Week 4 Legislative Update

February 2, 2024

This Week, both the House and Senate held subcommittee meetings on the Governor’s proposed Area Education Agencies (AEA’s) legislation. Prior to the hearings, leadership in the House and Senate released a joint statement with Governor Reynolds introducing an amendment to the bill that would allow AEA’s to continue to provide general education and media services. After hearing from members of the public, AEA staff, educators, and lobbyists, the House subcommittee chose to wait on advancing or tabling the legislation, sharing the need to have further internal discussions before moving any proposal forward. The Senate advanced the bill with a 2-1 vote after sharing some additional changes would likely be necessary.

 Governor Reynolds released the following statement on Senate Study Bill 3073:

“From the start, my focus has been on improving special education for Iowa’s students with disabilities. I want to thank the Senate Education subcommittee for their willingness to continue the conversation. The amendment reflects feedback from legislators, parents, teachers, and school superintendents, ensuring that AEAs can continue offering the services they do today. If schools like the services provided by their AEA, they can continue to use them. By allowing schools to control their funding, creating efficiencies in the AEA system, and increasing teacher salaries, more money will be infused into our classrooms, so every student receives the quality education they deserve.” 

The Senate and House considered Religious Freedom Reformation Act proposals, both advanced out of subcommittee and their respective committees. The House also heard from the public on legislation that would remove gender identity as a protected class from the Iowa Civil Rights Act and chose unanimously against moving the legislation forward.

Tax Reform

Senate Republicans released their tax reform proposal this week. Senate Study Bill 3141 would phase down the individual income tax to a flat 3.65% by TY26, lower Iowa’s corporate income tax to 4.9% using the current method adopted 2022, and transition the Tax Relief Fund to a trust fund with revenues generated used to gradually eliminate individual income taxes.

The legislation would accelerate the 2022 individual income reform legislation by reducing the lowest tax bracket to 3.9% in TY24, a flat tax of 3.75 in TY25, and a 3.65% flat tax in TY26.  Governor Reynolds proposal would implement a flat tax rate of 3.65% retroactive to TY24 and then a 3.5% rate in TY25.

Two constitutional amendments would be tied to the Senate’s tax proposal. The first, which was introduced last year but stalled behind other priorities, would require a constitutional amendment raise individual income taxes. In addition, the Senate introduced a second amendment that would add the proposed flat tax rate to Iowa’s constitution. Both amendments would ensure future lawmakers would not be able to reimplement Iowa’s current tax bracket structure or raise income taxes without a 2/3 majority from the public.

House Republicans have not introduced a tax reform proposal yet, but are anticipated to do so in the coming weeks.

Other Bills of Interest:

Major Economic Growth Program (SF 574): IEDA proposed a pilot program last session that would allow the state to offer incentives for large economic development projects. The legislation passed the Senate 45-2 in 2023 and advanced out of a House subcommittee on Wednesday. 

Foreign Land Ownership (SSB 3113): Governor Reynolds released legislation last week that would implement reporting requirements for any agricultural land owned by foreign entities. The Senate advanced the legislation out of subcommittee and committee this week.

E-Verify (HSB 105): Requires employers to utilize the federal E-verify database to confirm any new hires are authorized to work in the US and provides penalties for employers. Members of the subcommittee tabled the legislation after hearing concerns from employers on the efficiency of the database. The Senate advanced a companion bill, SF 108, out of subcommittee last week.

School Start Date (SF 2010): Legislation to modify Iowa’s school start date from August 23 to “no sooner than the first Tuesday following the final day of the Iowa State Fair” was introduced in both the House and Senate. This week the Senate advanced the legislation out of subcommittee. The House advanced a similar bill out of committee. HSB 585 changes the provision to “if August 23 is a weekday other than Monday, the school calendar shall begin no sooner than the Monday immediately preceding August 23”

Temporary Event Alcohol Licenses (HSB 594): Creates a temporary event alcohol license for those currently holding a retail alcohol license, beer permit, or wine permit to sell alcohol at events for on-premise consumption with a $50 fee. The legislation passed unanimously out of subcommittee.

Next week, subcommittees will continue to meet on priority legislation and committees will likely meet more frequently as the first funnel deadline approaches. Legislation must pass out of both subcommittee and committee in the chamber of origin to remain eligible after February 16^th. Appropriation and Ways and Means bills are exempt from this deadline.