Iowa lawmakers pass income tax cut, budget bills in push to end session

The Iowa Statehouse. (Photo by Perry Beeman/Iowa Capital Dispatch)

Iowa lawmakers passed several remaining priority bills of the Republican leaders as well as remaining budget bills Friday and early Saturday as legislators sought to wrap up the 2024 legislative session.

It was the second night of post-midnight debate this week at the Iowa Capitol. Most of the bills passed Friday headed directly to Gov. Kim Reynolds, with Republican leaders having reached agreements on spending and final policy bills.

Some bills contained last-minute changes, including a move in the House to approve a moratorium on new casino licenses.

Lawmakers met in closed door meetings much of the day Friday, reaching agreements and compromises on the remaining bills — as well as looking for spaces to add in legislative proposals that died earlier in session.

While some policy priorities of Republicans, like the casino moratorium, made it in during the final hours of debate this session, House Minority Leader Jennifer Konfrst criticized Republican leaders for not allowing Democratic proposals to advance this session. In a news conference with reporters, Konfrst also criticized Republicans for the drawn-out end of session, saying that it is reflective of earlier issues and disagreements between the chambers during the session.

She pointed to a House bill on fetal deaths that would have added “unborn personhood” language that the Senate did not advance over concerns about its impact on in-vitro fertilization treatment, and a spending oversight included in the Area Education Agencies legislation.

“Republicans in disarray, Republicans (are) not agreeing with each other, because it’s not about the policy,” Konfrst said. “It’s always about politics. If they cared about the policy, they would be more accurate in their policy. They would focus more on what’s in the bills and less than what’s in the headlines.”

Governor signs bill for school firearms

As lawmakers worked through the day to pass bills, Reynolds signed into law several measures that were approved by lawmakers this session. Chief among them was a bill changing the statute of limitations for child sexual abuse survivors involved in the Boy Scouts of America settlement, sent to Reynolds Friday – the deadline for the measure to become law for the impacted victims to receive payouts equitable to participants in other states.

The governor also signed more than 40 other bills Friday. Measures signed into law include:

  • House File 2586, legislation allowing school employees to go through a training process to receive a permit from the Iowa Department of Public Safety for carrying a firearm on school grounds and providing qualified immunity for school districts and staff from criminal and civil liability for damage related to firearm usage involving “the application of reasonable force.” 

  • House File 2153 changes reporting requirements for the Iowa College Student Aid Commission, having them file reports on the number of students who received state financial aid rather than loan repayment or forgiveness and having them include how awards are determined. It also strikes certain reporting requirements. 

  • House File 2240 classifies creating an image or video portraying the likeness of a person engaged in a sexual act or in a state of full or partial nudity without the consent of the person depicted as an act of first-degree harassment.

Here are some of the final bills passed by lawmakers before adjournment for the 2024 session:

Final legislative proposals pass

Tax omnibus: After quickly moving Senate File 2442 and its House companion through the committee process Thursday, the Senate approved the bill speeding up 2022 individual income tax cuts and setting a flat tax rate Friday morning.

Sen. Dan Dawson, R-Council Bluffs, said that in the eight years since the Republican trifecta took control at the Iowa State Capitol, the Iowa tax code will have transformed “from one of the least competitive in the United States to something that will be one of the most competitive.” The individual income tax changes in this bill add to that progress, he said.

The legislation received bipartisan support and passed 36-7. The measure would lower Iowa’s individual income tax to a 3.8% flat rate beginning in 2025, a cut from the 3.9% flat income tax by 2026 approved in the 2022 tax bill.

Dawson said the tax cut is “responsible, sustainable, as well as big. Dawson and Rep. Bobby Kaufmann, who managed the House bill, said the tax cuts will be paid for through excess tax revenue in this year’s budget, in addition to a withdrawal from Iowa’s Taxpayer Relief Fund. The bill also includes measures that allow future withdrawals from the relief fund if state revenues fall below the state’s spending during a fiscal year.

Some Democrats said this approach could lead to cuts in services that Iowans rely on in the future. Sen. Herman Quirmbach, D-Ames, said taxes are necessary to finance important state-funded services like education and public safety.

“When we look at the net impact of any tax proposal, the benefit side is how much of a tax cut do you get?” Quirmbach said. “The downside is how much in the way of services do you lose? It’s easy to focus on just, ‘hey, let’s cut taxes,’ and not talk about lost services.”

Sen. Nate Boulton, D-Des Moines, said Iowa has “a long ways to go to get tax fairness” in Iowa, calling for tax credits and exemptions that apply more to wealthy Iowans and large businesses rather than lower- and middle-income families.

“I also understand that this isn’t the tax bill we would have drafted on our side,” Boulton said. “… That said, several of my Democratic colleagues can also see something clear in this tax proposal. And that is for the first time in dealing with tax policy we’re actually seeing working class Iowans get a quicker step towards tax relief.”

