|
|
2011 Iowa Legislative Session Overview |
| Posted: July 18, 2011 |
2011 Iowa Legislative Session Overview
Provided by the Iowa Chamber Alliance
June 30th marked the 172nd day and the end of the 2011 Session of the 84th General Assembly of Iowa – the third longest in Iowa history. The session adjourned sine die with just over eight hours to spare before the end of the fiscal year, averting a state government shutdown. The last week of June saw significant motion, leading to a just-in-time completion of budget bills before the end of the fiscal year.
The session was marked with many interesting characteristics, among which three are perhaps most noteworthy:
- The Republican controlled House of Representatives had a steadfast zeal for reducing state government spending and the scope of government programs.
- The Democratic controlled Senate stood strong for promoting education spending and framing tax and regulatory issues as a “big vs. small” and “Main Street vs. Wall Street.”
- Newly elected Governor Terry Branstad, beginning his fifth four-year term in office championed two-year budgeting, fiscal restraint and economic growth policies, including property tax reform.
Overall Session Highlights:
Government Spending/Fiscal Restraint:
A bipartisan appetite for spending reductions and fiscal restraint defined the 2011 Session, though this narrative was driven primarily by the House, which acted consistently and passionately to reduce government spending in nearly every area of the budget. The House started the session with HF 45, a broad-reaching “de-appropriation” bill that reduced current year (FY 2010-11) spending. Only a few elements of this bill were agreed to by the Senate, but it did set the tone for spending for the session.
The Senate’s posture was open to some spending reductions, but fiercely defending increased spending in education. The downward pressure on spending was felt across the spectrum of appropriation bills. Much more scrutiny was brought to program spending. Most notably:
Reduced Spending. State government spending was limited to 96-97% of revenues with significantly less use of “one-time” funds to pay for programs and aligning ongoing spending with ongoing revenue sources.
Biennial Budgeting. For the first time in three decades, at Governor Branstad’s insistence, the Legislature passed a two-year budget. While this process needs to be further refined, it did force discussion of spending trajectories beyond the coming fiscal year.
Education Funding. Education was arguably the most publicly discussed program during the session. Democrats seized upon reductions in education spending as a go-to message point. In the end, FY 2011-12 was allotted 0% allowable growth, while 2% allowable growth was passed for FY 2012-13.
Pre-School. Pre-School was discussed early in the session and the House voted to eliminate the program. Governor Branstad offered a voucher-based compromise proposal. In the end, the pre-school program survived, though the funding level for the program was reduced.
Legislative Initiatives:
Iowa Partnership for Economic Progress (HF 590). One of the Governor’s top priorities for 2011 was the creation of a new structure for Iowa’s economic development efforts. The new entity, referred to as the Iowa Partnership for Economic Progress, will replace the current Iowa Department of Economic Development with a public entity and private not-for-profit designed to encourage more private-sector involvement in economic development.
Property Tax Reform (SF 522). The issue of property tax reform was hotly debated in 2011, but ultimately compromise between two competing methods to achieve relief was not reached and the issue died for the year.
The House, under the leadership of Rep. Tom Sands, passed a comprehensive property tax reform proposal that would have rolled back commercial and industrial property taxes to 60% of assessed value over five years. The House also passed property tax relief for all classes of property taxpayers though additional state funding of the school foundation aid formula. Also in the House proposal were measures designed to limit the rate of growth of local government budgets. The House bill only included intent language to backfill lost revenue to local governments.
The Senate approach, developed principally by Sen. Joe Bolkcom, was a property tax credit for commercial, industrial and railroad property taxpayers that would be distributed based upon a formula that is funded at $50 million in the first year and could increase up to $50 million each year if state revenues increase at least 4% per year. The tax credit would be limited to $200 million in funding.
Despite public comments from leaders of both chambers and the Governor throughout the session that they were committed to getting property tax reform done in 2011, efforts failed. All sides have publicly lamented that property tax reform could not be achieved and pledged to address the matter in 2012. There has been some discussion of taking up property taxes in a special session if a compromise were to be reached during the interim, though this is not likely to happen.
