Capitol Report: 2024 Session Adjourned

The Iowa Legislature adjourned the Second Session of the 90^th General Assembly on April 20th, just four days past the scheduled 100 days of session. Governor Reynolds and leadership in the House and Senate worked together in the final days to reach a compromise on key policy issues including the Fiscal Year 2025 budget, income tax reform, removing the statute of limitations for victims of child sexual abuse related to the Boy Scouts of America settlement, and minor driving licenses.

This year the legislature passed 147 bills, with Governor Reynolds signing 89 into law so far. The Governor has 30 days after the legislature adjourns sine die to approve or veto legislation sent to her in the last three days before adjournment or sent to her after the legislature adjourns.

Budget

The Revenue Estimating Conference projected at the March meeting that Fiscal Year 2025 would see $9.697.8 billion in revenues. A decrease of 2.2% from Fiscal Year 2024. Following the March REC meeting, the legislature agreed on an overall budget of $8.9 billion for FY25.

Area Education Agencies Reform

During the Condition of the State, Governor Reynolds shared her top priority for the 2024 session was to make changes to Iowa’s Area Education Agencies. Throughout session, both chambers considered versions of the initial proposal that would reallocate funding and make changes to the services AEAs provide. House File 2612 was agreed during the 12^th week of session with the following changes included.

• Districts will receive 10% of special education funding from the state while AEAs will receive 90% of funding effective after the 2024-2025 school year
• During the 2024-205 school year, school districts will receive 60% of state funding for general education and media services while AEAs will retain 40% of the funding
  • Following the 2024-2025 school year, school districts will receive 100% of funding for general education and media services
• Creates a task force to study and make recommendation to improve the AEA system
• Creates a special education services division within the Department of Education and provides the department with additional oversight over AEAs
• Increases Supplemental State Aid by 2.5%
• Increases teacher minimum pay to $50,000

Income and Property Taxes

Tax reform continues to be a top priority for the Republican trifecta. In 2022, the legislature passed legislation that gradually phases-down the state income tax until a flat tax of 3.9% is reached, as well as lowing the corporate income tax to 5.5%. In 2023, focus shifted from income tax to addressing property taxes.

During the Condition of the State, Governor Reynolds unveiled a proposal to accelerate the 2022 law by phasing down the individual income taxes to a flat rate of 3.5% by TY25. The Senate introduced a separate tax proposal in January that would gradually eliminate income taxes entirely by directing IPERS to invest the Tax Payer Relief Fund into a trust with the revenues generated therefrom used to buy down the individual tax rate.

Senate File 2442 was agreed upon in the final weeks of session and includes both individual and property tax changes. The final compromise accelerates the phase down from the 2022 legislation to create a flat individual income tax rate of 3.8% for TY25, a summary of the current rates versus the new rates can be found below.

The legislature also took the first steps toward amending Iowa’s Constitution this legislative session related to income tax. Two resolutions passed both chambers requiring a two thirds majority approval for future legislators to raise individual income taxes and requires Iowa use a flat tax rate system. The legislature must adopt the same language during the next legislative session for the proposed amendments to be considered by the public for ratification.

Boards and Commissions

In 2023, the legislature adopted Senate File 514, reorganizing Iowa’s Executive Branch to be more efficient. The legislation consolidated the number of state agencies from 37 to 16 and included a provision directing the legislature to form an interim committee to review Iowa’s Boards and Commissions. As the second phase of the reorganization, this year the legislature adopted Senate File 2385, consolidating and eliminating many of Iowa’s Boards and Commissions.

Under the bill, 69 boards are eliminated, 3 boards are merged into the Board of Behavioral Health Professionals, 3 boards are merged into the State Mortality Review Committee, and 2 new boards are created. 9 boards saw a reduction of board members under the bill.

A list of the eliminated boards can be found in Appendix A of the Fiscal Note.

Work Based Learning

One of Governor Reynolds priorities introduced in January was legislation to expand work-based learning opportunities in the state. Senate File 2411 expanded the definition of work-based learning, allowed summer programs to be included, and created a Workforce Opportunity Fund to support equipment, instructional materials, stipends, and other training related costs. The legislation made changes to the Future Ready Last Dollar Scholarship Program and student teaching requirements for individuals with prior experience in a classroom. On the final day of session, both chambers advanced the bill and sent it to the Governor to be signed into law.

The First Session of the 91^st General Assembly will convene on January 13^th, 2025. During the interim, legislators will begin their campaign work as the November 2024 election approaches. This year, 15 legislators will be retiring.