Government Relations Report - Week 6 Wrap-up: Property Tax, Education Reform, Red Light Cameras, Water Issues and Home Rule

We have now completed six weeks of the 2013 Session of Iowa’s 85th General Assembly. The end of week five marked the first milestone: the deadline for individual bill requests. After February 15th individual legislators cannot request that the Legislative Services Agency draft bills to be filed under their name. This brings an end to the high volume of constituent bills being introduced. However, there is still an avenue for legislation to be introduced as a committee bill, which requires the chair of the committee to sign off on the bill. The next significant deadline is the first funnel week March 4-7.

Property Tax
Unlike last session, in which the Governor and House introduced plans within the first two weeks, the property tax debate this year has begun slowly. This week, the Governor introduced his property tax reform plan, HSB150, adding substance to the concepts he outlined in his condition of the State address. The bill rolls back commercial and industrial property taxes by five percent per year for four years. It also reduces the growth limitation on assessed valuations from four percent to two percent. The bill includes a backfill to local governments for all lost revenue through the end of fiscal year 2017 followed by a capped backfill in later years. One subcommittee has been held on the bill, with another scheduled for next week.

The House Republicans plan is HF2, which is similar to Division I of their plan from last year. It includes an increase in the school aid formula from 87.5% to 100%, providing property tax relief to local taxpayers.

The Senate has filed its own version of property tax reform, SSB1135. This bill provides commercial property tax relief through a tax credit mechanism funded by the state. A tax credit approach ensures that local governments will not experience revenue cuts, but critics point out that the state has not historically fully funded its tax credits, such as the homestead credit. The credit is limited to the first $342,000 of valuation. A subcommittee on the Senate plan is scheduled for next week.

Education Reform
The Senate voted last week to approve a four percent allowable growth increase for the next school year. The vote came despite the Governor’s request that the legislature vote on his education reform proposal before considering allowable growth. Iowa law requires that the legislature take action on allowable growth within 30 days of receiving the Governor’s budget proposal.

This week, the House passed a scaled-back version of the Governor’s education reform plan, HF215. The amended bill gives school districts more flexibility in implementing the new system of “career pathways” for teachers, and provides for a review of the program in 2015. The House left the college and career-readiness seal program intact, but reduced the minimum starting salary for teachers from the Governor’s proposed $35,000 to $32,000. It also set allowable growth for this fiscal year at two percent, setting up a fiscal showdown with the Senate.

Red Light and Speeding Cameras
To date, a total of nine bills have been filed to either ban or regulate the use of Automated Traffic Enforcement Systems (ATEs). Seven of the bills were filed by Senator Brad Zaun, another by Senator Tim Kapucian and the single House bill was filed by Representative Walt Rogers. Many of those bills would require cities to give up the additional revenues raised through the use of ATEs. A subcommittee was held on Representative Rogers’ bill, HF106, which would require cities to put ATE revenues collected above the contractual obligations and administrative costs in the Road Use Tax Fund. The meeting was attended by several city officials, who presented compelling evidence of improved safety as a result of the use of ATEs. City officials also stated that they would continue to use the systems even if the revenue went to the state. Last year, a ban on ATEs passed the House but did not move forward in the Senate.

Water Issues
The House introduced HSB 111 which expands to rural water associations the current two mile limit within which a rural water district must currently notify a city of its intent to provide water service. The bill also provides for notice to a city within the two mile limit when a rural water district or association intends to obtain federal financing or refinance existing federal financing. The bill changes the compensation definition for the compensation to a rural water district or association which is providing water to an area annexed by a city. This bill is in response to a dispute between a rural water association and several Marshal and Story County cities.

Home Rule
Like the past several sessions of the Iowa Legislature multiple bills have been introduced this Session which encroach on the ability of Cities and Counties to govern themselves through Home Rule. The multiple ATE bills, zoning restrictions, gun carry laws and other bills continue the attempt to rule from the Capitol what is best left to local elected officials.

This session started slowly and has gained momentum in the last two weeks. Budget subcommittees are in no hurry to begin substantive work, and the two chambers are still deeply divided on education, health care, and property tax reform. The Governor’s announcement on February 23rd that he will not expand Medicaid coverage in Iowa creates another conflict between Senate Democrats, moderate republicans and the Governor at a time when consensus is needed to move any of the reform measures forward. If we do not begin to see some compromise in budget negotiations and other major issues, the 2013 Session will certainly surpass the 110-day deadline.