Collins Capitol Connection

How does Iowa’s new revenue forecast compare to changes seen in surrounding states? Not every state has a revenue forecasting process, but those that have recently released new data have some similar issues to those faced here. The state to the north has a much bigger problem looming ahead.

In Minnesota, the revenue forecasting process is controlled entirely by the Governor through that state’s budget office, with key forecasts released in November and late February. On February 29th, The Minnesota Management and Budget Office released their latest forecast showing that state revenue is increasing in the current budget period. Minnesota is now expecting to have enough tax revenue to finish the current budget for Fiscal Year 2024 & 2025 (they have a two-year budget) with an ending balance of $3.7 billion. This is an increase in their expected ending balance of $1.3 billion from what was projected last November. The state’s budget commissioner said the new figure was due to higher than projected tax receipts, with the growth being driven by corporate tax payments.

The potentially higher ending balance is important up north because they are staring down the barrel of budget trouble. Minnesota’s budget law requires their projections to go out a bit further than what is required of Iowa’s Revenue Estimating Conference. The out-year projection runs through Fiscal Year 2027 and shows anticipated state spending in Minnesota will exceed anticipated tax revenues in the next budget cycle. The forecast shows Minnesota having a “structural deficit” of $1.5 billion in the budget cycle of FY 2026 and 2027.

Governor Wahls tried to do his best Chip Diller from Animal House impression by telling Minnesotans “Remain calm, all is well!” by saying that the projected ending balance to the current budget will solve any issue being predicted in future years. What the Governor glosses over is the fact that his budget office is projecting a structural imbalance even after assuming that state spending in Minnesota will go down by $4 billion in the next budget. That’s highly unlikely after the current budget increased expenditures by $19 billion by the Democrat-controlled legislature.

In Nebraska, the nine-member Economic Forecasting Advisory Board met in late February to adjust their revenue projections. Their state also operates with a biennial budget that currently runs through June 30, 2025. The latest forecast in Nebraska has found an additional $50 million of revenue expected to be collected, thanks a new tax that will sound familiar to those following Iowa’s REC.

The new revenue in Nebraska is the result of that state’s implementation of the Pass-Through Entity Tax. The new tax for certain types of businesses will produce a whipsaw effect in the Cornhusker State, with revenue increasing in Fiscal Year 2024 by $575 million but declining by $525 million in FY 2025 as refunds are paid out. The ebb and flow of this new tax is so great in Nebraska that the state saw an 875% increase in corporate income tax payments in January of 2024, while corporate tax refunds were 2,249% higher. That detail shows the difficulty in predicting the impact of this new tax.

Until the Biden Administration does its job to protect our nation’s borders, states are stepping up to the challenge. Border states, like Texas, have passed legislation to permit the arrest of those who enter the state when they are not legally allowed to be in the country. While Iowa may not be a border state, the lack of border enforcement affects Iowans. That’s why both House and Senate Republicans and even some Democrats agreed on Senate File 2340, a bill to allow the arrest of illegal immigrants in certain situations.

Contrary to what some Democrats said on the House Floor, SF 2340 is not anti-immigrant. Instead it is pro legal immigration, pro law and order, and focused solely on illegal immigration. The bill is modeled after Texas Senate Bill 4 – it’s straightforward and makes clear that illegal immigrants face consequences for breaking the law.

Under the bill, if a person has previously been caught in the country illegally and they later enter Iowa they are guilty of the crime of reentry into the state. A person who has previously been deported, or denied admission into the United States, who re enters the country and Iowa, is guilty of an aggravated misdemeanor. The penalty increases to a class “D” felony if the person was previously convicted of certain misdemeanor crimes or removed from the country as part of the alien terrorist removal proceedings. Finally, a person previously removed from the country after a felony conviction is guilty of a class “C” felony if they come back illegally to Iowa.

The bill prohibits arresting or detaining anyone under this chapter of the law if they are at a:

• School for educational purposes.
• Church or other established place of religious worship.
• Health care facility to receive medical treatment.
• A facility that provides forensic medical examinations to sexual assault survivors if the person is there to obtain a forensic medical examination and treatment.

Once a person is arrested for any of the reentry crimes, they can agree to leave the country and return to their home country or the country where they entered the United States illegally. If they refuse and are convicted under this new code section, they can be imprisoned and then be ordered to return to the foreign nation where they entered. The bill prohibits any deferred judgment or sentence. Additionally, state and local officials who enforce the law are provided civil immunity and indemnification for their actions.

The goal of Senate File 2340 is not to scare or intimidate those who follow the process and come here legally, but rather to discourage those who enter the country illegally from coming to Iowa.

This week, the House passed House File 2667 which, if enacted, increases the income deduction limit on contributions to College Savings Iowa accounts by almost $1,500. Additionally, the bill amends Iowa Code to match recent changes to federal tax code to allow tax free transfers from an Iowa College Savings Account to a qualified Roth Individual Retirement Account. Beyond increasing the tax deduction of eligible 529 contributions, HF 2667 ties the deduction limit to the Higher Education Price Index to keep up with the inflating cost of higher education.

Commonly referred to as 529 plans, Iowa College Savings Accounts are plans that allow parents, family members, and others contribute to a child’s college savings account that grows in value without federal and state income taxes to provide tax free growth for future higher educational expenses. Qualified expenses that can be paid for by these plans include tuition, certain room and board, books, supplies, fees, equipment, certified apprenticeship programs, and postsecondary trade and vocational schools.