The legislation also includes changes to last year’s property tax law, including changes to thresholds that determine how much excess revenue is must be dedicated to reducing general fund levies for cities and counties with higher percentages of total assessed property value growth.

The bill also includes a measure allowing counties to eliminate county compensation boards, the panels that recommend salary increases for elected county officials. Kaufmann called this provision his favorite part of the bill during floor debate in the House, saying that such boards are “one of the largest contributors to the explosion and growth of property taxes in the state.”

Rep. Sami Scheetz, D-Cedar Rapids, offered an amendment to reduce Iowa’s sales tax by one cent – a tax he says every Iowan pays.

“As opposed to the legislation we’re considering, which will be a tax cut for about two-thirds of Iowans, this will be a tax cut of 100% of Iowans,” Scheetz said. “As many people in the state know, the sales tax is the most regressive form of taxation. It hits the people in the state who need help the most the hardest.”

The amendment was ruled not germane to the legislation.

Kaufmann said the bill will result in over $1 billion saved, and said the legislation shows that the Republican trifecta at the Iowa Capitol are committed to lowering costs for taxpayers and fiscal responsibility for the government.

“Every year we lower the rates, every year revenue goes up,” Kaufmann said. “We in Iowa show how we pay for it and we can give Iowans the confidence that we will make sure that these are sustainable.”

The bill goes to Reynolds for final approval.

Tax constitutional amendment: Senate Joint Resolution 2004, a move toward amending the state constitution to enshrine a flat tax rate, passed the House 58-35.

This proposal is moving in conjunction with House Joint Resolution 2006, another constitutional proposal that would require that future increases to the state income tax rate get support from two-thirds of the legislature to pass.

Boards and commissions: The Senate approved Senate File 2385 with a 32-14 vote, sending it to Reynolds.

The measure makes a significant reduction to the number of boards and commissions in the state, consolidating 9 boards into three new panels and eliminating another 74. The legislation also makes changes to the powers and make-up of some panels.

One of the most controversial components of the proposal was language changing the Iowa Civil Rights Commission. In the bill, the powers and authority given to the commission through the Iowa Civil Rights Act would be transferred to the Iowa Office of Civil Rights and the state’s Civil Rights Commission director.

The Iowa-Nebraska National Association for the Advancement of Colored People (NAACP) spent the last week lobbying at the Capitol and rallying supporters in opposition to the proposal, asking for lawmakers to kill the bill or to amend the bill striking these provisions.

The NAACP also opposed changes consolidating multiple commissions dedicated to specific minority populations in Iowa, including the commissions on the status of African Americans, Asian and Pacific Islanders, Persons with Disabilities and Women. Advocates for the bill say these populations will still be represented through the Iowa Human Rights Board, with a person from each community being a member of the body.

Sen. Janice Weiner, D-Iowa City, said the House amendment makes some positive changes to the legislation, but that the bill remains “an upside-down process.” She said she supported the review committee and process established by the bill, but said she cannot support the changes made to boards and commissions.

“That’s literally all we should have done,” Weiner said, referring to the review committee. “It should have been a short and simple bill. This bill still cuts too many boards that are still needed. … And it ignores what we’ve heard from many Iowans on a great many issues. Iowans, in my view, deserve a better process.”

The bill’s floor manager, Sen. Chris Cournoyer, R-LeClaire, and other Senate Republicans did not address Democrats’ criticisms Friday. But during the House debate on the bill Tuesday, Rep. Jane Bloomingdale, R-Northwood, emphasized that the review committee has the ability to recommend panels cut by this legislation be restored if needed.

Reynolds said the boards and commissions legislation builds off of the work started with the 2023 state government realignment law in making state government more efficient and cost-effective.

“The bill headed to my desk today is a continuation of that work,” Reynolds said in a statement. “It eliminates unnecessary and redundant boards and commissions, returning accountability to the people of Iowa through their elected representatives. Iowa’s boards and commissions have never been comprehensively reviewed and adjusted for effectiveness, only growing in numbers and scope over our state’s history. Today, we reverse that trend.” 

Casino moratorium: The House voted to amend Senate File 2427, a bill dealing with the Department of Revenue on issues including to taxes on sports wagering, cigarette and tobacco, to include a moratorium on new casino licensing until 2029.

Scheetz said the amendment to the bill dropped just an hour before representatives reconvened to debate the bill after 12:30 a.m. Saturday. He criticized the bill for unfairly limiting Iowa cities’ ability to pursue gaming operations.

“This amendment, filed on a completely irrelevant bill at the last second of our legislative session, is wrong,” Scheetz said. “It’s gonna hurt gaming in our state, and effectively, this legislation will be a permanent ban on new casinos in the state of Iowa indefinitely.”

