Capitol Update: Week 15

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House Majority Completes Focused Tax Agenda

The House tackled quite a Ways and Means agenda this year. From tax code updates to property tax transparency—it has been a busy session.

One of the early bills was Senate File 220. That bill provided section 179 expensing with a maximum deduction of $70,000 for corporations, financial institutions, and partnerships and limited liability companies taxed as corporations. The investment limitation in the bill is set at $280,000. With the passage of Senate File 220—these entities are allowed the same deductions and subject to the same limits as individuals.

Another piece of legislation handled this year was an omnibus bill. That bill did a myriad of things including:

  • Extending the Targeted Jobs Withholding Tax Credit pilot for two years until June 30, 2021.
  • Clarified the manufacturing exemption for manufacturers who engage in construction contracts.
  • Provides the department with the authority to audit or examine all taxes collected or administered by the department.

Finally—a property tax transparency bill was passed. The legislation created a process that starts with a local government receiving the new assessments. Based on these new values—all levies are adjusted up or down to represent a rate that would bring in the same amount of tax revenue as the prior year. This is the “effective rate.” The local government can then decide if this is the correct amount of tax to levy or if more or less is necessary.

Next the local government needs to publish notice and have a hearing on what the levies will be. The hearing will then take place and a resolution on the new levies will be passed. If the proposed levies bring in tax revenue that constitutes an increase of two percent or less—a resolution by a majority must pass. If the proposed levies bring in tax revenue that constitute an increase of more than two percent—a resolution by 2/3 majority must pass. After the resolution on the new levies has passed—the local government needs to publish notice of the budget they intend to pass and have a hearing on that budget. They can then pass a resolution for their budget as they do in current law. All information from the notices needs to be published on all local government websites and social media presences. Because of the new process—the date to certify budgets is moved from March 15 to March 31.

There were concerns brought forward by constituents and legislators that somehow this bill would affect IPERS.  The IPERS board, as a result of these concerns, released a statement regarding the property tax bill, SF634, “We have received many questions regarding recently passed property tax bill, Senate File 634. This bill does not alter the employers’ obligation to pay the employer portion of IPERS’ contributions as established annually under Iowa Code Section 97B.11. This bill does not affect a member’s or retiree’s pension.

Empower Rural Iowa Legislation Encourages Rural Broadband and Housing

House File 772 passed the Iowa House this week. The legislation was in response to meetings that took place last year in Iowa’s small towns and rural counties.

The bill is divided into two parts—broadband grants and workforce housing tax credits. Current law requires the Office of the Chief Information Officer (OCIO) to administer a broadband grant program to make awards to communications service providers that reduce or eliminate targeted service areas by installing broadband infrastructure at specific minimum speeds. House File 772 repeals the specific download/upload speeds and instead references the federal telecommunications act for applicable speeds. The bill also provides that the competitive grants awarded by the OCIO should be awarded based on the following new considerations in addition to those in current law:

  • Need in the particular area (including whether it is rural).
  • Applicant’s total budget, including local or federal match, any funding obligations shared between public and private entities, and the percentage of funding provided directly from the applicant.
  • Relative download and upload speeds of proposed projects for all applicants.
  • Specific product attributes.

The bill specifically states that of all considerations for grant awards (both current and new), the most weight is to be given to the first three listed above. The bill extends the sunset of the OCIO broadband grant program from July 1, 2020 to July 1, 2025.

The second part of House File 772 relates to the workforce housing tax credit program administered by the Economic Development Authority already in current law. The bill increases the program cap from $20.0 million to $25.0 million per fiscal year. This money is directed to increase the incentive for small cities $5.0 million to $10 million.  Current law states that the authority may accept applications on a continuous basis. The bill changes the process to require the authority to review and score the applications on a competitive basis.  House File 772 provides that for fiscal year 2020, all money allocated to this program will be used to clear the waiting list for small cities.

