End near for Iowa Legislature, but agreement still needed on major issues

After 14 weeks, the work product of the 2011 Iowa Legislature is starting to emerge, perhaps in time for lawmakers to adjourn on schedule April 29.

“There are some pieces that have to fall into place pretty much by the middle of next week, and if that happens, we'll have a shot at getting out of here by April 29,” House Speaker Kraig Paulsen predicted Thursday, April 14. If not, “then I think it starts to slip away.”

One of those big pieces fell into place later that day when a House-Senate conference committee reached an agreement on Senate File 209 that includes tax relief, couples the Iowa tax code with the federal code, pays attorneys who served indigent clients and supplemental appropriations for corrections and mental health.

“I think the idea of sort of an informal agreement on SF 209 helps to move everything forward,” Senate Appropriations Committee Chairman Bob Dvorsky, D-Coralville, said.

His counterpart, House Appropriations Committee Chairman Scott Raecker, R-Urbandale, agreed the conference committee agreement “sets a road map that the House and the Senate can come together and work out their differences.

Among those differences are most of the budget bills and, perhaps, more difficult, an agreement between the Democratic-controlled Senate and the Republican governor on two-year budgeting.

Senate Democrats have, so far, rejected that approach, which the governor says will make state budget more stable.

“If this is about a better budgeting process and practice, we're very open to that,” Senate Majority Leader Mike Gronstal, D-Council Bluffs, said. “If this is purely and simply about a power grab, we're not in favor.”

House Republicans have been sending two-year budgets to the Senate, but Paulsen said some of his caucus members have concerns about two-year budgeting.

“The concern is that, one, it gives more time for estimates to be less accurate,” Paulsen said, referring to the Revenue Estimating Conference projections on which budgets are built. House Republicans have proposed not bumping up against the statutory 99 percent spending limitation in the second year of the budget “and go back in and fill in the gaps in the following year.”

Another stumbling block on the road to adjournment is allowable growth, the base state aid for K-12 schools. Democrats have proposed a 2 percent increase. Republicans, including the governor, are at zero growth.

“Clearly we have enough resources to do better than zero for our kids,” Gronstal said. The state will have $300 million over and above the reserve accounts at the end of the current fiscal year, he predicted. “We can afford $65 million for next generation.”

Paulsen thinks it's likely that if there is a compromise on allowable growth it will come at the end of the session.

Based on Gronstal's comments, “It's part of the shutdown game,” Paulsen said, “It's part of the end discussions.”

Commercial property tax relief may dominate the discussion in the final weeks. The Senate approved a plan that when fully funded would provide $200 million in property tax relief for commercial property owners. The plan calls for a $50 million each year that state revenues grow by at least 4 percent and would have no financial impact on local governments.

In the first year, the commercial property tax credit would be worth approximately $600 for a $30,000 property. When the Business Property Tax Relief Fund is fully funded, the tax credit would be worth about $4,029 for $200,000 property.

To pay for this permanent tax break, Democrats would create a Business Property Tax Relief Fund with an annual appropriation of $50 million beginning July 1, 2012. The appropriation would increase by an additional $50 million each year that state revenues grow by at least 4 percent to reach the permanent level of $200 million in tax credits per year.

Gronstal called the plan “historic.” Senate Republicans called it “wimpy” after the majority party refused to debate their alternative. House Republicans and Branstad also have commercial property tax relief plans.