FY 2016 budgeted level of $7.1743 billion.

Below is how this amount is calculated:

FY 2017 Revenue Estimate            $7327.4 million

MINUS

FY 2016 General Fund Expenses      $7174.3 million

EQUALS

FY 2017 New Revenue                    $ 153.1 millions

The REC is continuing to project revenue growth in both FY 2016 and FY 2017.  In the current year, personal income tax and sales and use tax collections are expected to be even stronger than previously projected.  And in FY 2017, this growth will continue.  Corporate tax collections are slowing, as low commodity prices continue and the strength of the dollar is a headwind on exports.  But this downtrend looks to lessen in

FY 2017.  Iowa’s economy, while facing some turbulence, is still growing this year and is expected to remain on the growth path into FY 2017.

Medicaid Modernization

Medicaid is the single biggest threat to the state’s ability to fund core functions like education, public safety and the courts.  We have done too little to address this in the past.  Reform isn’t optional, it’s necessary.  Medicaid spending has grown rapidly over the last ten years and is crowding out other programs.

Governor Branstad has proposed a managed care model to be implemented.  This approach is already being used in 39 other states.  It presents an opportunity to provide services more efficiently and sustainably.

It is important that the state provide Iowans with information and is responsive in addressing their questions and concerns during this change.  If you are not receiving information or need help in your decision making process, please feel free to contact me.  I will try to put you in touch with someone who can answer your questions.

With the program start dates being moved back it will give everyone more time to study the information and hopefully make the best decision for their situation.

As you read this, I hope you are able to spend time with your family and enjoy the season. Wishing you a Merry Christmas and a Happy New Year.

If you have any questions, comments or concerns about these topics or any others please feel free to contact me by e-mail at lee.hein@legis.state.ia.us or by phone at (319) 480-1997.

Sincerely,

Rep. Lee Hein

 

End of Session June 5th, 2015

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End of Session Thoughts

As I spoke in my newsletter last week, there was talk of an agreement on the big number (total amount of spending).  If that number held, we would be putting the finishing touches on the 2015 session this week.  It did and late Friday afternoon the session came to a close.

During budget negotiations, Senate Democrats pushed a spending level of $7.3509 billion.  This is 102.3% of on-going revenue and obviously well above the on-going revenue number of $7.175 billion.  As we have done since the 2011 session, House majority held firm to our budget principles resulting in an agreement that has the state living within its means.  Under this plan, the ending balance in FY 16 is projected to be $262.8 million.

As has been the case every legislative session since 2011, the holdup to adjournment was the spending appetite of Senate majority.  Every year they push to spend more than the state collects and every year House majority hold the line while providing workable solutions to spend within our means.

The House Republican budget plan spends 99.9% ($7.175 billion) of on-going revenue ($7.184 billion) ensuring that government does not spend more than it has and lives within its means.  This is a 2.48% ($173.8 million) increase over FY 15.  The Senate Democrat plan was to spend 102.3% ($7.3509 billion) of on-going revenue.  That is a 5.10% ($356.6 million) increase over FY 15.  House Democrats, partisan to the end, advocated spending the $7.490 level allowed by our outdated expenditure limitation law.

Why do we in the House maintain our budget principles?  Because the money is earned by hardworking Iowans, we have a responsibility to protect the taxpayers, who go to work, play by the rules and pay their taxes.  Those Iowans expect to be treated with respect.  That is why House Republicans will stand up and protect their money every day.  Every dollar the Legislature spends that it doesn’t have, puts the financial security of those taxpayers and families in jeopardy.  Responsible budgeting ensures Iowa’s most vulnerable citizens have resources they can depend on next year and the year after.

Iowans are sending $7.184 billion to state government coffers.  That is a tremendous amount of money. Spending more than they are sending to the state sets hardworking taxpayers up for either future budget cuts or a tax increase.

So for the fifth straight year, the Legislature has set a budget that spends less than we take in.  With the uncertain economy, I believe it is a budget that meets the needs for Iowa and its residents.

With the summer upon us, I will be busy at the farm, participating in parades and attending events throughout the district.  If you see me, give me a wave or say hello.  I always enjoy hearing what is important to you and the district.  Have a fun and safe summer.

As always, please feel free to contact me by email at lee.hein@legis.iowa.gov or by phone at 319-480-1997 if you have concerns about any issue.

Rep. Lee Hein