News from House District 96

We are working hard to wrap up in Des Moines.  It has been a busy session for me serving my first year as Chairman of the Ways and Means Committee.  We had to work in bipartisan ways to move Iowa forward in the right direction.  There were also times when we had to make a strong stand for what we believed in.

The Ways and Means committee was able to support young farmers, provide transparency to local property tax payers, and make needed tweaks to last year’s tax reform.  I look forward to next session to continue this important work.

I look forward to visiting with people from across the district about their thoughts and concerns.   It has been an honor to be the voice for the constituents of Iowa House District 96 this session.

Capitol Update: Week 14

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Keeping Iowa Safe

Public Safety is frequently one of the top things that Iowans identify as something the Legislature needs to address.  The House Majority has taken this topic seriously, passing many bills this session that will keep students, motorists, and senior citizens safe across our state.

Whether it’s through policy or in the budget, I will continue to make public safety a priority and ensure that Iowans are protected.

Improving School Safety

One of the biggest priorities this session was extending the school infrastructure tax, known as SAVE. This provides schools with significant resources to make building improvements and ensure safe, modern classrooms. We included a provision in the bill that prioritizes upgrades like secure entrances, security cameras, and other safety enhancements, before using SAVE funds on athletic facilities.

We also passed legislation that protects students from known predators who move from school to school. House File 637 is an important school safety bill that requires administrators to report employee misconduct in a timely way.

Empowering Students on College Campuses

In recent years, the number of assaults and rapes on college campuses in Iowa is increasing. Additionally, a climate survey of students at the University of Iowa showed that more than 1 in 5 female undergraduates say they were raped during their time at UI. This is a serious problem that requires serious solutions.

Just this week the House passed a bipartisan bill that provides students with more tools to protect themselves on campus. The legislation prevents Iowa’s public universities and community colleges from implementing a policy that bans the carrying of a stun gun for personal protection. In a situation where seconds matter but law enforcement is minutes away, the use of this device could be the difference between life or death.

Safe Roads and Highways

Another bill passed this session, Senate File 113, holds repeat drunk drivers accountable and keeps them off the roads to make our highways safer. This bill clarifies that a person convicted with three or more OWIs can be charged as a habitual offender and face stiffer penalties. Drunk driving is not only irresponsible, but it puts those who wish to travel safely on our roads and highways at risk.

This year’s legislation builds on successful efforts from previous years to crack down on drunk and distracted driving and hold individuals accountable for their actions.

Protecting Seniors and Vulnerable Iowans

The House passed several pieces of legislation this session to protect seniors and other vulnerable Iowans in a number of ways. House File 731 updates Iowa’s mandatory reporter law to better protect dependent adults from abuse through more frequent and streamlined training. House File 323 ensures a person can be found guilty of dependent adult abuse even if they didn’t personally profit from the abuse. Finally, House File 569 ensures that an individual who intentionally shames, degrades, humiliates, or harms the personal dignity of a dependent adult is held accountable.

Capitol Update: Week 13

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House HHS Budget Includes Significant Funding for Mental Health

Last week, the House Appropriations Committee passed House File 766, the Health and Human Services Budget for FY2020. This budget appropriates a total of $1.94 billion from the state general fund to the Department on Aging, the Department of Public Health, the Department of Human Services, the Department of Veterans Affairs, and the Iowa Veterans Home. When combined with federal block grants, federal matching funds, and other revenue sources, the HHS budget tops $5 billion to fund human services in the state for the next fiscal year.

Importantly, this budget provides significant funding for mental health including an additional $1.2 million in state funding and total $3.1 million in funding next year to eliminate the waiting list for the children’s mental health home and community based services waiver. There are currently around 1,000 children on this waiting list, and this appropriation will allow these children and their families to receive much needed services close to home.

Additionally, this bill funds the single statewide 24-hour crisis hotline for all ages and funds our current and soon to be 22 Assertive Community Treatment teams statewide. This funding amounts to about $2.8 million that is currently being subsidized by the 14 Mental Health and Disability Services (MHDS) Regions. This budget provides a $5.2 million increase to Medicaid to pay for the additional mental health services passed last year, like Access Centers and Intensive Residential Service Homes, in the Mental Health Complex Needs Act (HF2456).