Scheetz said it is not the prerogative of the Legislature to deny cities and their residents the right to have a casino operation. But Kaufmann disagreed, saying that it is the Legislature’s role to set policy on these issues.

He also pushed back against criticisms of the timeline of introducing the proposal as an amendment to an unrelated bill, saying that the moratorium is “far from a new topic.”

“I believe it’s been discussed, at least on my end, every week of every month of session,” Kaufmann said. “We just happen to reach critical mass at this time.”

Opioid settlement fund: The Senate passed Senate File 2395, providing funding for specific nonprofits. $3 million goes to Youth and Shelter Services, $8 million to Community and Family Resources and $1.54 million in funding to the state Attorney General’s office under the bill..

The Senate amended out the House’s proposal, passed Thursday, of creating an advisory council to oversee the allocation of money from the Opioid Settlement Fund. In future years the council would oversee a grant program awarding one-time grants to applicants for opioid addiction and treatment services, reviewing and making recommendations to lawmakers about the funding of grant applications each year.

Senate Democrats criticized Republicans’ removal of the advisory council, calling for keeping this provision in. Weiner said the advisory councils are required by some opioid settlement agreements reached between state and local governments and businesses involved in the opioid crisis.

“Red and blue states alike have created advisory committees to allocate these funds for purposes of transparency and accountability,” Weiner said. “And because it’s required under the settlement agreements to avoid the very issues of lack of accountability and diversion of funds that we experienced with the tobacco agreement.”

The bill’s floor manager, Sen. Mark Costello, R-Imogene, said the advisory council component was taken out because there was dissent between Senate Republicans, House Republicans and the governor on whether to use an advisory committee or a different proposal.

He said that while an agreement hasn’t been reached, “what we would like to do is just get this money out.”

“And so we’re just going to go to the things we all agreed on,” Costello said.

The amendment striking the advisory council was approved. Sen. Janet Petersen, D-Des Moines, said that she wasn’t sure an agreement had been reached with the House, but called for advancing the measure as amended to ensure some funding is distributed.

“The most important thing is that we have these dollars getting out to help save lives in Iowa,” Petersen said. “So I would encourage the body to support the bill so that we can get something done this year and not waste another year without dollars being spent.”

Appropriations bill compromises move to governor

Education funding: The Senate sent Senate File 2435 to the governor’s desk Friday with no debate. The legislation appropriates funds for the Iowa Department of Education, Department for the Blind and the Iowa Board of Regents and the universities it governs.

Each of the state universities would receive a 2.5% increase in general university funding, bringing allocations to more than $223 million for the University of Iowa, more than $178 million to Iowa State University and almost $102 million to the University of Northern Iowa. Iowa tuition grant funding would also see a 2.5% increase to more than $52 million.

An amendment to the bill, sent by the House late Thursday, changed how state funds to Iowa’s community colleges are distributed. Sen Tim Kraayenbrink, R-Fort Dodge, said the amendment still increases total community college appropriations by $7 million, but half of those dollars will go to providing “more equity” to the six colleges that see the lowest average amount of state funding per student. The other $3.5 million was allocated according to the current aid distribution formula. 

Private universities would be required to submit annual reports on the number of students receiving Iowa tuition grants and other information on them and graduate outcomes, at the risk of students not being eligible for tuition grants if they do not submit reports. 

State universities would also be prohibited from establishing, maintaining or funding diversity, equity and inclusion offices under the bill, unless required by state or federal law or accreditors. 

Rep. Adam Zabner, D-Iowa City, said during House debate that this legislation does not adequately fund education in Iowa, which will place more burdens on families and fail in helping them and employers looking for educated workers. It does, however, include fear mongering about indoctrination and politicization of diversity, equity and inclusion, he said. 

“This is an embarrassment,” Zabner said. 

Rep. Carter Nordman, R-Panora, said the legislation helps keep costs of education low for students through continued and additional funding to grants and loan repayment programs. 

“I believe this budget accomplishes many priorities House Republicans set out to get done this year, and it is consistent with the responsible budgeting practices we have set forth over the past decade-plus,” Nordman said. 

The bill would also create processes to deal with chronic absenteeism and truancy in schools, having school district boards adopt policies for interventions and penalties when a student is chronically absent with the county attorney’s involvement. Sen. Molly Donahue, D-Cedar Rapids, said in Senate debate Thursday night she’s seen chronic absenteeism plans fail before, causing families to pull their students out of school in order to avoid penalties from them. 

School districts are already putting in the work to lower absenteeism, she said, and putting in these rules would throw out their efforts and make them start all over again. 

“The prescriptive and high state mandates … do not work and they certainly do not improve outcomes for students,” Donahue said. 

Judicial branch: Rep. Brian Lohse, R-Bondurant, said he has learned “you take wins where you can get them and live to fight another day” as a budget chair.

