PDI POLICY PERSPECTIVES | March 20, 2017
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Legislative Session Update

Monday, March 20th marks the 71st day of the 100-day legislative session and the start of the 11th week. Only about four weeks of session remain before the April 18 target adjournment date arrives (though the Legislature often goes beyond that date).
 
Second Funnel
The second funnel is only two weeks away (on Friday, March 31) and will be the driver behind a lot of legislative activity in the days ahead. All policy legislation must pass one chamber and make it through committee in the other chamber by that date in order to stay alive. Bills assigned to the Appropriations (spending), Ways & Means (taxing), or Oversight committees are exempt from the funnel.
 
Revenues Drop Again
The Revenue Estimating Conference (REC) met on Tuesday, March 14 to re-evaluate Iowa's revenues and expenditures. At that meeting, they announced that the state needs to cut another $105.9 million from current year (FY17) budget.  This is on top of the $88.2 million that was already cut in the Deappropriation Bill (SF 130) passed earlier in session.  That bill also held back $25.2 million in refundable business tax credits; if that had not been done, the cuts needed to balance this year's budget would have been closer to $131 million.
 
Legislators have decided that there is no way to cut further in the final months of the budget year, so they will dip into the economic emergency fund and borrow $105.9 million to cover the shortfall.  The key word is "borrow;" legislators say they will pay the emergency fund back with next year's budget money.  Here's a quick rundown of what the budget looks like for next year (FY18):
  • $258.5 million total new money to spend.
    • $105.9 million will pay back to the Economic Emergency Fund.
    • $40 million already spent on 1.1% school funding increase.
    • $42 million is needed for Medicaid.
  • That leaves $70.6 million left for the rest of the budget (including salary increases, increased costs of operations, and any other built-in increases).
These numbers come from the non-partisan Legislative Services Bureau -  you can see their review here.  Legislators may use a different set of numbers, as some will want to be more conservative in budgeting so they don't need a round of election-year cuts.  Whatever numbers are used, there is simply no money for any new programs and every existing program will receive a high level of scrutiny.  While the fairest way to address this shortfall is through an across the board cut, legislative leaders have been more interested in cutting out duplicative programming and "wasteful spending."   Three things legislators are looking at right now are: 
  • Eliminating tax credits so they can boost general fund revenue.
  • Five-year review of every budget item to look at return on investment.
  • Simplifying agency budgets to give more flexibility (fewer line items).
So the bottom line - no money to spend on new programs or priorities, more cuts are likely, no money to reinstate cuts made in Deappropriation Bill, and not enough money to actually cover the shortfall in Medicaid that the managed care companies say they have undertaken. When you couple this with uncertainty for many programs that rely on federal funding to the State, it means the next few weeks are going to be pretty hectic.    
Tax Credit Bill Could Spell Trouble
Over the last few issues, we have reported there may be news coming soon of tax credits under attack. Unfortunately, we have now reached that stage.
 
A week ago Wednesday, the House and Senate each held a rarely seen joint meeting of the Appropriations and Ways & Means Committees to hear a presentation on tax credits. The session was largely informational, however it was clear that the information was requested by legislators in preparation of a legislative proposal. Some of the information distributed was in this report.
 
Last Monday, the House Appropriations Committee introduced legislation (HSB 187) that would make a number of changes to tax credit programs, the biggest two of which are a cap section and a refundability section.
 
The cap section of the bill would take a long list of about 43 tax credits (ranging from Economic Development to Education to Adoption to Renewable Fuels, etc.) and cap them ALL collectively at $400 million. (This year, those same tax credits are predicted to "cost" $432m). The cap would be lowered by $10 million per year until it reaches $370 million. Included in this list, among many others, are the Accelerated Career Education Program Job Credit, the New Jobs Credit from withholding, the Targeted Jobs tax credit, the Renewable Chemical Production tax credit, all wind, solar, geothermal, biodiesel and ethanol tax credits, the Endow Iowa Credit, the Innovation Fund Investment tax credit, the Iowa Fund of Funds tax credit, the Research Activities Tax Credit, the Venture Capital Fund Investment tax credit, the Workforce Housing Investment tax credit, the Redevelopment tax credit, the High Quality Jobs Program, the remaining Enterprise Zones program.
 
