End of Session Legislative Update
May 5, 2023
The Iowa Legislature adjourned the First Session of the 90th General Assembly on May 4th, one week past the scheduled 110 days. Governor Reynolds and leadership in both the House and Senate worked together in the final weeks to reach a compromise on key policy issues including the Fiscal Year 2024 budget, property tax reform, and youth employment regulations.
At its March meeting, the Revenue Estimating Conference projected that Fiscal Year 2024 would see $9.6503 billion in revenues. A decrease of 1% from Fiscal Year 2023, which is projected at $9.75 billion. The Iowa Department of Revenue and Republican leaders in the House and Senate shared that the slight decreases are due to the tax policy implemented in 2022 to phase down individual and corporate income taxes, and the federal stimulus money received during the pandemic.
Following the March REC meeting, the legislature agreed on an overall budget of $8.516 billion for FY24.
Tax reform continues to be a top priority for the Republican trifecta. In 2022, the legislature passed legislation to gradually phase-down the state income tax until a flat tax of 3.9% was reached as well as lower the corporate income tax eventually to 5.5%. In 2023, focus shifted from income tax to addressing property taxes.
Both chambers introduced property tax proposals at the start of session. The Senate proposal focused on limiting budget growth at the local level by consolidating levies, while the House proposal focused on capping assessment growth and reducing the $5.40 levy. During the legislative session, property assessments across the state saw such substantial increases that the legislature was pushed to address property taxes before finishing their work.
During the last week of session, leadership in the House, Senate, and the Governor were able to reach an agreement on an amendment that combined a number of the provisions in both the Senate and House proposals.
It is estimated that House File 718 will reduce property taxes by $100 million dollars by reducing tax rates when assessments rise, implements basic levy limits, consolidates and simplifies 15 levies into a single general levy and increases transparency requirements.
Gov. Reynolds, Senate Majority Leader Whitver, and Speaker Grassley released the following joint statement:
“We’ve heard Iowans across the state voice their concern about out-of-control property taxes and the impact on family budgets. Today, we’ve come to an agreement on a path forward. This deal provides much-needed property tax relief for Iowans and lays the groundwork for even bolder reform in the future.
“House File 718 curbs the growth of local governments in a responsible manner and begins reducing property taxes next year. It also provides additional relief for older Iowans and military families and requires property tax bill transparency. In total, the bill is estimated to provide $100 million in relief.
“This is an important first step toward long overdue property tax reform. Iowa’s existing property tax code is outdated, overly complex, and costs Iowans too much of their hard-earned pay. Work on this issue is just getting started.”
During the Condition of the State, Governor Reynolds highlighted the need to evaluate and reform Iowa’s Executive Branch to be more efficient and cost saving to taxpayers. Senate File 514 was proposed by the Governor and would consolidate the number of state agencies from 37 to 16. The House and Senate held numerous subcommittee meetings on the legislation and met with each state agency to evaluate the impact.
Policy regarding limiting damages in tort cases had been introduced multiple times over the past few years, however the legislature had been unable to reach an agreement between the various stakeholders. This year, bills limiting noneconomic damages for both medical malpractice and commercial vehicles cases were passed and signed by the Governor.
House File 161 creates a $2 million cap on noneconomic damages for medical malpractice lawsuits against hospitals, and $1 million in lawsuits against clinics and individual doctors. Governor Reynolds highlighted the need for a medical malpractice tort reform bill during her condition of the state, arguing with proponents that the legislation is needed to protect rural healthcare providers from rising insurance rates.
“I’m grateful to the Legislature for passing reasonable medical malpractice reform, allowing Iowa’s health care industry to become stronger and more accessible," Reynolds said in a statement. "To the OB-GYNs and physicians who have been worried about practicing in Iowa, we are ready for you!"
Senate File 228 also creates a $5 million cap on noneconomic damages and allows plaintiffs to recover 100% of punitive damages in commercial vehicle crash cases. Iowa’s trucking industry has pushed for the legislation for a number of years, arguing the need for a limit to protect businesses against rising insurance rates. The cap does not apply if a court finds that the driver of the commercial vehicle:
- Was operating under the influence of drugs or alcohol;
- Committed a felony involving the use of a motor vehicle;
- Was involved in manufacturing or delivering a controlled substance;
- Was driving without a proper commercial driver's license or driving with a revoked or suspended license;
- Was driving a vehicle involved in human trafficking;
- Was driving recklessly;
- Was using a device like a phone while driving; or
- Was going 15 miles per hour or more over the speed limit.
The cap is required to be reviewed and adjusted every two years to account for inflation.
The House and Senate were able to reach an agreement to reform Iowa’s youth employment regulations during the final week of session. Senate File 542 bounced back and forth between the House and Senate as both chambers worked to make changes that would allow for minors to work longer hours, and jobs that were previously banned while still providing necessary protections.
The final legislation allows for minors to serve alcohol in restaurants with parental permission, allows for exceptions to prohibited jobs for 16 and 17-year old’s participating in a registered work based learning program, and extends the eligible hours a minor can work to 9 p.m. during the school year and 11 p.m. during the summer.
The Iowa Economic Development Authority (IEDA) introduced two priorities this session to help drive economic growth in the state. Senate File 574 would create a Major Economic Growth Attraction Program that would be used to help close large scale development deals by providing additional incentives. The Senate approved a two year pilot of the program, limited to two projects with a 45-0 vote. The House advanced the bill out of committee but failed to vote it off the floor before adjournment.
IEDA also introduced an omnibus bill that was passed by both chambers and sent to the Governor. Senate File 575 made various changes to tax credits including:
- Extending he renewable chemical production tax credit until 2041 and strikes the waitlist
- Strikes the waitlist for the Innovation Fund and extends the sunset to 2028
- Expands the Housing Tax Credit to include housing built on a greenfield site
Finally, Destination Iowa, a program started in 2022 with American Rescue Plan Act funding for quality of life projects, received a $6.5 million appropriation in FY24 to continue funding transformational projects.
The Second Session of the 90th General Assembly will convene on January 8th, 2024. Legislation that was not adopted this year will remain eligible for consideration when the legislature reconvenes.