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POLICY PERSPECTIVES | June 4, 2018
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Post - Legislative Session Update
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With a number of pen strokes this past Friday, June 1st, the Governor officially brought the 2018 session of the 87th Iowa General Assembly to a close. The Legislature completed their work for the year by adjourning "sine die" at 5:11 pm (Senate) and 5:25 pm (House) on May 5, 2018. (Sine die means "without a day" - meaning the next meeting will be the 2nd Monday in January, as prescribed in the Iowa Constitution).
After the Legislature's closedown, the Governor has 30 days to take action on any bills sent to her at the end of session. On Friday, she completed that by taking action on the last 12 bills remaining from the session, signing eight, vetoing one, and using a line-item veto on three.
Primary Election - June 5!!
The Governor and the Legislature have now shifted their focus to this Tuesday's primary election, where a number of policymakers are waiting to see which opponent they will face in the November 6th General Election. Included in that list is Governor Reynolds who will learn which of five Democrats she will face on the General Election ballot. There is also a crowded five-person primary in the race for the Republican nomination for Secretary of Agriculture.
Be sure to vote in your primary election on Tuesday! For information about the primary (and results after polls close), just go to
For a complete list of primary candidates that will appear on the ballots around the State, click on THIS LINK to download a PDF list.
FY 2019 Budget
The Fiscal Year (FY) 2019 budget that was ultimately enacted by the Legislature and the Governor goes into effect on July 1, 2018, the official start of the State's fiscal year. Their budget spends a total of $7.48 billion from the General Fund, according the House Republican staff analysis.
The FY 2019 budget contains an increase of $132.8 million over the FY 2018 budget. Of the $7.48 billion allocated in the FY 2019 budget, $7.3671 billion is spread between the budgets for the various state departments and agencies, and the remaining $113.1 million is used to complete the repayment of $131 million that was borrowed from the Cash Reserve Fund in 2017. With this move, the House Republican caucus is saying the
Iowa's two reserve funds - the Cash Reserve Fund and Economic Emergency Fund - will be filled to the statutory maximum amount in Fiscal Year 2019 budget.
Tax Reform Bill
The biggest hold-up to the close down of the 2018 Legislative session was debate between the House, Senate and Governor about the size and the contents of the tax reform bill they were determined to pass prior to adjournment. Senate File 2417 became the compromise bill and was one of the last bills of the 2018 session, passing with only Republican votes. It was signed into law by Governor Reynolds at a ceremony in Hiawatha on May 30, 2018.
You will undoubtedly see more information and analysis on SF 2417 in the media and elsewhere in the days and weeks ahead, especially as the two major parties begin their fall campaigns. In the mean time, below is the brief analysis of SF 2417 that we prepared for the Campbell/Patterson Consulting bill tracker.
This bill makes a number of changes to income taxes, sales and use taxes and other taxes. A FISCAL ONLY summary of the final version of the tax bill, prepared by the non-partisan Legislative Services Agency can be found HERE. The bill contains triggers that restrict some of the tax reductions from occurring unless the State is meeting certain financial milestones.
Corporate Income Tax
- Cuts the number of income tax brackets from 4 down to 3
- Cuts the top tax rate from 12% down to 9.8%
- Eliminates Federal Deductibility in Tax Year 2019
- Eliminates Corporate AMT in 2021
- In Tax Year 2021, rates will be 5.5% on up to $100,000, 9.0% on $100,000 to $250,000, and 9.8% on above $250,000.
- Qualified Business Income (QBI) will be 25% in Tax year 2019, 50% in 2021, 75% in 2022, and 100% in 2023
- Raises Section 179 limit to $100k/$400k in 2019, and fully couples with deduction in 2020
Individual Income Taxes
- Cuts the number of income tax brackets from 9 down to 4
- Cuts the top tax rate from 8.53% down to 6.5%
- Eliminates federal deductibility and AMT in tax year 2023
- Raises Section 179 limit to $70k/$28k in 2018, $100k/$400k in 2019, and fully couples with deduction in 2020
Online Sales and Services
Updates Iowa Code with regard to sales tax to allow for the taxation of online good and services, including software, games and other products, subscription services such as Netflix, taxi and ride services, etc.
