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In final stretch, Iowa lawmakers turn attention to state budget, promised property tax cuts
House and Senate Republicans differ on budget, tax, education, health bills
Tom BartonCaleb McCullough, Gazette-Lee Des Moines Bureau
Mar. 31, 2023 4:45 pm, Updated: Mar. 31, 2023 5:10 pm
DES MOINES — The funnels have come and gone.
The countdown to adjournment has officially begun.
Iowa lawmakers have spent the past several weeks passing dozens of bills out of the House and Senate — from contentious Republican priorities like private school savings accounts and gender-affirming care bans for minors, to bipartisan consumer data protections and rural hospital funding.
Friday marked the second “funnel” deadline, meaning most bills needed to be passed out of one chamber and a committee in the other chamber to remain viable. There are some exceptions, and dozens of bills have been placed on the “unfinished business” calendar making them eligible for consideration.
In the final stretch of the legislative session, Republican leaders are turning their attention to creating the fiscal 2024 budget, delivering promised property tax reductions and working out key bills on education, child labor and health care.
Iowa House Republicans are proposing spending $8.58 billion in the upcoming budget year, an increase of about 4.5 percent from the current budget year.
The proposal is $92.5 million more than the budgets proposed by Gov. Kim Reynolds and Republican Senate leaders.
House Speaker Pat Grassley, R-New Hartford, said House Republicans’ budget targets take into account measures already signed into law this session that have added additional costs not factored into the governor’s budget proposal published in January.
That includes a 3 percent increase in state funding for K-12 public schools and a new law adjusting an erroneous property tax formula, which added nearly $45 million more to state income.
The budget target also includes another $50 million of priorities House Republicans plan to push forward yet this session. Those, Grassley told reporters Thursday, include increasing mental health and nursing home reimbursement rates and funding a new Iowa Workforce Grant and Incentive Program administered by the state’s College Student Aid Commission.
The program would provide grants and scholarships to students who enroll in more high-demand majors at Iowa’s public universities.
Current Medicaid reimbursement rates are based on nursing home costs in 2018, before the COVID-19 pandemic. Raising that rate could help address rising costs and workforce issues at nursing homes across the state, where more than a dozen have been shuttered because of inflation and the COVID-19 pandemic.
According to the Center for Medicare Advocacy, 17 Iowa nursing homes closed in 2022.
A state revenue panel estimates Iowa will collect roughly $9.65 billion in the next budget year. By state law, lawmakers can’t spend more than 99 percent of that estimate.
Republicans have consistently spent less than that 99 percent in the past several years, and Grassley said the budget proposal reflects Republican goals of spending about 89 percent of projected revenue.
House Republicans also are working on a bill to reduce property taxes, but Grassley said any hit to the state budget from that bill would be covered by the taxpayer relief fund, which is expected to have a balance of about $2.7 billion next year.
“We’re not very close at this point” to reaching agreement with the Senate on the budget, Grassley said.
Competing legislation is floating between the Senate and the House intended to cut property taxes for Iowans.
House File 1 would lower the property tax levy for state school funding; limit annual property assessment increases to 3 percent; and require school districts to put down 10 percent of a project’s cost and notify property taxpayers before holding an election to borrow money for a building project.
Under Senate File 356, if total taxable value increases over a set percentage, local governments’ levy rates would be decreased. It also would combine several revenue streams into a general levy for both cities and counties.
Senate File 550, would expand a number of property tax credits like the homestead, elderly and military service credits and limit assessment values for some commercial properties.
The bill also would overhaul the state’s sales tax, bumping it up from 6 percent to 7 percent statewide, while eliminating the local-option, 1 percent sales tax that most local governments have in place.
Sen. Dan Dawson, a Council Bluffs Republican who chairs the Senate tax policy committee, said during a Thursday taping of “Iowa Press” that he believes “something will get done this session.”
“And while we have different bills, we hit the same topics,” Dawson said of House and Senate proposals.