The refundability section removes refundability from a number of Iowa tax credit programs. Of particular concern to economic developers, this section includes the Research Activities tax credit, the Redevelopment tax credit, the Renewable Chemical Production tax credit, the Historic Preservation and Cultural and Entertainment District tax credit, and all ethanol and biodiesel promotion tax credits.
 
PDI is registered as opposed to this bill. Both the cap and the removal of refundability would have a disastrous effect on economic development in Iowa, throwing uncertainty into some of the most effective and efficient programs in the nation.  
 
Please take a moment to contact your House members and let them know you oppose HSB 187. Examining tax credits for their effectiveness is certainly a good goal, but arbitrarily capping them and removing refundability sends a message of uncertainty and chaos to businesses looking at Iowa.
Bill Tracker Change
Note that the link for the Bill Tracker have been changed to make it easier for you to remember. PDI's bill list is now at http://www.ialobby.com/billtracker/pdi/
Other Issues

Preemption
House File 295 (Click HERE) has now passed the House and is working its way through the committee process in the Senate. 

TIF
We still have not seen any bills attacking tax increment financing, which is obviously good news.  However, it is worth noting that in the joint Appropriations/Ways & Means Committee meeting mentioned in the tax credit story, there was a specific mention of the roughly $58 million/year that is backfilled for schools due to the TIF. This leads us to believe we still may see some anti-TIF legislation in the weeks ahead.

The WISE Solution to Water Quality
In the last edition, we broke down for you the three different water quality proposals. At the time, the much larger, more sustainable, and permanent solution, Representative Kaufmann's proposal, was still in drafting. Since then, the bill (HF 597) was introduced by Representative Kaufmann, along with a dozen of his House Republican caucus members (Reps. Heaton, McKean, Bloomingdale, Hinson, Zumbach, Gustafson, Baxter, Rob Taylor, Wills, Jones, Koester, and Lundgren).
 
The "WISE (Water, Infrastructure, Soil for our Economy) Solution" would do the following:
  • Raise the sales tax by 1/8 cent per year over three years
  • Fully fund the Natural Resources and Outdoor Recreation Trust Fund
  • Lower income taxes for every taxpayer by the same amount as is raised through the sales tax increase
  • Convert the sales tax on pressurized water into a water excise tax, and create a drinking water treatment financial assistance program for installing or upgrading drinking water infrastructure and source water protection projects.
  • Require that at least 60 percent of the money deposited in the Natural Resources and Outdoor Recreation Trust Fund be used on research-based water quality initiatives that are part of the Iowa Nutrient Reduction Strategy, have a life expectancy of more than 24 months, and provide for multiple natural resource benefits.
You can find more about the WISE Solution HERE.
Bills Being Tracked for PDI

This is a list of the bills being tracked for PDI and their status at the time of publication.  The online bill list is updated constantly, so if you wish to see the updated bill list, just go to
http://www.ialobby.com/billtracker/pdi/
 
Bill# Title Status
HF203
Primary Road Fund
Summary | Details
Sent to Governor

Allows the state transportation commission to periodically allocate funds from the Primary Road Fund (PRF) to the secondary and municipal road systems in exchange for retaining all or a portion of federal aid road funds that would otherwise be allocated to counties and cities.
HF231
EDA Powers and Programs
Summary | Details
Signed

Addresses Economic Development Authority powers and programs.
HF288
Water Service Taxation
Summary | Details
House Ways & Means Committee

Exempts from the state sales tax the sales price from the sale or furnishing by a water utility of a water service in the state to consumers or users. 
HF291
Collective Bargaining
Summary | Details
Signed

Makes changes to several employment matters involving public employees, including collective bargaining, educator employment matters, personnel records and settlement agreements, and city civil service requirements.
HF295
Minimum Wage
Summary | Details
Senate State Government Committee