Recent changes to Federal tax policies have made contributing to these 529 plans even more attractive. Newly effective federal law now allows the transfer of unused 529 funds to the beneficiary’s qualified Roth IRA without tax implications. HF 2667 mirrors this change and would not impose a tax on such transfers. If enacted, HF 2667 would continue to encourage Iowans to save and invest in their children’s educational future while providing tax relief for contributions.

This week, the House passed House File 2658 to increase child care rates for the Child Care Assistance Program by $15.2 million. Last year, the legislature increased these rates by $10.8 million, and this bill continues the work of providing significant resources to Iowa’s child care centers and homes.

This bill also extends the child care workforce pilot program for an additional year to collect data on recruiting and retaining child care employees. This pilot program provides the children of child care workers with Child Care Assistance.

The House also sent House File 319 to the Senate this week. This bill removes unnecessary regulations for child care workers and allows for additional flexibility during nap time and 5-min breaks for staffing. Additionally, the House also recently passed House File 2655. This bill provides child care centers a residential rollback (instead of commercial) for property tax purposes, which is estimated to provide $17.7 million in reduced property taxes for child care facilities statewide. These bills now await action in the Senate.

This week, the House passed House File 2663 unanimously. This bill transfers $300,000 from the Lottery fund to provide each county with funds to be used for national training for veteran service officers. $2.5 million is annually allocated to the Veterans Trust Fund from the lottery. This bill will allow $300,000 of that to be used for VSO training. $500,000 will continue to be allowed to be spent annually by the Commission on Veterans Affairs. There is currently $40.5 million in the Veterans Trust Fund, with interest deposits over $100,000 per month.

The House also sent House File 259 to the Governor. This bill includes provisions to ensure that Iowa’s veterans service officers are certified and have access to the veterans benefits management system within a year of being hired. Iowa’s veteran service officers are the first stop for any Iowa veteran that is seeking the benefits owed to them for their service. Obviously then, we should do everything we can to support them.

Changes in how Iowa allows underage drivers to go to school and to work took a major step towards being implemented into law Tuesday when the Senate passed its version of the bill.

Senate File 2109 would change the school permit and the farm work permit into essentially one permit – the special minor’s driving license. Under the bill, a student who not 16 years old but has completed driver’s education could get a permit that would allow them to drive in certain circumstances:

• To and from school;
• To and from extracurricular activities they are participating in;
• To and from their work;
• And to and from a service station.

A student with this license would be limited in how far they could drive, which would be 25 miles and must be the most direct route. The driving would have to take place one hour before or after these events. The 25-mile limit is a change from the current farm work permit and for those students who drive to a private school.  Current law allows these students to drive up to 50 miles one way, and to drive at any time between 5AM and 10PM.

The biggest change allows these students to drive to any job, not just work on the farm. Currently that is not allowed under the current school permit. The bill sets conditions that would have to be met before this would be allowed. The parent or guardian of the student would have to submit written consent to the Department of Transportation before they could start driving to work.

Another change is who qualifies for the new license. Current law prevents students who live within one mile of their school from getting a school permit. That exclusion is removed by the committee’s recommendations. Current law also limits a student to one residence to travel to and from. The committee’s recommendations would now allow a student to have 3 residences, which would have to be consented to by the parent or guardian, and the new license allows students to travel through a contiguous school district to attend their school, if they are using open enrollment. They would still have to be within 25 miles of their residence.

On the Senate Floor, language was added to ensure that these driving privileges were also available to those students who are home-schooled. With home-schooled students taking some classes at schools participating in extracurricular activities, or having a part-time job, it was only fair that home-school students have the same ability to get a special minor’s driver’s license as do those students attending public or private schools.

The Senate also made changes to the language on driving to work. Those changes have caused some heartburn amongst various groups interested in the bill, and these will get a thorough vetting before the bill hits the House floor. Also, to be examined is some of the administrative processes under the bill, as they may create some unintended issues in DOT driver’s license stations.

This week the House passed Senate File 2331, which amends current code on public notice requirements for governmental bodies. This bill will help bridge the gap between where and how public notices are published. Currently public notices are required to be published in an official newspaper of record. These requirements were in place before the mass expansion of the internet in the daily lives of Iowans. This issue has been discussed for a while as there are many Iowans who prefer to read the notices in their local newspapers and Iowans who want to use the internet to get their information.

SF 2331 aims to be the compromise and solution for these issues. It would codify the creation of a free to the public statewide public notice website that is managed by an organization that represents most Iowa’s newspapers. Newspapers and governmental bodies are required to submit the notices to the state-wide website. This will provide the notice both electronically and in the official newspapers. The statewide website is required to provide access to all public notices for one year from the publication date, to provide subscription alerts for notices by email, and to provide a searchable database of the notices to allow for searching by criteria.

On Monday, the Senate passed House File 2237 by a bipartisan 45-aye to 2-nay vote. HF 2237 explicitly allows the operation of registered ATV (All-Terrain Vehicle) and registered Off Road Utility Vehicles (that are included in the pertinent ATV definition) on state park road system where other motor vehicles registered under Code chapter 321 are allowed to operate. Existing law concerning ATV operation in state park significantly restricts the operation of ATV’s to certain rule specified areas and does not explicitly allow ATV operations on state park road systems. This change makes sense since Iowa has already expanded where registered ATV’s can operate on state primary road systems and the maximum speed in state parks is 35-mph or less. Senator Lofgren and I introduced a similar bill earlier this session after hearing from a constituent in New London who simply wanted to be able to drive his UTV over to Geode State Park but could not under current law.