DES MOINES — Republicans began work Tuesday on a $7.85 billion state budget proposal for next fiscal year that they called a “status quo” spending plan for much of state government while providing more state money to K-12 school and Medicaid.
However, progress on crafting the general fund budget was put on hold Tuesday evening when the House Appropriations Committee adjourned until Wednesday morning. The committee Republicans and Democrats went into separate closed-door meetings to discuss the budget bill, House Study Bill 710. Chairman Gary Mohr, R-Bettendorf, said Democrats indicated they needed time to develop amendments, and it was agreed to adjourn until morning.
Republicans — who control the House, Senate and Governor’s Office — have not reached an agreement on the budget. However, Senate Majority Leader Jack Whitver, R-Ankeny, said the majority party is having “productive discussions.”
“As soon as that agreement is reached, the Senate will pursue an end to the legislative session,” he added.
Lawmakers returned to the Capitol last week after suspending their session mid-March because of the coronavirus. Before the session resumed, a state panel of revenue forecasters told lawmakers the pandemic had lowered state revenue projections for fiscal 2021 by $360 million.
During a television interview last week, House Speaker Pat Grassley, R-New Hartford, said this year’s budget deliberations “will be difficult to get through, but we can manage it.”
According to a news release issued Tuesday, House Republicans say they plan to maintain most funding for state budget areas at current fiscal year levels. After making some supplemental appropriations earlier this session, the state’s current budget stands at $7.752 billion through June 30.
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However, they indicated Republicans plan to maintain the 2.3 percent increase of nearly $100 million in state aid to K-12 schools for fiscal year beginning July 1 that was approved earlier in the session.
The House GOP spending plan of $7.85 billion in the fiscal year beginning July 1 provides about $1.516 billion for Medicaid — which is $56 million above the projected need set in late May. The Hawk-i children’s insurance program also would get increased funding resulting from changes in federal matching funds for that program, and funding for the state institution in Eldora would be raised in order to maintain on-campus programs that were funded last year with one-time sources, according to House Republicans.
Given the negative effect the coronavirus pandemic has had on the Iowa economy, a spokesman for the state Board of Regents — which oversees Iowa’s three state universities and two special schools — expressed appreciation for House Republicans’ status quo approach.
Last fall, the regents asked lawmakers to increase their campuses’ general fund appropriations by $18 million — giving a $7 million bump to the University of Iowa and Iowa State University and a $4 million increase to University of Northern Iowa.
Gov. Kim Reynolds’ budget proposal in January recommended 3 percent more general education support for UI, ISU, and UNI — amounting to $6.7 million more for UI, $5.3 million more for ISU, and $3 million more for UNI, or less than what they asked.
Per a previously approved five-year tuition model, lower-than-requested state appropriations would have prompted regents to raise tuition rates above a 3 percent base increase — specifically tying tuition and fees to lawmaker funding. But the board this month opted instead to freeze tuition rates — at least for the fall — in light of the COVID-19 pandemic and the financial impact it’s having on many students and families.
On Tuesday, the House Republican budget plan called for state funding hikes at Iowa special schools in Vinton and Council Bluffs but kept the regents’ overall appropriations flat for fiscal 2021.
“During these challenging economic times, we appreciate the House proposing to fund the regent universities at current levels for FY21, with an increase for the special schools,” said regents’ spokesman Josh Lehman. “We will continue to work with the Legislature and governor’s office as the budget process moves forward.”
Tax code changes
Also Tuesday, the House Ways and Means Committee approved HSB 696, a Department of Revenue bill that would make several changes to the tax code. Among them was a sales tax exemption for nonprofit food banks, treating income from an Iowa corporation’s foreign subsidiary the same as a domestic subsidiary and creating of a penalty for people who owe no taxes, but fail to file the required returns. The penalty now is 10 percent of the amount due, which means there is no penalty in those cases.
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The bill also would raise the cap on the student tuition organization tax credit from $15 million to $20 million over time if 90 percent of the credit is utilized. The change would be delayed until calendar year 2022.
Vanessa Miller of The Gazette contributed to this story
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