Week four brought more bill introductions and the continued rapid pace of committee work. We are now two weeks from the second funnel deadline, February 18. Over the next two weeks, committee work will continue with bills advancing out of subcommittee and moving through full committee to become funnel proof and remain eligible for consideration.
Floor Action – Governor’s E-15 Program
The first bill of the session was debated and approved on the House floor on Wednesday. The House approved the Governor’s E-15 Program (HF2128) on an 82-10 bipartisan vote, with 50 Republicans and 32 Democrats supporting the bill and 7 Republicans and 3 Democrats opposing the bill. It is uncommon for the majority party to consider a bill on the floor that requires votes from the minority party, which demonstrates how high of a priority this bill is for the House Republicans. HF2128 requires gasoline retailers to start selling higher blends of ethanol or to seek a waiver from the requirements.
The Governor has worked over the last year to create a renewable fuel standard to boost the sale of corn-based ethanol and biodiesel. In 2021 the proposal divided the retailers and the agriculture producers; ultimately the chambers were unable to reconcile differences and nothing advanced. Changes made in HF2128, including a more flexible waiver process, helped garner broad bipartisan support for the bill.
On Wednesday, Governor Reynolds held a press conference to discuss her tax proposal. The Governor stated that Iowa is currently tied for the third-highest corporate income tax rate in the nation; she emphasized the state needs to lower the rate to compete with other states. The proposals from the Governor (HSB551/SSB3044) lower the top rate to 5.5%. Eleven other states will still have a lower rate. The House did not include corporate tax cuts in their proposal (HSB626). The Senate proposal (SSB3074) cuts the corporate income tax and reforms tax credits.
Governor Reynolds said that her income tax proposal will take Iowa from being one of the highest tax rates in the nation to the 5th lowest, “Practical tax reform that meets the priorities of the state, allows Iowans to keep more of what they earn, and creates a highly competitive tax system. This historic tax cut will benefit every taxpayer and turbocharge widespread, broad-based prosperity in our state, and most importantly, it rewards hard work.”
The House and Governor have agreed on a 4% flat rate. Leadership in the Senate has commented that the difference between the 4% level and the 3.6% level proposed by the Senate is that the Senate takes the reductions in the individual income tax rate out five years instead of four years.
The House, Senate, and Governor all support excluding retirement income for all Iowans and excluding some retirement income for farmers.
The Senate Ways & Means Committee approved the Senate tax proposal (SSB3074) on an 11-6 party-line vote. The Chair of the Ways & Means Committee believes this bill goes beyond tax cuts and modernizes Iowa taxes for the 21st Century.
On Tuesday, Senate Republicans introduced their Supplemental State Aid (SSA) budget bill (SSB3090). The Senate bill proposes a 2.25% growth in SSA. Governor Reynolds has called for a 2.5% increase in state funding for schools (about $150 million). The Senate Education Committee approved SSB3090 on a 10-5 party-line vote.
The House introduced their version of SSA (HSB658) and a fiscal year 2022 School Supplemental funding bill (HSB660) on Thursday. The House SSA proposal is the 2.5% increase requested by the Governor ($150 million) along with $19 million in supplemental appropriations to assist schools with higher-than-expected costs.
House and Senate Democrats have released their proposal for a 5% SSA rate, which they project to increase public school funding by about $300 million. Democrats have raised concerns about Iowa dropping to 39th in per-pupil school funding and that more than 130 schools have closed since 2011.
It is likely a final SSA budget will be sent down to the Governor for her signature next week.
Two additional Governor budget bills were introduced on Thursday: the Governor’s Transportation, Infrastructure, and Capitals bill (SSB3098) and the Governor’s Administration & Regulation bill (SSB3099).
Work continues behind the scenes to develop budget targets. If the chambers develop joint budget targets, appropriations work could begin much sooner than in previous years. This also means that the legislature could be on pace to concluding the session in 90 days or less as projected by Majority Leader Windschitl.
Public Health Disaster Emergency Proclamation
Governor Reynolds extended the Public Health Disaster Emergency Proclamation for the final time. The initial proclamation was issued on March 17, 2020, and has been extended regularly over the course of the pandemic. Today’s proclamation will continue until Tuesday, February 15, 2022, when it will end. In a statement issued with the final Public Health Disaster Emergency Proclamation, Governor Reynolds proclaimed:
“We cannot continue to suspend duly enacted laws and treat COVID-19 as a public health emergency indefinitely. After two years, it’s no longer feasible or necessary. The flu and other infectious illnesses are part of our everyday lives, and coronavirus can be managed similarly. State agencies will now manage COVID-19 as part of normal daily business and reallocate resources that have been solely dedicated to the response effort to serve other important needs for Iowans.“
Next week is one week before the first funnel, so the urgency to move bills through committees will increase as committee chairs attempt to “funnel proof” their priority bills by getting them out of committee. Also, next Monday is the day for local caucuses around the state. Most legislators will want to be present at those. This has the effect of taking away a full day of potential subcommittee and committee work making the timeline even more compressed.