Week Five of the state legislative session is in the books. You may have seen reports in the media on SF 181, a bill to fix the residential rollback calculation from an error that occurred at the Dept of Revenue last Fall. The bill is now poised for House debate as early as today, but more likely Tuesday. Efforts to have the bill amended to provide either an extra year before implementation or have the State commit to backfilling local governments for one year have come up short. As previously reported, the bill will eliminate $437,000 of revenue owed in FY 24 to the City of Marion.

Schools will see a 3-percent increase this year in Supplemental State Aid, thanks to legislation (SF 192) that was signed into law by the Governor this past Tuesday.  This is the largest percentage increase since a 4 percent bump in Fiscal Year (FY) 2015. Increases since that year have ranged from 1 percent to 2.5 percent every year.

Another key priority of the Governor’s, Medical Malpractice Tort Reform (HF 161), passed both chambers this past Wednesday. The bill would limit the amount of non-economic damages for medical malpractice claims to $2 million for causes of action involving a hospital and $1 million for all other causes of action. The Governor is expected to sign the bill into law this week, most likely on Thursday at a bill signing event.

Another aspect of Tort Reform the Legislature has sought to see implemented this year is to provide liability protection for trucking companies, another initiative that failed to garner 51 votes in the Iowa House last year. This year’s bill, HF201/SF228, would place a $1 million cap on noneconomic damages against a trucking company in civil cases involving personal injury or death. Both bills have passed committee in their respective chamber and can be debated at any time.

Government Reorganization is a key piece of Governor Reynold’s legislative agenda for this session. According to her office, this initiative is a culmination of input and research that has been done looking at other states and trying to find efficiencies that would better fit Iowa. The result is a 1569-page bill, SSB 1123 (Link), that aims to accomplish that goal. The House has a similar bill, HSB 126 (Link), that is one page shorter because it does not include the Senate’s Division on Confirmation of Appointments.

The two bills hit on all parts of state government and are being handled in each chamber with multiple subcommittees focused on different sections of the bill. Amy Campbell reviewed the Senate bill and prepared a summary that you can review HERE. Additionally, the Governor’s Office has two handouts about the reorganization effort that you can view HERE and HERE.

Tax Reform Out For Discussion Early

Typically, the Legislature holds off on discussing tax reform until the latter part of the session. This year, the Legislature will likely have the rollback recalculation bill (SF 181 discussed above) signed into law by the end of this week, and they are introducing some major tax reform bills that are garnering a lot of attention.

SSB 1124 (Link) is a new property tax limitation bill that would make a number of changes to the property tax system in Iowa including the following:

• Create a new Combined General Fund Levy (CGFL) that would replace a number of other city and county property tax levies. The process for determining the CGFL would be connected to assessment growth, and a growth limitation would be applied in subsequent years. The Iowa League of Cities has created a webpage to help cities try to determine their specific calculations; you can view that page HERE. 
• Would automatically reduce the new levy rates if taxable values exceed 102.5% of the previous year, but would allow rates to be increased by the city or county up to 103.25% of the previous year’s amount.
• Reduces population-based thresholds for bonding by 30 percent and makes other bonding changes.
• Adds new reporting requirements for Annual Financial Reports, including a list of bonds, notes, and obligations issued as well as project or purpose of the issuance and whether approved by election of subject to petition for election.

There is a subcommittee meeting for SSB 1124 scheduled for this Tuesday at 3:45pm

SSB 1125 (Link) is a far-reaching tax bill that makes changes to the state sales tax, the local option sales tax (LOST), tax increment financing, and a number of other credits and exemptions. The bill includes the following provisions:

• Increases the state sales tax from 6% to 7%, and simultaneously eliminates the LOST. The goal is to keep most taxpayers at the same rate; the only people seeing a tax increase would be those living in one of the few areas of the State that don’t have the LOST. The bill intends to distribute these new funds back to local cities and counties in the same amount and to be used in the same manner as that local government indicated when it was approved by their local taxpayers.
• Triggers state funds in the amount of 3/8 of one cent to start flowing into the Natural Resources and Outdoor Recreation Trust Fund. The bill also adds two new provisions to the allocation formula for the Trust Fund – an allocation for construction, maintenance, and expansion of roads under the jurisdiction of the Dept. of Natural Resources (DNR), and an allocation to go toward the salaries and employee benefits paid to conservation officers, park rangers or park managers within the DNR.
• Deposits revenues from the water service tax into the general fund. Right now, half of those funds go toward water quality, but would be more than replaced by the funds flowing into the Natural Resources and Outdoor Recreation Trust Fund for these purposes.
• Phases out the homestead property tax credit and replaces it with a homestead property tax exemption that would be phased in and then set at $10,000 beginning in 2027. The cost would cease to be covered by the State. A similar transition would take place for the Veterans Property Tax Credit.
• Prevents the inclusion of the $5.40 school foundation levy in TIF projects for wind turbines.
• Prohibits residential property from receiving urban revitalization tax exemptions after July 1, 2024, and prohibits commercial property from doing so unless the owner and the local government enter into a written agreement specifying the minimum value until the termination date under the agreement.

Follow these and other bills tracked by Marion Economic Development & Professional Developers of Iowa by using the Billtracker tool at https://www.ialobby.com/billtracker/pdi.