Monday, March 21st will mark the 71st Day of the 100-day scheduled legislative session, a mere four weeks away from target adjournment when legislative per diems end. Granted, the Legislature can (and often does) go over the deadline. However, there is typically an increased pressure to wrap up the session once the last scheduled day arrives.

 

On Wednesday, March 16th, the Revenue Estimating Conference (REC) met to make their predictions about state revenues. The verdict was that revenues for the state are UP slightly when compared to their December predictions - somewhere between $23M and $30M for FY2017, the fiscal year that begins July 1, 2016. Revenues being up means the Legislature is required to use those earlier December predictions (which means the budget "targets" we sent out a few issues ago will be the road map they use). The REC bottom line is that the Legislature and the Governor have about $300 million more they can allocate in this budget than the current fiscal year. A large portion of this increase is already spoken for through built-in increases, and any education funding increase will also take a large bite.

 

With the funnel deadlines reached and the new REC projections announced, the Legislature will likely kick into high gear this week and start to prepare and negotiate budget bills. As the budget bills start their journeys through the legislative process, the number of remaining policy bills will continue to get smaller as leaders in both chambers assess whether to pass certain bills or whether to throw them overboard for the year due to lack of bipartisan and/or bicameral support.

 

School funding, an issue that has been at the center of the legislature's discussion all session, remains unresolved. We keep hearing from different sources that the multiple sides have settled on 2.5% for next year's increase, however a bill to enact that level has yet to start moving through the process. Before the appropriations bills can be settled upon, school funding will need to be addressed (probably this week), since any adjustment in this particular funding item has a dramatic effect on the rest of the budget.

 

One contentious issue that was nailed down this past week was whether or not to update the Iowa tax code to reflect changes in the federal tax code. In the media, this issue is often referred to as "coupling" (meaning coupling with the federal tax code). The Legislature and the Governor were able to reach agreement on a proposal that would ensure $95 million in tax cuts take effect this year. In order to gain agreement, the legislation also clarifies the intent of a sales tax exemption for materials that are used in manufacturing (known as "consumables.") The exemption was enacted by the Governor over the interim using a rule change, but many legislators argued at the time that the change should have been voted upon by the Legislature.