This budget also focuses on mental health workforce by funding 4 additional psychiatric residencies in rural communities and increases psychiatric training for physician assistants and nurse practitioners

These increases are in addition to the status quo appropriation of $96 million to Iowa Medicaid for children’s mental health services, $1.4 million towards children’s systems of care, $2 million towards the Medical Residency Training State Matching Grants Program which has funded 8 new psychiatric medical residency slots in central Iowa, and continues the appropriation to Des Moines University to partner with NAMI to prepare family physicians and other medical providers to help those suffering from mental illness. There are also additional funds appropriated through the federal community mental health block grant, Iowa Medicaid, and Public Health for substance abuse, 1st Five, home visitation, and other mental health prevention work for Iowa children, to name a few.

The House Majority has  made significant state investments into the state mental health system, and continue this important work with increases this year in the House HHS Budget as well as the Education Budget.

House Ways & Means Committee Passes Child Care Tax Credit Bill

This week the House Ways and Means Committee unanimously passed House File 227—a bill that doubles the income limitation for the Iowa child and dependent care tax credit. This is a credit that supports working Iowa families who spend large portions of their paychecks on childcare.

Currently, the federal tax code provides for a Child and Dependent Care Credit equal to 20 percent to 35 percent of qualified expenditures paid to care providers for a child under the age of 13 and for certain other dependents of the taxpayer. Qualified expenditures are limited to $3,000 per year for one qualified dependent or $6,000 for two or more qualified dependents. The federal tax credit does not have an upper income limit.

Iowa provides its own tax credit as a percentage of the amount of the federal credit. The Iowa tax credit is allowed on a sliding scale, based on the taxpayer’s net income. The Iowa tax credit amount ranges from 75 percent of the federal credit for net income of less than $10,000, to 30 percent for taxpayers with net income of $40,000 to $44,999. Currently, there is no Iowa child care tax credit available for net income of $45,000 or higher.

House File 227 doubles the Iowa income limit and makes the credit available to taxpayers with net incomes of less than $90,000. The legislation does not change the income based percent ranges—so all taxpayers with income over $40,000 will receive a credit of 30 percent of the federal credit.

The bill makes the change apply to tax years beginning on or after January 1, 2019. The legislation would have a state fiscal impact of -$5.4 million in fiscal year 2020. It  is now ready for further consideration on the House floor.

Capitol Update: Week 12

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Property Taxes: Understanding the Plan to Reduce Growth in your Tax Bill

House Study Bill 165 has cleared a House subcommittee and is eligible to be considered in the House Ways and Means Committee. The legislation has been diligently worked on for the last several weeks and a strike-after amendment will be offered that takes into account the suggestions of many legislators, taxpayers, and interest groups.

The legislation seeks to limit the growth of city and county budgets to two percent per year. Increased valuations have been driving outsized growth in county and city budgets.  The two percent limitation represents a reasonable growth rate that taxpayers can understand the necessity of. This legislation removes the property tax surprise legislators have heard about from their constituents.  While Iowans are told their property tax rate hasn’t increased, they are hit with a unexpectedly large tax bill driven by the increased value of their home.

Under the bill, to figure out what a local budget can be (and therefore what needs to be levied) for the next year,  local governments will have to start with their prior year’s budget. To explain it simply—they would be able to levy up to two percent more than last year’s budget. When they receive their property valuations—the Department of Management will assist in calculating what the levy needs to be in order to collect the correct amount of property tax.

The legislation recognizes that there are some funds, levies, pots of money, whatever you want to call it—that need to be outside of this calculation of up to 102 percent. The legislation leaves all net new property out of the limitation.  If a city had a new development built one year—the legislation would not include that value in the calculation that first year. Additionally—any bonding, mental health, EMS, capital funds, or voted upon levies (symphonies, libraries, etc.) live outside of this limitation calculation. The things that are included in the limitation calculation are the emergency, trust and agency, transit, utility replacement transfers, anything under the city 8.10 levy or the county general or supplemental levies. These are things taxpayers would generally think of as “general fund” pots of money.

