Week 7 Legislative Update

February 23, 2024

This Week, attention shifted to floor debate and tax policy. Both the House and Senate debated Monday through Wednesday. The House advanced their proposed k-12 public school funding proposal, the Senate Ways and Means Committee met to consider the Governor’s proposed income tax reform bill and the House held a public hearing regarding legislation to reform Iowa’s Area Education Agencies. The hearing focused on the proposal introduced in the House that survived the first funnel deadline. The House proposal would retain AEA’s as the sole provider for special education services and allow school districts to contract out media and general education services if they so choose. 

Religious Freedom Restoration Act 

On Tuesday, the Senate considered Senate File 2095, also known as the Religious Freedom Restoration Act. The bill prohibits a governmental entity from substantially burdening a person’s free exercise of religion. Under current law, a court is not required to apply heightened scrutiny when reviewing a law that could burden a person’s exercise of religion. The bill requires a court to apply a compelling government interest test and consider if the law is the least restrictive means of furthering a governmental interest. Opponents of the bill expressed concerns that the legislation as written is too broad and will allow for businesses to unfairly discriminate against individuals based on religion. The legislation passed 31-16, along party lines. 

Supplemental State Aid 

On Thursday, the House advanced House File 2613 with a 60-36 vote. The legislation determines the growth rate for Supplemental State Aid for the 2024-2025 school year. The proposal would increase funding by 3%, approximately $229 per student. Democrats proposed an amendment that would raise the increase to 6%. The amendment failed with a party-line vote. Governor Reynolds previously proposed a 2.5% increase in SSA funding for the 2024-2025 school year. The Senate advanced a shell bill for SSA funding but has not released a number yet. Education budget discussions are largely being held up while discussions around AEA reform and teacher salary increases are ongoing. 

Tax Reform 

On Monday, the Senate held a subcommittee meeting on the Governor’s proposed tax plan before being considered by the full Ways and Means Committee on Thursday. During the meeting, the committee adopted an amendment striking provisions related to childcare property taxes and unemployment taxes that were introduced in separate bills. The committee advanced the bill sharing their interest in having independent conversations about the various divisions rather than advancing on a large tax omnibus bill. The Governor’s proposal would reduce individual income taxes to 3.65% retroactive to FY24, and in FY25 it would be further reduced to a flat 3.5%.

The House and Senate have introduced a separate tax reform proposal that would include reducing the corporate income tax rate, phasing down individual income taxes to a flat 3.65% in FY 2027, and establishing a taxpayer relief trust fund to gradually eliminate individual income taxes. Additionally, two constitutional amendments were proposed that would require a 2/3 majority to raise income taxes and establish a flat individual income tax rate in the state. 

EPA Approval 

On Thursday, the Environmental Protection Agency announced a final rule allowing 8 Midwestern states to sell a higher blend of ethanol fuel throughout the year. Governor Reynolds pushed to end the summertime ban on the sales of gasoline blended with 15% ethanol with the support of Iowa’s farming community due to the importance of ethanol to Iowa’s agriculture industry. The rule will take effect in April 2025 and apply to Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin. Governor Reynolds released the following statement in response to the ruling. 

“After continuous delays by the EPA to allow year-round sales of E15 fuel, consumers across the country can finally look forward to lower-cost, cleaner-burning year-round E15 in 2025. Nearly two years ago, I organized a bipartisan coalition of eight Midwest governors to join me in challenging the EPA’s refusal to allow E15 sales during summer months. Finally, our request is approved, however, the EPA’s unjustified delays come at a cost for drivers and the environment.  

“As governor of the nation’s top ethanol-producing state, I’m pursuing a waiver to continue offering drivers the option to purchase lower-cost, cleaner-burning E15 in Iowa this summer, and I won’t stop fighting for year-round E15 until it’s available nationwide. The solution to making America energy independent is growing in the Heartland.” 

Other Bills of Interest: 

Workforce Housing Tax Credit (HF 2218): Increases the workforce housing tax credit program maximum from $35 million to $50 million, and increases the allocation reserved for projects in small cities from $17.5 million to $25 million. The bill passed the House Economic Growth and Technology Committee and was referred to the Ways and Means Committee. 

Work-based Learning (SF 2260/HF 2516): The legislation creates a workforce opportunity fund to be used to fund equipment, instruction materials, stipends, and other training related costs for work-based learning programs. The legislation also modifies requirements related to technical and career education, student-teacher requirements, and the last-dollar scholarship eligibility. The Senate advanced the bill out of subcommittee after the bill was referred to appropriations.

MEGA Program (SF 574): IEDA proposed a pilot program last session that would allow the state to offer incentives for large economic development projects. The legislation passed the Senate 45-2 in 2023. Last week, the House Ways and Means Committee advanced the bill out of committee.

Cell Siting Act Extension (HF 2175/SF 2183): The Iowa Cell Siting Act regulates the placement of wireless facilities and associated infrastructure. The House passed legislation 96-1 extending the repeal date to July 1, 2035. The act currently repeals July 1, 2025. 

Open Meetings (HF 2539): Legislation to increase the penalties for a governmental body that knowingly violates Iowa’s open meetings law advanced off the House floor this week with a 92-2 vote. The bill also adds a requirement for newly elected officials to complete an educational course regarding Iowa’s open meetings and open records laws. 

Next week, debate will continue in both chambers as well as discussions on tax and appropriation policy proposals. The second funnel deadline is March 15th, legislation must pass a committee in the opposite chamber by the second funnel deadline to remain eligible.