Local Option Sales Tax (LOST)
In counties that do not already have the LOST, the bill allows communities to individually pass the LOST without requiring continent communities to also pass it.
Tax Credits
- Extends the Innovation Fund from 6/30/2018 to 6/30/2023
- Extends the Targeted Jobs Withholding Tax Credit Program by 1 year (to 6/30/2019)
- Places some limitations on who is eligible for the Research Activities Credit
- Repeals the Geothermal Tax Credit
- Provides a mechanism for the review of ALL tax credit programs in Iowa Code during the 2019 legislative interim with the intent being that changes be suggested to the Legislature for enactment during the 2020 session
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Other PDI Issues
With a tumultuous budget year that included over $250 million in mid-year cuts, it was a major victory to escape with anything close to status quo. The IEDA Admin budget came through roughly at status quo
(basically gaining back the reduction that occurred as a result of the deappropriation bills). However, the High Quality Jobs (HQJ) program is coming in lower ($13.65 million) than where is was originally at the end of last session ($15.9 million). At one point in the session, it looked like the HQJ program would be cut much more than that, but some scrambling by PDI and Iowa Chamber Alliance lobbyists helped bump it back up to $13.65 million. The bill also funds the
Regents' economic development programs ($8.7 million total) and STEM scholarships ($1 million) at the same level as last year.
In the Education budget bill (SF 2415), there was no change in the
funding for loans from the Skilled Workforce Shortage Grant ($5 million), Workforce Training & Economic Development Funds ($15.1 million), Adult Literacy in the Workforce ($5.1 million), PACE and Regional Sectors ($5 million), Gap Tuition Assistance ($2 million), Work-Based Intermediate Network ($1.5 million), and workforce prep. outcomes reporting ($200,000). The bill did cut ACE Infrastructure by $1 million (total $5 million).
Infrastructure Budget
The Rebuild Iowa's Infrastructure Fund (RIIF) Budget bill (SF 2414) contains level funding for water quality initiatives ($5.2 million) agricultural drainage wells ($1.9 million), State Park Infrastructure ($2 million), Lake Restoration ($9.6 million), Great Places ($1 million), CAT grants ($5 million), railroad revolving loan fund ($1 million), and recreational trails ($1 million). The bill restores $500,000 for low head dam safety and water trails (half of what was available in FY17, no appropriation in FY18). The bill also funds broadband grants for the first time since authorized in 2015 ($1.3 million).
Tax Increment Financing (TIF)
PDI Lobbyists and others at the Capitol were able to again fight off the passage of any legislation that would negatively affect TIF. We were concerned that a piece could end up stuffed into the large tax bill, but Senator Feenstra was able to hold the line on that. Feenstra chairs the Senate Ways & Means Committee, led the Senate's tax reform bill efforts, and is a supporter of TIF, having served in local government prior to his arrival in the Senate.
As we gear up for the next year, please take some time to reach out to legislators and candidates in your area about TIF. Take them out to tour some areas you are working on and let them know how valuable TIF is to your efforts. Most importantly, make them aware that every time anti-TIF legislation is even introduced, it is used against Iowa by states with which we compete.
Property Tax Backfill
In a bit of great news, as you all know from reading previous issues, PDI fought side-by-side with the Iowa League of Cities, the Iowa State Association of Counties (ISAC) and others all session to try to convince legislators to NOT cut the property tax backfill that is provided to local governments. For most of the session, the message being received was that the backfill would be cut, so we did our best to limit the damage by pushing for longer phase-outs and to not start until a year out.
As the session wound down and legislators winnowed down their priority issues, legislators no longer had an appetite to go after the backfill due in no small part to your advocacy in support of our efforts at the Capitol. In the end, the session ended without any negative impact on the backfill. Going forward, be sure to keep talking to legislators about the importance of healthy local governments, as this issue has definitely not gone away.