So now that we understand what a local government’s budget can be and we have a tax rate—what if the elected officials think it is not enough? If a local government feels strongly that they need to certify a budget higher than 102 percent of the prior year they can—and pretty easily. The council or board simply passes a resolution of their intent to do so. If the taxpayers do not have an issue with it—it is certified and that budget (despite being over the 102 percent) becomes the base for the next year’s calculation.

But what if the taxpayers do object? House Study Bill 165 provides a mechanism for taxpayers to call for a vote on whether the government should go over the 102 percent limitation. If the taxpayers get the requisite signatures, the local government can either abandon the proposal and go back to 102 percent—or wait for the results of the referendum.

The bill also contains some suggestive language on reserve funds. It is not mandatory or statutorily required, but the legislation asks that a local government’s undesignated reserves be kept at 25 percent of the prior year’s budget.  If a government has more than that, say for bond repayment and rating purposes, they need only designate those funds for that stated purpose to meet the goal of keeping reserves at a reasonable level.

House Study Bill 165’s goal is to provide transparency for taxpayers as well as local control. It provides opportunities for local governments to communicate with those that fund them. The legislation is ready for amendment and consideration by the House Ways and Means Committee.

Capitol Update: Week 11

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Responding to Severe Flooding Across Iowa

Over the last few weeks, much of the state has experienced severe flooding which doesn’t look to be slowing down anytime soon.  The western part of Iowa has been impacted significantly compared to the rest of the state with several towns being evacuated.

In response to the flooding, Governor Reynolds has been traveling the state to survey the damage and meet with local officials. I want to thank the Governor for her work and quick action to help in recovery efforts.

Governor Reynolds requested an expedited Presidential Disaster Declaration for $1.6 billion in aid which President Trump quickly approved for 56 counties, making them immediately eligible for federal disaster relief.

This is how the $1.6 billion in aid will be disbursed to assist in recovery efforts:

Agriculture $214,000,000
Public Assistance $77,417,455
Business (4,244 commercial parcels) $300,000,000
Homes with minor damage $417,000,000
Homes with Major Damage $64,000,000
USACE Levees (70 miles) $350,000,000
Non-Federal Levees (175 miles) $175,000,000
TOTAL $1,597,417,455

 

Learning from past disaster events, the Legislature passed legislation in 2011 that gave the Governor the authority to use the Economic Emergency Fund to quickly respond to disasters across the state.

Thanks to this forward-looking legislation, it is unlikely that the Legislature will need to take actions this session, but the House stands ready to assist with recovery efforts if necessary.  Individual legislators with flooding in their districts have been actively working with local officials and community leaders to assist in cleanup efforts and will continue to do so.

Capitol Update: Week 10

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Misconceptions on Energy Equity Bill

HF 669 proposes an equitable change so utility infrastructure costs are not transferred from one electricity customer to another. This relieves end electric customers from subsidizing their neighbors. As simple as this concept is, opponents have looked for ways to confuse the issue.

For example, some have claimed HF 669 would effectively end net-metering in Iowa.  This is not accurate. This legislation grandfathers the status of current customers and preserves net metering at full retail rate for new private generation (e.g. solar or wind) customers. Net metering stays the same; the only change is that private generation customers pay for their use of the grid just as their non-generating neighbors do.

It has also been said that the increased cost will make the payback not worth the investment thus costing jobs in the solar industry. Similar concerns were raised in 2003 when legislation was passed regarding wind energy. In 2003, the wind industry impacted approximately 850 jobs. Over 15 years later, that number has increased to approximately 8,000.

Another claim is that private generation users already pay for their use of the grid. However, this is misguided at best. The basic service charge is a flat fee to cover administrative costs like billing and meter reading; it also covers the cost of connecting to the grid (like a driveway connects a garage to the street).

