Iowa 2021 Legislative Report – Week 15

With Week 15 behind us, we are now on the brink of the last scheduled week of session. The 110th calendar day of session falls on April 30.  The legislature is not required to adjourn sine die by that date, but the per diem payments for legislators end on the 110th calendar day.

The Senate and the House need to come to an agreement on major tax issues included in two Senate approved bills: 

1. Inheritance Tax/Tax Triggers (SF576) strikes the revenue trigger requirement before income tax cuts become effective in 2023 and phases out the inheritance tax over the next four years.
2. Property Tax Reform (SF87) shifts mental health funding to the state and eliminates property tax replacement payments (backfill) to local government as of FY 2028 (establishes a new formula for payments to phase out the backfill from FY 2023-2028).  The bill also:
   • Creates a Mental Health and Disability Services regional fund; establishes funding formula and creates a risk pool.
   • Increases the state school aid base to 88.4% as of the 2022-2023 school year.
   • Eliminates the tax trigger requirement before the 2018 income tax changes take effect (see also SF576).
   • Strikes the charitable conservation donation income tax deduction.
   • Makes changes to:
     • Calculating income tax deduction
     • Makes changes to the elderly property tax credit
     • Makes changes to the forest/fruit tree property tax credit

In addition to an agreement on tax cuts, the legislature must reach an agreement on a budget and number of outstanding policy issues (e.g., renewable fuel and ‘Back the Blue’).  The Senate also needs to wrap up work on Governor appointments.  The Senate adopted SR6 Appointment Confirmation to allow it to delay action on appointments after the April 15 deadline until the end of session.  Governor appointments need the approval of two-thirds of the Senate, which allows the opportunity for Democrats to block appointments.

Debate was limited to Tuesday and Wednesday this week. The House and Senate bounced five bills back to the originating chamber and sent a total of 20 bills down to the Governor.  Of significance, the House passed SF524 Inpatient Bed Tracking with an amendment that would require health carriers to reimburse mental health telehealth services.  The delivery of and payment for telehealth has been a significant topic of the 2021 session, carried over from 2020 and highlighted by the pandemic. 

Bills to be sent to the Governor after enrollment:

Bottle Bill

The House Ways and Means Committee held a public hearing on the House version of the Bottle Bill (HF814) on Tuesday.  A significant number of Bottle Bills have been introduced this session.  The HF814 strike and replace amendment increases the handling fee for redemption centers and allows retailers to refuse to accept bottles and cans  At the public hearing, supporters of the bottle bill stressed the importance of updating the Bottle Bill in order for it to continue working.  Redemption centers stated that the handling fee needs to be updated for redemption centers to stay in business.  Recyclers discussed the benefits of the Bottle Bill in keeping recycling costs low in Iowa.  Retailers continue to emphasize the sanitary hazards of handling and storing bottles in grocery stores.  Opponents of HF814 believe the distributors are holding millions of dollars in unclaimed deposits and that the system needs to be more transparent.

Despite widespread support and momentum to enhance the bottle bill this year, further action appears unlikely for the remainder of this session.  HF814 has no Senate companion and Senate leadership has declared the issue dead.  The bill can be tabled on the unfinished business calendar and kept alive for further action next session.

Budget

Both the Senate and the House brought their versions of the HHS budget out of their respective Appropriations committees.  The Senate version of HHS (SF606) contains provisions from an earlier bill related to Public Assistance Oversight (SF389), which adds oversight on the public assistance program (SF389 was approved by the Senate 30-18 but did not advance out of House Human Resources Committee). 

The House version (no House File number yet) does not include those provisions from SF389, but the bill does contain a number of provisions that have not advanced in the Senate, including: 

• Reimbursement parity of Mental Health telehealth (see also SF524)
• Use of matching grants to offset medical residency liability costs
• Childcare provisions to address the childcare cliff in Iowa (graduated phase-out of eligibility of childcare assistance was previously passed by the Senate in HF302, but has sat on the Senate unfinished business calendar). 

In addition to reconciling differences in how they appropriate the HHS dollars, HHS subcommittee chairs will also need to address these policy differences in order to finalize the HHS budget for FY 2022-2023.

The House did pass one budget this week: HF867 Administration & Regulation budget passed on a 55-37 vote after several hours of debate on Wednesday.  During the debate, the floor manager stated that the House and the Senate have reached an agreement on the budget.  Most notable in the Administration & Regulation budget is the $100 million appropriated for the broadband grant program.  Both chambers have approved HF848 Broadband Grants, which includes policy language for the broadband grant program, but not an appropriation (HF848 has not yet been signed by the Governor).  The Governor initially requested $150 million for the program for FY 2022-2023 ($450 million is the total estimated cost).  $100 million was the major difference between the House and Senate Administration & Regulation budgets, but it appears that has been worked out.

What’s next?

Leadership will need to settle on an overall budget number for FY2022-2023 (taking into account tax changes) before Appropriations Subcommittees can agree on details of individual budgets.  A lot of negotiations ahead with the clock ticking down.  For now, stay tuned.  When the logjam does break, things can move quickly.  If it does not, we may be looking at sine die adjournment sometime in May.