Prohibits a county or city from providing for any terms or conditions of employment that exceed or conflict with the requirements of federal or state law relating to a minimum or living wage rate, any form of employment leave, hiring practices, employment benefits, scheduling practices, or other terms or conditions of employment.
HF335
Public Recreational Use Area Tax Credit
Summary | Details
House Ways & Means Committee

Provides a tax credit and other benefits for private land owners who make land and water areas available for public recreational purposes.   
HF403
Confidentiality for Government Volunteers
Summary | Details
House Floor

Makes personal information of government volunteers confidential. 
HF439
Workforce Housing Tax Incentives Program
Summary | Details
House Ways & Means Committee

Increases the maximum dollar amount that may be allocated to the Workforce Housing Tax Incentives Program.
HF478
Property Assessment Appeal Board
Summary | Details
Senate Floor with Companion

Makes changes to the property assessment appeal board.
HF517
Gun Law Changes
Summary | Details
Senate Floor

Makes several provisions related to carrying, possessing, acquiring, and using weapons, including allowing the possessing of pistols and revolvers by individuals under age 14, permitting concealed carry at the State Capitol, and justifiable use of reasonable and deadly force (stand your ground).
HF518
Workers' Compensation
Summary | Details
Senate Floor with Companion

Makes several provisions related to workers' compensation.
HF521
Alcoholic Beverage Control
Summary | Details
House Floor

Makes several changes concerning alcoholic beverage control and matters administered by the Alcoholic Beverages Division of the Department of Commerce.
HF538
Water Quality Programs
Summary | Details
House Floor

Establishes new water quality programs, makes appropriations related to water quality, and creates a state water service excise tax and a related sales tax exemption.
HF555
EDA Programs and Projects
Summary | Details
House Ways & Means Committee

Makes changes to programs and projects administered by the Economic Development Authority.
HF572
IWD Board
Summary | Details
House Floor

Modifies IWD Board membership requirements.
HF575
Bottle Bill Repeal and Replace
Summary | Details
House Ways & Means Committee

Repeals the beverage containers control law and replaces it with new recycling, litter control, and community enhancement programs.
HF592
Homeownership Development Tax Credit
Summary | Details
House Ways & Means Committee

Creates a homeownership development tax credit for taxpayers who make charitable contributions to eligible housing developers or eligible rural housing developers.
HF90
Raceway Facility Sales and Use Tax Rebate
Summary | Details
House Ways & Means Committee

Modifies the sales and use tax rebate to the owner or operator of a raceway facility.
HSB121
Tax Law Administration
Summary | Details
House Floor

Makes changes related to the administration of state tax laws, including the administration of the research activities credit, income taxes, and the flood mitigation program.
HSB184
Eminent Domain
Summary | Details
House Floor

Addresses the use of eminent domain and the procedures and compensation required for the use of eminent domain.
HSB187
State Tax Credits
Summary | Details
House Appropriations Committee

Limits the total amount of certain tax expenditures that may be claimed in a fiscal year, provides for transfers to the taxpayers trust fund, and eliminates the refundability of Iowa tax credits. 
HSB43
Local Option Sales Tax
Summary | Details
House Ways & Means Committee

Makes changes to the process for approving and imposing a the local option sales and services tax.
SF1
Jobs Impact Statements
Summary | Details
House Floor

Requires that every proposed rule under a notice of intended action or publication without notice contain a jobs impact statement outlining the purpose and statutory authority of the rule and analyzes and sets out in detail the impact of the proposed rule on state agencies, local governments, the public, and the regulated entities, including regulated businesses and self-employed individuals affected by the rule.
SF103
Inheritance Tax Repeal
Summary | Details
Senate Ways & Means Committee

Repeals the state inheritance tax and the state qualified use inheritance tax effective July 1, 2017.
SF104
High Quality Jobs Criteria
Summary | Details
Senate Ways & Means Committee

Alters the high quality jobs criteria to no longer allow projects that only have capital investment, but no new job creation. 
SF130
FY17 Deappropriation
Summary | Details
Signed

Deappropriates $117 million for the current fiscal year (FY2017), which ends on June 30, 2017.
SF14
Sales Tax Increase
Summary | Details
Senate Ways & Means Committee

