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February 25, 2022
2022 Legislative News
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Legislature Passes Historic Tax Cut Package
It was a historic week at the Capitol. First, Governor Kim Reynolds was chosen to give the Republican response to President Biden's State of the Union Address on Tuesday. Legislative leaders wanted to give her something big to showcase during her speech, so they moved quickly to pass the largest tax cut in our state's history yesterday. Here are a few things to know about this tax cut:
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It will reduce state revenues next year by $236 million and by $1.9 billion in 2026 (read more detail here).
- Income taxes will be reduced over five years to a 3.9% flat tax on income. Iowa's tax rates right now are between 4.4-6.5%.
- Businesses would also pay less in taxes, with capital gains also exempted in some situations. While corporate tax rates are reduced, there were several reforms that would reign in refundable business tax credits that have concerned both Democrats and Republicans. Those changes offset some of the cuts; the Research Activities Tax Credit alone will allow the state to retain an extra $45 million that had been paid out to large companies like John Deere.
- Retired Iowans would not pay state taxes on income from their 401(k)s, IRAs, and pensions. Also retired farmers that rent out their farmland will not pay taxes on the money they earn from those rental agreements.
The Des Moines Register reported that a family earning the state's median income of $68,000/year would see their taxes lowered by $563. On the other hand, someone earning more than $1 million a year would pay $66,879 less in taxes. Democrats attempted to amend the bill (House File 2317) to double the earned income tax credit, but it was ruled non-germane ("not relevant") and no vote was taken.
Sen. Dan Dawson (Council Bluffs), the chief sponsor of the bill and chair of the tax committee, said this is the first step toward eliminating the income tax completely. He also said they would keep working on a plan to fund the Natural Resources & Outdoor Recreation Trust Fund, which was created to fund water quality, wildlife, trails, and other outdoor programs. Voters approved a constitutional amendment to use the first 3/8 of any sales tax increase to fund it. Senate Republicans had proposed taking the one-cent local option sales tax statewide to pay for this, but that was dumped from the final tax agreement. As Sen. Dawson said, "As long as we're here, we're not going to be done cutting taxes."
The bill passed 32-16 in the Senate and 61-34 in the House. Four Democrats joined Republicans in voting for the bill: Senator Tony Bisignano (Des Moines), Senator Kevin Kinney (Oxford), Representative Kenan Judge (Waukee), and Representative Steve Hansen (Sioux City). The bill is on its way to the Governor for signature.
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Budget Targets Out Early This Year
Legislators have about $9 billion in state funds to spend in the upcoming budget year (fiscal year 2023), well over the $8.1 billion in spending budgeted for the current year. Usually budget work doesn’t begin until the middle of March, when the Revenue Estimating Conference takes another look at the amount of money the state is collecting. This year, legislators are confident the revenue estimates on March 10 will come in higher than those in December. So it is full steam ahead with budgeting, but to set the stage for the budget, you have to see the full picture.
- The state is collecting $1 billion more than it is spending.
- Iowa ended its last fiscal year with $1.2 billion in unspent funds (“surplus”).
- Iowa’s reserves are full ($800 million).
- There was $1 billion in the Taxpayer Relief Fund, which will grow to nearly $2 billion by the end of June.
Because the state is collecting much more than it is spending - $1 billion more - legislative leaders have made the decision to hold the line on spending and reduce the revenues the state is taking in by cutting income taxes. The impact of tax cuts on the budget could be significant - about half of the money collected last year ($4.25 billion) came from income taxes. Now that the tax cut agreement has been struck, legislators can focus on policy bills and how to spend the remaining funds. Both chambers released their initial budget recommendations, but these will need to be revised based on the $1.9 billion tax cut plan adopted on Thursday.
Senate Budget Targets ($8.2 billion)
- Increase of $77 million (.9%)
- Includes $71.2 million for MH/DS Regions (eliminating all property taxes)
- No breakouts by spending area available.
House Budget Targets ($8.3 billion)
- Increase of $149 million (1.8%)
- Includes $71.2 million for MH/DS Regions (eliminating all property taxes)
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Includes $25 million to help build up home and community based services in response to the US Department of Justice findings earlier this year.
- The chart below shows the breakdown by spending area.
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Most of the budget subcommittees have completed their work for the year and will not meet again until they are ready to adopt their budget plan, but there is a lot of work going on behind the scenes now. Budget decisions are being made, and by the time you see a meeting announcement, the agreement will have been made.