Economic Development Incentives
The 2011 session was a tough year for economic development incentives. Between fundamental disagreement with state-based incentives by elements of the House Republican caucus and downward pressure on spending with a $5.99 billion spending cap, non tax-credit based incentives were a tough sell.
The Governor fought hard to ensure there were enough incentive dollars appropriated – and perhaps more importantly, not de-appropriated, which would have had a disastrous effect on already approved projects. That said, funding levels for incentives ended up significantly lower than in the recent past.
The Values Fund was not appropriated new dollars and faces repeal next session, but carry-over dollars were allowed. IPEP was appropriated $15 million for economic development incentives, $8.6 million of which are pre-allocated to specific programs. With the $12 million in carry-over dollars, approximately $20.6 million is available for actual incentives, but that must cover programs approved to date.
The Legislature also required the IPEP to propose a new Business Development Financial Assistance Program to the General Assembly and the Governor by November 30, 2011, and propose any changes in law necessary to implement the repeal of the Grow Iowa Values Program.
Tax Credits
Angel Investor Tax Credits & Innovation Fund (SF 517). The tax credits for innovation and for seed capital funds were passed in the Economic Development budget bill.
Brownfields/Grayfields Tax Credits (SF 514). SF 514 requires the Department of Economic Development to allocate up to $5 million in tax credits for the Redevelopment Tax Credits program.
Endow Iowa Tax Credits (SF 302). The Endow Iowa Tax Credit Program was expanded by providing an $800,000 increase to the base of Endow Iowa, providing approximately $4.5 million in tax credits annually. This allows the leverage of more than $18 million per year in permanent endowment contributions with community foundations.
Historic Tax Credits (SF 521). SF 521 changed and expanded the Historic Preservation Tax Credit program by: 1) Allowing up to 60 months for project completion; 2) Allowing all qualified rehabilitation expenses to be incurred. This is especially helpful for disaster-related projects; and 3) Eliminating the $100,000 per residential unit cost limit.
Defense of…
TIF. Despite discussion in Ways & Means Committees in both chambers by legislators of both parties and bills filed to undermine Tax Increment Financing, no legislation directly affecting TIF was passed by either chamber this session.
R&D Tax Credits. Early in the session there was media attention brought to the amount of Research & Development Tax Credits being received by Iowa business, which did generate some discussion by legislators, but no action was taken on the matter.
Passenger Rail. House Republicans were intent on defunding the previously appropriated dollars for passenger rail service, which would have effectively killed the program. Persistent lobbying efforts by the Iowa City Area and Quad Cities Chambers along with the Passenger Rail Working Group and steadfast support from Sen. Bob Dvorsky buoyed passenger rail through no less than four attempts to de-fund it in the House. While it was not de-funded in 2011, passenger rail will face the same challenges in the 2012 session.
Other noteworthy issues for the session included:
Redistricting. The 2010 Census brought Iowa’s loss of a congressional seat. The Iowa Legislature acted quickly and adopted the first set of maps proposed by the non-partisan Legislative Service Agency. The new districts brought substantial change and have thrown multiple incumbents together in Statehouse, Senate and Congressional races. The new districts also reflect the continued urban and suburban growth Iowa has seen – more and more legislative seats are inclusive of or entirely within metropolitan areas.
Nuclear Energy. The bill to examine new construction of nuclear power plants, thought given much discussion and attention, ultimately did not pass. Expect this issue to come back in 2012.
Taxpayer Trust Fund. Though various tax cuts passed the House and did not move in the Senate, one element did survive: the Taxpayers Trust Fund. This fund will “fill” with up to $60 million in revenues collected beyond allocated spending and reserve funds and will be distributed back to taxpayers. The method for distribution will be determined by Ways & Means Committee recommendations to both chambers.
Provided by the Iowa Chamber Alliance
|