Increases state sales tax rate from 6 percent to 6.375 percent and provides for the transfer of sales tax revenues to the natural resources and outdoor recreation trust fund.
SF16
Wind Energy Conversion Property Tax Division and Allocation
Summary | Details
Senate Ways & Means Committee

Requires property taxes collected from wind energy conversion property located in an urban renewal area be allocated to and, when collected, paid into the funds for the respective taxing districts in the same manner as all other property taxes.
SF167
State Sales and Use Tax
Summary | Details
Senate Ways & Means Committee

Increases the state sales and use tax to 6.375%, and provides for the transfer of sales tax revenues to the natural resources and outdoor recreation trust fund. Amends the transfer of use tax revenues to the SAVE fund to 15.6863%.
SF17
Property Taxes from Wind Energy Conversion
Summary | Details
Senate Ways & Means Committee

Requires property taxes collected from wind energy conversion property located in an urban renewal area be allocated to and, when collected, paid into the funds for the respective taxing districts in the same manner as all other property taxes.
SF176
IEDA Technical Corrections
Summary | Details
Senate Floor

Makes technical corrections to IEDA programs and projects.
SF179
IRS-Bonus Depreciation Provisions
Summary | Details
Senate Ways & Means Committee

Temporarily updates the Code references to the Internal Revenue Code and decouples from certain federal bonus depreciation provisions.
SF228
Certified Suppliers of Anchor Manufacturers
Summary | Details
Senate Ways & Means Committee

Creates an economic development program allowing certified suppliers of anchor manufacturers to make an adjustment to net income for state individual and corporate income tax purposes.
SF309
Individual Income Tax Exclusion
Summary | Details
Senate Ways & Means Committee

 
Excludes certain net capital gains from the individual income tax.
SF38
Individual Income & State Sales and Use Taxes
Summary | Details
Senate Ways & Means Committee

Repeals the individual income tax and increases the state sales and use tax rates.
SF394
Research Activities Tax Credits
Summary | Details
Senate Ways & Means Committee

Limits the aggregate amount of research activities tax credits that may be refunded.
SF456
Des Moines Water Works Restructuring
Summary | Details
Senate Floor

Creates a regional water authority and regional water authority board to assume the transfer of powers, duties, assets, and liabilities of a water utility.
SF482
Water Quality/Wastewater Treatment
Summary | Details
Senate Appropriations Committee

Modifies existing wastewater treatment program, establishes new water quality programs, and creates a water service excise tax and sales tax exemption.
SF488
Workforce Housing Tax Incentives Program
Summary | Details
Senate Floor

Increases the maximum dollar amount that may be allocated to the Workforce Housing Tax Incentives Program.
SF493
Recreational Lake/Water District Bonding Authority
Summary | Details
Senate Floor

Gives combined benefited recreational lake and water quality districts the same power to issue bonds that cities have.
SF82
Inheritance Tax
Summary | Details
Senate Ways & Means Committee

Reduces the state inheritance tax rate over a nine-year period with the tax repealed effective July 1, 2027.
SJR9
General Fund Expenditure Limitation Constitutional Amendment
Summary | Details
House Appropriations Committee

Proposes an amendment to the Iowa Constitution that limits state spending to 99% of revenue estimates, or 104% of the revenue estimates for the current fiscal year (whichever is greater).
SSB1126
Energy Conservation
Summary | Details
Senate State Government Committee

Extends existing energy conservation requirements to residential renovations and repairs.
SSB1141
Targeted Jobs Withholding Credit Pilot Project
Summary | Details
Senate Ways & Means Committee

Extends the targeted jobs withholding credit pilot project by five years.
SSB1155
Endow Iowa Tax Credits
Summary | Details
Senate Ways & Means Committee

Increases the amount of Endow Iowa tax credits that may be authorized by the economic development authority.
SSB1181
Federal Block Grant Appropriations
Summary | Details
Senate Appropriations Committee

Appropriates federal block grants for federal fiscal year 2018 & 2019.
Your Legislative Team
The Advocacy Cooperative | Campbell/Patterson Consulting LLP, PO Box 1403, Des Moines, IA 50131
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