Others argue that private generation and solar in particular brings value to the grid by putting energy on the grid during peak times relieving demand during the most expensive time to purchase or create electricity. They forget that a rate-regulated utility is required to be prepared and able to serve the needs of all customers at the instant they demand it. This is the same for private generation owners and their neighbors who pull all their energy from the grid. In order to provide maximum reliability the utility must stand by and be ready to supply energy and grid services as though the private generation does not exist.

Motives have also been questioned. Some have suggested this is an effort by the utilities to increase their monopoly and profits. However, rate-regulated utilities will not see any additional income from this legislation. The IUB determines what costs are recoverable from customers and this legislation would simply allocate the grid costs across all customers, not just those who cannot afford or chose not to install a private generation system.

It is also important to remember HF 669 will have no effect on current customers who have invested in private generation (solar, wind, etc.). All current private generation owners will be grandfathered in at whatever arrangement they chose when they made the investment.  Nothing will change for them.

Sports Betting Bill Update

A version of sports betting has passed the House Ways & Means Committee on a bipartisan vote of 16-9. This bill had previously passed the House State Government Committee with bipartisan support on a vote of 13-10. This bill continues to allow for sports betting on professional and collegiate level through a licensed casino.  It also legalizes internet fantasy sports contests.

A limitation was placed on collegiate sports betting through an amendment.  House File 648 now places a ban on commercial sports betting on in-state collegiate individual bets.  Another amendment committed .25% of tax revenue from sports wagering to the Department of Public Health for problem gambling programs.

The last amendment also requires Prairie Meadows to use receipts from gambling games and sports betting to support the horse racing industry and to supplement purses for races particularly for Iowa-bred horses pursuant to an agreement. The amendment also expands what the horse purse money designated for quarter horses and thoroughbred horses can go to include benevolence, quarter horse aftercare, breeder promotions and awards, and improvements to the horse racetrack in Polk County.

Capitol Update: Week 9

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House and Senate Pass Ag Protection Bill

On Tuesday, March 12, 2019, both Chambers of the Iowa Legislature approved Senate File 519 by bi-partisan votes.  41-aye to 8-nays in the Senate and 65-aye to 32-nay vote in the House.  SF 519 creates new agricultural production facility trespass provisions that specifies certain offenses relating to agricultural production operations that cause economic damage or other injury are illegal.  Those offenses include sabotage, adulterations, and destruction of property such as agricultural crops or animals.

The measure provides for a criminal offense of agricultural production facility trespass that involves the use of deception to obtain access to a facility not open to the public with an intent to cause physical or economic harm or other injury to the facility’s operation, property or persons.  The offense may include obtaining by deception with intent to harm the operation, property, person.

The legislation is similar to aspects of an Idaho law that has withstood a federal Court challenge.  This legislation is of great interest to Iowa’s livestock and food processing industry as fraudulent trespass could result in the introduction of catastrophic animal diseases such as foot and mouth, or African Swine Fever.  Either disease could cause billions of dollars of economic damage to Iowa farms, businesses and employees and would likely be ten to fifty larger impact than the avian influenza outbreak of a few years ago.

Under the Radar Bipartisan Work

While the press likes to focus on divisive issues and controversial topics, the truth is that the vast majority of the Legislature’s work is either unanimous or bipartisan. Through the first funnel, 91% of the bills passed out of House committees had bipartisan support (217 out of 238).

Here are a couple examples of bipartisan bills that that flew under the radar and passed this week but weren’t covered by the press:

Keeping roads safe from drunk drivers: Senate File 113 holds repeat drunk drivers accountable and keeps them off the roads to make our highways safer. This bill clarifies that a person convicted with three or more OWIs can be charged as a habitual offender and face stiffer penalties. Drunk driving is not only irresponsible, but it puts those who wish to travel safely on our roads and highways at risk.

Combatting opioid dependence: House File 623 requires the Iowa Medicaid program to offer at least one form of medication-assisted treatment without prior authorization. This legislation increases access to medication-assisted treatment which has shown to be an effective way to reduce opioid abuse and dependence.