Overview / Major Events
Annually one of the most difficult and contentious issues that faces the legislature are the decisions regarding changes in the various state funding steams for local K-12 school systems. In fact, given the inordinate share of the general fund that is spent on state school aid, these decisions can drag on for months.
However, 2019 proved to be different. This week both the House and Senate passed school funding legislation and sent it to the Governor for her signature. In fact, the debate over K-12 spending was significantly less contentious and acrimonious than it has been for many years.
Overall, Iowa’s K-12 schools will see a nearly 3% increase in state funding (which equates to an additional $93.6 million). Without question, this will be the largest budget increase in terms of shear dollars in the upcoming FY20 budget.
The speedy passage of this legislation suggests legislative leaders are on a fast track for resolving the FY20 budget and potentially ending the session well before its allotted 110 days.
Sales and Income Tax Changes Jumble State Revenue Picture
For most of the current fiscal year the state had been experiencing relatively robust revenue growth (and at a rate comfortably above the revenue projection on which the budget was based). However, two tax changes, from prior years came together to jumble the revenue picture this January.
Overall, state revenue year-to-date is growing at a rate of 3.4% (whereas the revenue estimate is pegged at 4.9%). Two things come into play this January as revenues are down from January 2018 by 9.2%.
The revenue numbers at the end of February will be important to determine whether or not January 2019 was a one-month adjustment period, or the beginning of a trend. The Revenue Estimating Conference meets again in mid-March and will make a final determination of revenue estimates for both FY19 and FY20. Any reductions in their current projections will have to be addressed in the state budget.
Religious Freedom Legislation Emerges
Prominent Republican members of the House and Senate have recently introduced legislation that is commonly referred to by the acronym RFRA (religious freedom act). Proponents of the legislation (SF 240, HF 258) argue the bills are necessary to further protect citizens from rules or laws that place a burden to a person’s exercise of religion.
Often cited in such discussions are cases that involved owners of a wedding chapel that denied its use to same sex couples, due to the owners’ religious beliefs regarding homosexuality. Along a similar line are the bakery owners who refused to sell wedding cakes for use in same sex wedding receptions.
Opponents of the legislation argue such laws are intended to allow people and businesses to legally discriminate against people, using their religious beliefs as a pretense. Many prominent Iowa businesses and associations are now opposing such legislation due to potential harm it could do when recruiting highly skilled talent (many of who are looking for environments that embrace diversity).
A Senate subcommittee is set to debate this legislation, next week.