Week 10 Legislative Update

March 17, 2023

March 10th, the Revenue Estimating Conference (REC) met to provide the most recent fiscal projections for FY23 and FY24. Following the major tax reform policy that was enacted in 2022, the REC predicted the state would see in drop in revenues compared to FY22. During the March meeting, the REC adjusted the December predictions, sharing that while the state will see a drop in revenues, it will be less severe than originally predicted.

The state is predicted to bring in $9.75 billion in the current fiscal year, a 0.5% decrease from FY22. The panel projected FY24 will see a 1% decrease in revenue as Iowa’s corporate and personal income tax is gradually phased down.

Kraig Paulsen, director of the Iowa Department of Revenue, shared that the negative growth this year is a result of the tax cut.

“There was no organic negative growth,” he said. “Actually, all organic growth is positive.”

Republican legislators shared similar sentiments, arguing the growth in FY22 was in part due to the federal stimulus money the state received, and state revenues have largely remained steady.

High Profile Legislation

Government Reorganization:

On Wednesday, the House passed Senate File 514, Governor Reynolds proposed government realignment bill. The legislation would reduce the number of state agencies from 37 to 16. The legislation passed the Iowa Senate last week and now awaits Governor Reynolds signature.

Governor Reynolds released the following statement following the bills passage.

For decades, Iowans have seen state government grow beyond its means. Today, the Iowa House joined me and the Iowa Senate to declare an end to bloated bureaucracy. We are making government smaller, more efficient, and more effective. We are saving taxpayer dollars and putting Iowans' needs first. This transformational legislation will put Iowa in the best position to help our state thrive.”

Regent Diversity, Equity, and Inclusion Programs

Iowa Public Universities would be prohibited from using state money to fund Diversity, Equity, and Inclusion offices and positions under House File 616, a bill that survived the first funnel deadline. On March 14th, Board of Regents President Michael Richards issued the following statement:

“Over the next few months, the Board of Regents will initiate a comprehensive study and review of all Diversity, Equity, and Inclusion programs and efforts at the University of Iowa, Iowa State University, and the University of Northern Iowa... As a result, I am directing Iowa’s three public universities to pause the implementation of any new DEI programs until the study is completed.”

Other Bills of Interest

IEDA Technical Bill: Senate File 408 was introduced by IEDA and makes technical changes to existing programs within the department, including eliminating the waitlist for the Angel Investor program. A Senate Ways and Means subcommittee recommended passage on Wednesday.

Income Tax Reform: Senate File 552 expands on the income tax reform passed in 2022 by phasing down individual and corporate income tax rates until the individual income tax rate reaches 0. The Senate Ways and Means Committee advanced the bill.

Bathroom Bill: Senate File 482 prohibits individuals from using elementary and secondary school restrooms that do not align with their sex at birth. Students can request special accommodations, including a faculty or single-occupancy restroom, with parental consent. The Senate passed the bill with a party line 33-16 vote, and the House passed the bill 57-39, with 5 Republican Representatives voting no. The bill now goes to the Governor for signature.

Auditor of State: Senate File 478 proposes to make changes to Chapter 11, which governs the authority of the Auditor of State.  As passed by the Senate, the bill would require the Auditor’s office to specify when an audit begins and the scope of the audit.  The bill adds to the types of confidential information that the State Auditor is prohibited from requesting unless the information can be shown to be relevant to the audit.   The legislation passed the Senate with a party line 33-16 vote.

Next Week

Following the March REC meeting and the passage of the government realignment legislation, work on the budget will begin in earnest. Lawmakers will continue to move priority legislation through as the second funnel deadline approaches.

Session Timeline

  • March 31st is the second Funnel Date
  • April 28th is the 110th day of session where per diem expenses end