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Signed Bills Tracked for PDI
Below you will find a final list of the signed bills we tracked for you this year. If you are looking for a bill that may not have made it through the process, you can find those by visiting the bill tracker LINK, changing the search status from "Active" to either "Inactive" of "All", and clicking the "Search Bills" button. Additionally, a complete list of ALL bills that Governor Reynold signed into law this year can be found HERE.
| HF2253 |
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Signed |
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Makes changes to competitive bidding requirements for construction on properties that certain government entities will lease or lease-purchase.
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| HF2321 |
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Signed |
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Requires a criminal history check for department of workforce development applicants and makes changes to unemployment insurance requirements.
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| HF2343 |
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Signed |
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Prohibits a state agency from implementing or enforcing any standard, requirement, or threshold unless explicitly required or permitted by a state statute or a federal statute or regulation.
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| HF2440 |
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Signed |
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Makes changes to existing water quality programs.
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| HF2458 |
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Signed |
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Creates the Future Ready Iowa Act.
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| HF2491 |
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Signed |
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Appropriates a total of $39.4 million, which restores the deappropriation made earlier this year ($312,0610) and increases funding by $587,939. Appropriates $90.4 million from other funds, which is a net increase of $10,000.
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| HF2493 |
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Signed |
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Spends $40.2 million on cultural, historic, workforce, and economic development programs, which restores the deappropriations from the general fund, adds another $1.8 million (5% increase), and partially restores funding taken from the High Quality Jobs Program.
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| HF2494 |
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Signed |
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Appropriates $380.8 million to the Department of Transportation from the Road Use Tax Fund and Primary Road Fund (this is a decrease of $5.8 million).
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| HF2500 |
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Signed |
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Allows EDA to extend the deadline to complete a housing project under the workforce housing tax incentives program.
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| HF2502 |
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Signed / Line-Item Vetoed |
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The annual budget bill that changes automatic, or "standing," appropriations. Reduces these automatic appropriations by $29.2 million (but this is still $71.8 million more in spending than the current fiscal year).
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| SF2117 |
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Signed |
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Cuts the current fiscal year (FY18) budget by $23.3 million and transfers $10 million from the Skilled Worker & Job Creation Fund (which was to be used to provide tax credits under the High Quality Jobs Program). This reduces the High Quality Jobs tax credit by 63% (from $15.9 million to $5.9 million) and cuts the FY18 budget overall by .3%.
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| SF2311 |
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Signed |
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Modifies various provisions relating to public utilities.
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| SF2353 |
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Signed |
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Makes changes to the state and local workforce development boards.
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| SF2388 |
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Signed |
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Changes the central assessment process for telegraph and telephone companies.
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| SF2407 |
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Signed |
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Makes changes to sales tax rebates for construction at certain raceway facilities.
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| SF2414 |
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Signed |
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Appropriates $115.9 million from the Rebuild Iowa Infrastructure Fund (gambling dollars) for fiscal year 2018 - $17 million increase. Also appropriates $45.8 million in FY2020, $35 million in FY2021-2023, and $15 million in FY2024.
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| SF2415 |
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Signed |
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Appropriates $912.6 million for state universities, Department for the Blind, and educational programs. This restores the deappropriation made earlier this year ($4,058,675) and adds another $12.5 million (total increase 1.5%).
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| SF2417 |
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Signed |
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This bill makes a number of changes to income taxes, sales and use taxes and other taxes. A FISCAL summary of the final version of the tax bill, prepared by the non-partisan Legislative Services Agency can be found
HERE.
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| SF512 |
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Signed |
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Modifies existing wastewater treatment program, establishes new water quality programs, and creates a water service excise tax and sales tax exemption.
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Your Legislative Team
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Lobbyists:
Legislative Committee Co-Chairs:
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STAY CONNECTED
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