For the most part, the budgets will be status quo with a few increases for things that line up with the Governor’s and leadership priorities (workforce, mental health, educational choice). Unfortunately, the mental health priorities seem to only be targeted at MHIs and inpatient beds (needed but certainly not the array).
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Updates on Bills of Interest
The IPA bill tracker is the best place to look for updates on bills; we update them daily and the bill status box pulls from the Legislature's website twice a day. We have cleared out the Bill Tracker so only those bills surviving the funnel are now "active." All bills failing to make the cut were moved to the "inactive" list, including some that may be technically alive but are for all practical matters dead (like bills sponsored by minority party members).
First Funnel Survivors
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HF736: Medicaid Overpayment/Recoupment: Gives Medicaid (fee for service & MCO) two years to identify a non-fraud overpayment, and another year to collect it via offset or recoupment. DHS is working on an amendment with providers to limit this to just recoupments caused by the eligibility system being out of date.
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HF2167: Autism Definition: Updates definition of autism to match DSM, and defines as mental health condition so parity laws apply. (Passed House 95-0)
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HF2197: Concussion Professionals: Adds neuropsychologists with training in concussion protocols to do school sports concussion assessments. This is IPA's bill, we support.
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HF2246: Provisional Psychologists: Allows a doctoral psychology student to be issued a two-year provisional license during the student’s internship. (Passed House 95-1). Rep. Lohse was the only "no" vote - on to the Senate Human Resources Committee! This is IPA's bill, and a priority (and we support).
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HF2297: Medicaid MCO Regulation: Exempts Iowa Medicaid and its managed care organizations (including hawk-I) from insurance regulation (including mandates), unless legislation specifically requires them to be covered.
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HF2323: Opioid Antagonist Medication Fund: Creates an Opioid Antagonist Medication Fund to assist first responders with the cost of opioid antagonists. Some local governments have said they want to buy fire trucks or make improvements to their stations with opioid settlement funds; this is setting up a structure to ensure the opioid settlement funds are used appropriately.
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HF2386: Psychological Testing Disclosures: Allows the disclosure of "psychological testing materials" to defense counsel (to lawyers not just expert witness). The Senate bill failed to make the funnel, but the House bill moved out of committee. IPA opposes this bill; stay tuned for an action alert on this early next week!
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HF2399: Prior Authorization Reimbursement: Prohibits a utilization review committee from limiting or revoking a prior authorization after the health care service has been provided. (Passed House 97-0; the bill was amended slightly to eliminate utilization reviews of prescriptions from this bill)
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HF2497: Palliative Care: Amends the definition of palliative care and palliative care team. The bill previously only included social workers, but at IPA's request was amended to include psychologists (then other groups had others added as well).
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HF2521 & SF2210: Healthcare Employment Agencies: Requires healthcare employment agencies (like traveling nurses) to register with the Department of Inspections and Appeals (and pay a fee) and prohibits non-compete clauses. The House bill has been through Ways & Means, so is funnel-proof.
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HF2529: Psychiatric Residency Programs: Requires the University of Iowa Hospitals and Clinics to administer a psychiatric residency program jointly with Cherokee and Independence mental health institutes, Oakdale Classification Center, and the State Resource Centers. The program would add 12 new residencies.
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HSB647: Medical Privacy and Freedom Act: Strikes prohibitions against businesses requiring proof of COVID immunizations passed in the special session, and prohibits a business, school, organization, or governmental agency from requiring any type of immunization. Far reaching bill, that has still not yet been redrafted with a new House File number (which is intentional I believe; the bill isn't going to become law).
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SF2314: MHDS Cash Reserves: Increases the amount of cash reserves a mental health and disability services region may have before payments are reduced. This is in Ways & Means, so is funnel proof (subcommittee on 3/1 at Noon)
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SF2359: Technology Impact Study/Cognition: Requires the Department of Education to convene a workgroup to study the impact of technology on learning, cognition, and recommend best practices by December 2022.
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SF2361 & HF 2527: Governor's Workforce & Regulatory Bill: There is a lot of miscellaneous things in this bill (county zoning, work-based learning, health care loan repayment cleanup to allow part-time and expand to neurology, professional licensing reform for military spouses, EMS certificates for National Guard, lifetime military hunting and fishing licenses, military service property tax credit increase, temporary licenses for insurance producers, state building code updates).
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