Government Affairs Weekly Report - Week 9: Mar. 7-10, 2016

by CBI Lobbyist
Jeff Boeyink
Partner,
LS2 Group

Overview / Major Events
House and Senate leaders late this week reached tentative agreement on a deal that would resolve disagreements over federal tax coupling and supplemental state aid for K-12 schools. These two issues have been sticking points between the House and Senate and the tentative deal could speed the way toward an early- to mid-April adjournment date.

However, as legislators were reminded last summer, any deal between the House and Senate also needs the blessing of the Governor. It is not clear at this point whether or not the Governor is satisfied with agreement. Regardless, the House and Senate are moving rapidly to get the elements of the agreement to Governor Branstad’s desk ASAP.

What’s in the Deal?

1. House and Senate agree to couple the state income tax code to match federal changes on Section 179 expensing for the 2015 calendar year, only. The fiscal estimate for this change is a $95 million hit to the state treasury, which would be reflected in a smaller ending balance (prior to this change, the ending balance for FY16 was estimated at $172 million). Governor Branstad did not include coupling in his budget, but has since indicated he could support it under certain circumstances.
2. House and Senate agree to rescind the rules put forth by the Iowa Department of Revenue last summer that define those consumable supplies in the manufacturing process that are tax exempt. However, they also agree to adopt House language from last year on consumable supply exemptions – which is less broad than the Departmental rules. The bottom line for some manufacturers is this will raise $13.5 million in new revenue for the current fiscal year, thus mitigating some of the revenue loss from the Section 179 coupling (meaning the hit to the ending balance will be closer to $80 million). Governor Branstad supported the Department of Revenue when the new rule was announced and it is unclear his position on rolling it back.
   
3. House and Senate agree on an increase in supplemental state aid to K-12 schools at a level around 2.5% (this still may be under some additional negotiation). The House had proposed 2.0%, the Senate 4.0%, and the Governor 2.45%. This figure is extremely close to the Governor’s original budget request and it is difficult to imagine he would object to this compromise (that could change if it included one-time spending).

View the Iowa Legislative Bill Tracker.

What’s the Status and Timeline?
Both House and Senate Ways and Means Committees met this morning and quickly approved the tax portions of this agreement (SSB 3171 and HSB 642) on nearly unanimous votes. Expect one or both chambers to take full floor action on these bills by Tuesday, with completion in both chambers likely by the end of next week.

The education spending portion of the agreements are still being finalized and will need to be considered by the Appropriations Committees in both chambers before moving to floor debate. However, given the speed with which legislative leaders are attempting to move, it will be surprising if they leave town next week without completing the legislative work on both pieces.

Iowa Utilities Board Unanimously Approves Dakota Access Pipeline
Today the Iowa Utilities Board approved, on a 3-0 vote, the Iowa portion of the Dakota Access Pipeline (full disclosure, Dakota Access Pipeline is a client of LS2group). This four-state $4 billion pipeline project will pump crude oil from the Bakken area of North Dakota to a terminal in Illinois (that then feeds to refineries in the southern United States). Iowa was the last of the four states involved to approve the project.

Efforts on Behalf of Community Bankers of Iowa:

• SF 2279 (the amended Credit Union Division bill that no longer contains the section CBI strongly opposed) passed the House Commerce Committee this week on a unanimous vote. Passage means the bill survives the second funnel and it moves to the House debate calendar for consideration by the full Iowa House.