He said many Iowa homeowners are experiencing sticker shock after being mailed notices over the past week of their property values. Home sale prices have led to “unprecedented increases in real estate values in the last two to three years,” Scott County Assessor Tom McManus recently told the Quad-City Times.
On average, residential properties have increased in value by 20 percent over the past two years, Dawson said.
"There is a legitimate fear out there people can actually afford this assessment spike,“ Dawson said. ”And that is probably the fault in our system. It is not built to withstand some of these massive assessment, these real estate cycles, that we've gone through. And that is really where the crux of what we're trying to address.“
Grassley said leadership has had “productive meetings” with members of the House GOP caucus on property tax reform, and he expects to see the House bill progress next week.
“This is about providing certainty for the taxpayer,” Grassley said. “That is what our bill all along the goals has been — to provide relief but also provide certainty. And I’m hopeful that we’re able to find some resolution, because I think that is a pretty common theme we all want to try to achieve.”
Senate Majority Leader Jack Whitver, R-Grimes, agreed.
“Looking at the formula and the rollbacks and just making sure that cities are only taxing what they need to, and not just collecting increased assessment value just for the sake of collecting it,” Whitver told Radio Iowa on Thursday.
“What we want to focus on at the end of the day is, what is your actual property tax bill? Period. That’s what we care about, and that’s what we need to be working towards.”
Democrats have said they are open to supporting legislation lowering property taxes, but they want to make sure it offers relief to middle-class taxpayers and does not limit the ability of local governments to fund law enforcement, emergency services and quality of life initiatives and other local services Iowans rely on.
“We understand that that is a top issue for many voters, and we hear that at the doors as well,” said Sen. Pam Jochum, a Dubuque Democrat and ranking member of the Senate tax policy committee, who joined Dawson this week on “Iowa Press.”
Jochum said she believes there is “room for us to find some common ground.”
“I just want to make sure that when we start tinkering and tweaking with a massive complex system that we're doing it very prudently and very thoughtfully, that we don't end up shifting the burden around,” she said.
“I know cities and counties are very distrustful, quite frankly, of state government because we have always promised backfills and other things, and we have changed that property tax system only to renege on that promise down the road, and it leaves them holding the bag. So, we have a trust issue that we need to work on, too, with our cities and our counties and our local taxpayers.”
The Senate and House will need to agree on the details of an expansive education bill that would regulate school libraries and address LGBTQ issues and transparency in schools.
Among other things, Senate File 496 would bar instruction on gender identity and sexual orientation at public schools in kindergarten through sixth grade, ban any book with graphic depictions of sex acts from school libraries, and require parents’ permission for educators to refer to a student by a different name or set of pronouns.
Parents also could request a list of educational materials used in classrooms and the school library, and schools would need to put their library catalog online.
In committee, the House tacked on several other bills it had already passed in an attempt to get those bills through the Senate. While much of the bill is the same as the Senate version, House Education Committee Chair Skyler Wheeler said negotiations around final passage are not done.
A plan to direct $2 million to a program supporting expecting parents and discouraging abortion and fund other maternal health care projects remains to be settled with proposals in both chambers.
Senate File 324 and House File 427 have some differences but are based on a bill proposed at the beginning of the session by the governor. The bills would boost funding for the More Options for Maternal Support program, a program of the Department of Health and Human Services that funds crisis pregnancy centers — facilities that provide pregnancy support and services and discourage abortions.
They would also fund health care grants, a family medicine obstetrics fellowship program and resources for adoption and Iowans in foster care. The Senate version includes paid family leave for state employees.
A section that would allow birth control to be dispensed without a prescription remains in the House bill, but similar language also advanced out of the funnel under a separate bill.
Both chambers passed the maternal health bills out of committees in February, but neither chamber has passed the bill. Since the bills would create new spending, the bills are not subject to the funnel and remain eligible for consideration.
The Gazette’s Erin Murphy and Sarah Watson of the Quad-City Times contributed reporting.
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