Capitol Report: End of 2023 Session


May 6, 2023

The Iowa Legislature adjourned the First Session of the 90th General Assembly on May 4th, one week past the scheduled 110 days. Governor Reynolds and leadership in both the House and Senate worked together in the final weeks to reach a compromise on key policy issues including the Fiscal Year 2024 budget, property tax reform, and youth employment regulations.

 

 

Budget

The Revenue Estimating Conference projected at the March meeting that Fiscal Year 2024 would see $9.6503 billion in revenues. A decrease of 1% from Fiscal Year 2023, which is projected to see $9.75 billion. The Iowa Department of Revenue and republican leaders in the House and Senate shared that the slight decreases are due to the tax policy implemented in 2022 to phase down individual and corporate income taxes, and the federal stimulus money received during the pandemic.

 

Following the March REC meeting, the legislature agreed on an overall budget of $8.516 billion for FY24.

 

 

Education Savings Account

During the 2022 legislative session, Governor Reynolds pushed the legislature to pass school choice legislation that would allow for the creation of state funded educational savings accounts (ESA’s). The bill ultimately failed after a month-long stalemate in May.  In response, the Governor campaigned on the bill and endorsed primary candidates who supported school choice.

 

Returning in January, Governor Reynolds outlined ESA’s as a top priority for 2023 during her condition of the state. During the third week of session, both the House and Senate quickly advanced House File 68 through the legislative process, sending it to the Governor for signature. The bill was signed into law on January 24th.

 

Parents who choose to enroll their children in an accredited private school will receive an amount equal to the per pupil funding allocated to public school districts for the same budget year. For students who leave a public school for a private school, the public school will receive approximately $1,205 per pupil in categorical funding. Effective for the 2023-24 school year, ESA’s will be available based on the following eligibility:

 

Year 1: School Year 2023-24

  • All kindergarten students
  • All public-school students
  • Private school students with a household income at or below 300% federal poverty level (FPL), $83,250 for a family of four

 

 Year 2: School Year 2024-25

  • All kindergarten students
  • All public-school students
  • Private school students with a household income at or below $400 FPL, $111,000 for a family of four

 

Year 3: School Year 2025-26

  • All k-12 students in Iowa regardless of income

 

Applications will be accepted from May 31 through June 30, 2023, for the 2023-2024 school year. 

 

 

Property Tax

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

 

Both chambers introduced property tax proposals at the start of session. The Senate proposal focused on limiting budget growth at the local level and consolidating levies, while the House proposal focused on capping assessment growth and reducing the $5.40 levy. During the legislative session, property assessments across the state saw such substantial increases that the legislature was pushed to address property taxes before finishing their work.

 

During the last week of session, leadership in the House, Senate and the Governor were able to reach an agreement on an amendment that combined a number of the provisions in both the Senate and House proposals.

 

House File 718 will reduce property taxes by $100 million dollars by reducing tax rates when assessments rise, implements basic levy limits, consolidates and simplifies 15 levies into a single general levy and increases transparency requirements.

 

Gov. Reynolds, Senate Majority Leader Whitver and Speaker Grassley released the following joint statement: 

 

“We’ve heard Iowans across the state voice their concern about out-of-control property taxes and the impact on family budgets. Today, we’ve come to an agreement on a path forward. This deal provides much-needed property tax relief for Iowans and lays the groundwork for even bolder reform in the future.  

 

“House File 718 curbs the growth of local governments in a responsible manner and begins reducing property taxes next year. It also provides additional relief for older Iowans and military families and requires property tax bill transparency. In total, the bill is estimated to provide $100 million in relief.  

 

“This is an important first step toward long overdue property tax reform. Iowa’s existing property tax code is outdated, overly complex and costs Iowans too much of their hard-earned pay. Work on this issue is just getting started.” 

 

 

Government Realignment

During the Condition of the State, Governor Reynolds highlighted the need to evaluate and reform Iowa’s Executive Branch to be more efficient and cost saving to taxpayers. Senate File 514 was proposed by the Governor and consolidated the number of state agencies from 37 to 16. The House and Senate held numerous subcommittee meetings on the legislation and met with each state agency to evaluate the impact.  The bill was passed and signed by the Governor the first week of April. 

 

 

Tort Reform

Policy regarding limiting damages in tort cases had been introduced multiple times over the past few years, however, the legislature had been unable to reach an agreement between the various stakeholders. This year, bills limiting noneconomic damages for both medical malpractice and commercial vehicles cases were passed and signed by the Governor.

 

House File 161 creates a $2 million cap on noneconomic damages for medical malpractice lawsuits against hospitals and $1 million in lawsuits against clinics and individual doctors. Governor Reynolds highlighted the need for a medical malpractice tort reform bill during her condition of the state, arguing with opponents that the legislation is needed to protect rural healthcare providers from rising insurance rates.

 

“I’m grateful to the Legislature for passing reasonable medical malpractice reform, allowing Iowa’s health care industry to become stronger and more accessible," Reynolds said in a statement. "To the OB-GYNs and physicians who have been worried about practicing in Iowa, we are ready for you!"

 

Senate File 228 also creates a $5 million cap on noneconomic damages and allows plaintiffs to recover 100% of punitive damages in commercial vehicle crash cases. Iowa’s trucking industry has pushed for the legislation for a number of years, arguing the need for a limit to protect businesses against rising insurance rates. The cap does not apply if a court finds that the driver of the commercial vehicle:

  • Was operating under the influence of drugs or alcohol.
  • Committed a felony involving the use of a motor vehicle.
  • Was involved in manufacturing or delivering a controlled substance.
  • Was driving without a proper commercial driver's license or driving with a revoked or suspended license.
  • Was driving a vehicle involved in human trafficking.
  • Was driving recklessly.
  • Was using a device like a phone while driving.
  • Was going 15 miles per hour or more over the speed limit.

 

The cap is required to be reviewed and adjusted every two years to account for inflation.

 

 

The Second Session of the 90th General Assembly will convene on January 8th, 2024.  Legislation that was not adopted this year will remain eligible for consideration when the legislature reconvenes.