But with the passage of Senate File 2436, he said that he did not have to make many compromises.

“They said you don’t always get what you want,” Lohse said. “But in this case, I kind of did.”

Lohse said both House Republicans and Democrats were very clear about their goals for the judicial branch appropriations, and he was “delighted” to report that most of those goals were met.

Included provisions were a 5% increase to the salaries of judicial officers. Pay increases for judges was first brought up in the Condition of the Judiciary address by Chief Justice of the Iowa Supreme Court Susan Christensen in January, who said Iowa’s judicial pay has not kept pace with inflation and is a major contributor to judicial vacancies across the state.

Another request Christensen made was to return the Judicial Retirement System from its current variable contribution rate to a fixed contribution rate, as was the system prior to 2022. This change has resulted in judges putting more of their salaries into their pension, further driving down net pay for judicial officers.

In the finalized appropriations bill, the retirement system remains on a variable contribution rate, but makes changes to create a 35%-65% split between contributions from judges, in addition to setting a 1% limit on how much contribution rates can vary from the prior year’s rate.

Lohse said “sometimes it’s not what we do, but also what we do not do that is just as important.” 

Rep. Eric Gjerde, D-Cedar Rapids, praised the legislation.

“Judiciary spoke very loudly and clearly to us and told us what they need,” Gjerde said, adding that the retirement system and pay raise provisions address these concerns.

Not included in the legislation is a measure from the original Senate Judicial Branch appropriations proposal changing the make-up of the judicial nominating commission that nominates district court judges. The proposal would have given the governor the power to appoint six of the commission’s 11 members.

Another measure stripped from original proposals was a pay raise for jurors. The House proposed increasing pay for jury duty from $30 to $50 per day to $75 to $95 per day.

“That is something that we desperately do need to do,” Lohse said. “However, unfortunately, it was a casualty of the budgeting process. And I hope next year we’re able to bring that forward.”

The bill passed 90-1, with Rep. Jeff Shipley voting against. It moves to the governor for approval.

Justice system: House File 2693 appropriates $712.8 million to the state’s justice system, a roughly $24 million increase from the previous year.

Lohse said one of the biggest questions related to the justice system’s costs is the potential loss of funding through the federal Victims of Crime Act, or VOCA. Iowa currently receives more than $5 million annually through VOCA, funds that go to services for victims of human trafficking, sexual assault, domestic violence, and violent crimes.

Congress is considering cutting VOCA funds by more than 40% for the 2024 fiscal year, which would put a significant portion of funding for these services in Iowa at risk. The Des Moines Register reported in February that Iowa victims’ rights advocates as well as state officials like Iowa Attorney General Brenna Bird are calling on federal lawmakers to reject these changes to VOCA or to provide short-term funding solutions to ensure that victim support agencies can continue to provide services.

Current VOCA funding will continue through the federal fiscal year through Sept. 30, 2024, Lohse said. But past that point, funding for these services could be reduced. Lohse said Bird and various Iowa organizations, working with the federal government and Iowa’s congressional delegation, have identified potential funds that could go to replenish VOCA, but that change is still contingent on congressional action.

“It’s our intention that if the federal government doesn’t come through, that we will provide emergency funding as quickly as possible when we convene next January,” Lohse said. “So I hate to say it’s a ‘wait and see what happens,’ but that, at this point, is where we’re at. And we’re very hopeful the federal government will come through and replace the funding that they had promised.”

The bill also includes some pay raises, increasing correctional workers’ starting pay and minimum pay to $24 per hour, and increasing the pay rate for indigent defense rates for attorneys by $3 per hour across the state.

The bill also includes an increase of $2.8 million for the Attorney General’s office, which includes funding for six new employees – three attorneys, two investigators and one paralegal, that will assist county attorneys with investigating and prosecuting crimes.

Petersen introduced an amendment during Senate debate requiring the Attorney General’s office to reinstate its policy of paying for emergency contraceptives and other health care services for sexual assault victims. The amendment comes following criticism by Iowa Auditor Rob Sand and legislative Democrats for Bird’s decision to pause payments for the Sexual Assault Examination Payment Program as part of a “full audit of victim services” that she announced shortly after taking office in January 2023.

Under longtime Attorney General Tom Miller, a Democrat, the office paid for these services, including medicine like Plan B as well as procedures like abortion, for sexual assault survivors using money from the state’s victim compensation fund.

“Iowans who are raped or sexually assaulted should not be revictimized by the attorney general denying them medical care that they need,” Petersen said, asking for support of the measure.

But Sen. Julian Garrett, R-Indianola, said the amendment was “unusual” as it would put conditions on the attorney general’s ability to access funding contingent on reinstating the program – “not something we would ordinarily do.” The proposal failed in a 15-32 vote.

Brooklyn Draisley contributed to this report.

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