Policy Perspectives
February 21, 2015
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The BIGS - School Funding, Gas Tax and Medicaid

February 20 brings the end of the 6th week of the 2015 legislative session, and the 40th session day (of 110 scheduled). There is a lot going on at the Capitol right now with a couple hundred visitors and at least 40 new bills being introduced every single day (sometimes closer to 100). The number of subcommittee meetings is ever increasing as the first funnel deadline on March 6th approaches. Any policy bill (non-tax or spending) that doesn't make it out of committee by then becomes dead for the year. Since bills are still being introduced at such a fast pace, this obviously puts some pressure on legislators.


While the committee and subcommittee schedules are heating up in the background, all of the air in the Capitol building is being consumed by a few big issues - school funding, Medicaid managed care and the gas tax.


The school funding issue has taken a difficult turn as the House and Senate battle over what the State can afford to put toward this. The House passed legislation to increase school funding by 1.25% (or about $50 million), per the Governor's request. The Senate chose to not even take up the House bill, but to instead pass their own bill at 4%. Running a separate bill means a few more hurdles before an issue can advance to a conference committee to be resolved.


Expect the school funding issue to take a while longer to reach resolution. According to House Appropriations Chairman Chuck Soderberg, "while the state revenues are projected to increase approximately $200 million next year, the new dollars available are NOT adequate to cover a number of built-in expenses and prior commitments that exceed $457 million for the upcoming budget year." Soderberg estimates the increased costs of Medicaid to be more than $205 million by itself. The $50 million increase to schools coupled with that means cuts or savings have to be found elsewhere in state government, especially if school funding will increase by more than $50 million.


Speaking of Medicaid, anyone involved in any aspect of health care this week was tied up at the Capitol going through the recently released Request For Proposal (RFP) for managed care of Medicaid. The Governor is hoping that transitioning Iowa's Medicaid program over to a managed care program will save in the neighborhood of $50 million. Don't get too excited though about throwing that $50 million toward the deficit in the previous paragraph; it is already factored into those calculations. Sigh...


The last big issue at the Capitol, and the one that has probably graced your local news in the past 48 hours, is bipartisan efforts in the House and Senate to pass a transportation infrastructure funding bill that contains a ten-cent increase in the state gas tax. Since PDI supports this bill, we'll address that in the next article.   

More on the Gas Tax  
In the last issue, we indicated that a gas tax bill was coming soon.  Since that time, identical bills were introduced in the House and Senate Transportation Committees and began moving immediately.  Legislators want to get a bill to the Governor's desk for his consideration before the end of the month, but doing so has taken some serious legislative maneuvering through two committees in each chamber.

House Speaker Kraig Paulsen took the extraordinary step late this week of removing two members of the House Ways & Means Committee and replacing them with himself and another pro-gas tax member. Doing so produced the 13 votes necessary to bring the bill out of committee (13-12) and made it eligible for floor debate next week.


Speaker Paulsen's move was one of those reminders of the challenges those in leadership positions face from time to time. He saw that a clear majority of the House chamber wanted to be able to take a vote on this measure, so he took action to ensure the bill did not die in the House Ways & Means committee.

Social media immediately erupted after the move, and people will surely be talking about the maneuver should the gas tax bill become law.  The majority party membership on each committee, however, is at the discretion of the Speaker, so the move was fully in line with the powers he has at his disposal.  

Both the House (HF 351) and the Senate bills (SF 257) will be eligible for debate before the full chambers next week.  If you have not already done so, please weigh in with your legislators in support of more infrastructure funding.  You can find their contact information HERE.  More information about Iowa's infrastructure needs can be found at http://www.wecantaffordtowait.com/.

TIF Bill Update  

The Tax Increment Financing (TIF) bill we have mentioned previously is still being drafted. We are keeping a close eye out for it. As a reminder, we anticipate it will contain a sunset for TIFs that don't have an ending date, a ban of the use of TIF for public projects, and some sort of debt limitation.


The Iowa League of Cities distributed a great publication entitled "A Snapshot of Tax Increment Finance" and has shared it with PDI. You can view it HERE.
Renewable Chemical Production and
Angel Investor Tax Credit bill

In the previous versions of Policy Perspectives, we have talked about the two main legislative proposals submitted by the IEDA, the department's miscellaneous policy bill (which has advanced through a committee in each chamber) and the Renewable Chemical Production and Angel Investor Tax Credit bill (SSB 1116 and HSB 98).   


The summary of the renewable chemical bill can be found HERE).    It is the product of the Battelle Report and the goal is to incentivize the establishment of new businesses that use biomass feedstocks.  The IEDA views this as a tool that could lead to job and wealth creation, especially in rural Iowa, in close geographic proximity to Iowa's ethanol plants and similar businesses.  Please take a few minutes to familiarize yourself with this proposal.  As we make headway on this, legislators may call you asking for input so we want to be sure PDI members know the proposal.  

Tax Credit Analysis 

Legislative Services Agency (LSA) analyst Jeff Robinson presented to the Senate Ways & Means Committee on February 10, 2015. The topic was an update on tax credits and contingent liabilities on the horizon for the State. You can view the presentation HERE and a one-page table of all of Iowa's contingent liabilities HERE.

Full House during Gas Tax Vote
in House Ways and Means Committee
The House Ways & Means Committee room shortly before they moved to a bigger room to accommodate the Gas Tax crowd.

Broadband Expansion

Broadband legislation continues to get lots of discussion at the Statehouse, with probably five subcommittees over the past two weeks.  The Governor's bill (HSB 104; one pager HERE) has passed out of the House Commerce Committee and will now head to the Ways & Means Committee where it may very well shed the $5 million grant section.  At the subcommittee level, legislators expressed some concern in being able to come up with $5 million for the bill, and they also questioned whether that level of grant funding would do much to move the needle on broadband infrastructure.   As we mentioned last issue, if you have input for legislators on this issue, be sure you reach out them! 


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