Capitol Report - Week 10 2021

These Triggers Don’t Shoot. Last Friday, the Revenue Estimating Conference (REC) met and adjusted its December projections for FY 2021 and FY 2022. The REC also issued its forecast for FY 2023. The March numbers are always met with great anticipation as they set in motion the final stages of the legislature’s budgeting process, the only work the legislature really must get done before it can adjourn for the session.

Expressing varying degrees of cautious optimism about Iowa’s economic recovery, the REC agreed to increase its projections beyond the December numbers. For the current fiscal year, FY 2021, the REC increased its projection by $109.6 million, to $8.08 billion, resulting in a growth rate of 1.9% over FY 2020. The estimate for the next fiscal year, FY 2022, was increased by $119.9 million, to $8.39 billion, an increase of 3.8% over the FY 2021 projection. For FY 2023, the REC projected revenues totaling $8.76 billion, a growth rate of 4.5% over FY 2022.

The REC’s growth rate estimate for FY 2022 fell just short of what is needed to trigger automatic income tax cuts in 2023. Legislation passed in 2018 provided for a reduction in the individual income tax rates and elimination of federal deductibility beginning January 1, 2023, but only if the revenue growth in FY 2022 is at least 4% higher than FY 2021. As noted above, the REC projected 3.8%. Michael Bousselot, the director of the Department of Management and the governor’s appointee on the REC, reminded his colleagues that the tax triggers are based on actual growth, not their projections, so the trigger could still be met for FY 2022.

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But This One Might. To eliminate any uncertainty about whether Iowans will receive a tax cut in 2023, Governor Reynolds called for elimination of the triggers in her Condition of the State address in January. And on Wednesday, the Iowa Senate answered her call. In addition to eliminating the triggers, the bill, SF 576, that passed unanimously, would repeal the state’s inheritance tax. The House has not proposed a similar bill. House Speaker Pat Grassley has said that while he understands it’s a priority for the Governor, the House will take a “cautious approach” in eliminating the triggers. His comments were made prior to REC’s meeting on Friday. 

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Muzzleloader Mama. On Wednesday, the House passed HF 756, a bill that makes numerous changes in the state’s laws on purchasing and possessing firearms. The bill passed by a vote of 60-37, largely along party lines. HF 756 would make having a permit to acquire or carry a firearm optional, rather than required, when purchasing a firearm from a federally licensed dealer. As an alternative to having a permit, the person would have to undergo a federal instant background check. HF 756 would make it a class D felony for a person to sell a firearm to someone the seller knows or reasonably should know is prohibited from owning a firearm. It also would allow off-duty and reserve police officers to carry weapons on school grounds, allow EMTs assigned to tactical teams to get a professional permit to carry, prohibit local governments from regulating “carrying” beyond what is required by state law, and prevent landlords that receive federal rental assistance from imposing restrictions on tenants’ use or possession of firearms within their rental units. Additionally, the bill prohibits a person from carrying a firearm if they are under the influence of drugs or alcohol, in possession of illegal drugs or if they are committing a crime.  HF 756 has been sent to the Senate where a similar bill is on the debate calendar.

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Don’t Muzzle Me. Also on Wednesday, the Senate passed a bill, SF 580, by a vote of 30-17, to prohibit the state and local governments from contracting or providing economic incentives to tech companies that interfere with Iowans’ “constitutionally protected” speech by restricting their ability to view content or comment on the companies’ internet sites. The Attorney General would be tasked with receiving and investigating complaints from Iowans regarding social media censorship. A similar bill introduced in the House did not survive the first funnel.

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Week Ahead. Expect floor debate to continue with some fervor as the second funnel date approaches. Bills that are not exempt from the funnel need to be out of committee in the second chamber by April 2 to stay alive this session.

The Nyemaster Goode Government Affairs team tracks and analyzes legislation as part of its full range of legislative services. At the statehouse, our public policy attorneys use experience, knowledge, and technical skills to achieve our clients’ goals.