DES MOINES — Gov. Kim Reynolds called Tuesday on state lawmakers to take the first bold step into a new decade by enacting a multi-pronged plan to invest in Iowa with tax-policy changes she said would raise the state sales tax but also return money to taxpayers, preserve Iowa’s land and water, strengthen schools, improve health options and give every Iowan a chance to succeed.
Reynolds used her third Condition of the State address to propose her Invest in Iowa Act that would expand upon a voter-approved idea to raise the state sales tax by a penny to fund water quality and other environmental and resource needs, but also take a large share of the new revenue to cut state income taxes by at least 10 percent and ease property-tax burdens by having the state pick up from the counties some costs for expanding mental-health services to adults and children.
“Let’s be bold and visionary,” Reynolds told a joint session of the 88th Iowa General Assembly and a statewide television audience, according to prepared remarks. “Let’s seize this opportunity and make the next decade Iowa’s best. It’s time to show the world that opportunity lives here.”
The governor proposed instituting a 2010 constitutional amendment passed by Iowa voters that authorized the Legislature and governor to raise the state’s sales tax and direct the proceeds into a wide range of environmental, conservation, natural resources and outdoor recreational initiatives.
“Funding that trust is no small investment, but I believe it’s one we need to make,” she said.
As prescribed in the amendment, three-eighths of a new penny sales tax increase — estimated at about $170 million a year — would flow into the Iowa Water and Land Legacy trust fund under Reynolds’ plan.
The new tax would take effect Jan. 1, 2021.
But the designated formula for distributing that money should change to reflect current water quality priorities and realities, she said.
As a state senator in 2010, Reynolds said she voted for the distribution formula, but said now “the challenges we face today and will face tomorrow are different than what we understood them to be 10 years ago, so it’s time to amend the formula.”
Under her plan, Reynolds said almost 58 percent of the new money would be allocated for water quality and conservation, or an estimated $100 million annually. That would be a nearly 31 percent increase.
Another $52 million would go for other conservation and outdoor recreation efforts — a 14.6 percent increase.
“These investments will not only aid our conservation efforts, they will improve our quality of life and help us retain and recruit a new generation of Iowans,” she said.
While opening the conversation on the IWILL options, Reynolds said she has “no interest in raising taxes.” So any increase in revenue — some estimate that to be nearly $380 million — from adding a penny sales tax “must be more than offset by additional tax cuts,” she said.
“That starts with continuing to reduce our uncompetitive income-tax rates. Two years ago, thanks to many of you in this room, we passed the largest income-tax cut in Iowa history. I said then, and I’ve said ever since: that wasn’t a one-and-done,” Reynolds noted. “I intend to make good on that promise, which is why I’m proposing to cut income tax by an additional 10 percent for almost every Iowan, with lower-income Iowans receiving as much as a 25 percent cut.
“Let me put that into perspective,” she added. “Just one year ago, our top tax bracket was at almost 9 percent, one of the worst in the country. Now, with this new round of tax cuts, our top rate will be down to 5.5 percent by 2023 — significant progress that will make Iowa competitive with our peers.”
Reynolds said Iowa’s finances currently are in a strong, surplus position that will allow policymakers to make bold plans for now and decades to come. That planning and action, she said, must begin “right now, this session.”
Legislators convened the 100-day 2020 legislative session on Monday.
Along with the income tax cuts, Reynolds said she was proposing the state follow up on its recent commitments to bolster mental-health services for adults and children by using proposed sales tax proceeds to reduce property tax levies and provide the needed funding through the state general fund.
Counties now levy a property tax to help fund mental health care, but do so at different rates.
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“No parent, family member, or friend should be told that treatment isn’t available for their loved one,” Reynolds said. “By establishing a dedicated and stable fund for mental health, we will give hope to so many who are suffering in silence. It’s a promise we’ve made, and it’s a promise I intend to keep.”
The governor praised lawmakers for investing more than a $90 million increase in K-12 education last year, including an increase in per-pupil funding and transportation equity. She called on them to spend even more in fiscal 2021 by appropriating more than $103 million in new funding that she said Iowa schools can use to “maintain the best teachers and classrooms in the world.”
In her quest to see the state take bold action, Reynolds pledged an additional $20 million in flood relief to areas of the state hard hit by weather disasters.
She also pledged an additional $2 million for the Renewable Fuels Infrastructure Program, as well as modernizing and expanding the E15 Plus Promotion Tax Credit to support the sale of the E15 higher blend of ethanol year-round, driving domestic demand for Iowa’s homegrown renewable fuels.
The governor said Iowa must do more to promote and support maternal health as fewer doctors and fewer hospitals are delivering babies and providing care for mothers, especially outside of urban areas.
To help increase the number of doctors who are willing and able to provide OB services in Iowa, Reynolds said she is proposing a fellowship for new family-practice physicians who want to train and specialize in OB care. She said she also wants to launch a tele-mentoring system where OBs at institutions can consult with physicians across the state.
She said her budget also includes additional funding to expand the use of telehealth services to underserved Iowans.
She also called on the Republican-controlled Legislature to adopt measures against abortion rights after courts struck down an attempt she signed into law last year.
”As we begin 2020, I’m focused on the overall wellness of all Iowans, in every part of the state, in all stages of life. And when I say all stages of life, I mean to include the unborn. We must protect life by making clear, through an amendment, that our constitution does not grant a right to an abortion. It’s time, and unfortunately it’s necessary,” the governor said.
Calling high-speed broadband “critical infrastructure” for rural areas, Reynolds said she is seeking another $15 million on top of the $5 million provided under last year’s Empower Rural Iowa Act to improve connectivity and adjusting the state match to leverage private and federal funding to build out broadband to every part of Iowa to become the most connected state in the nation.
Reynolds also called for legislators to require computer science be taught as a basic skill statewide — something she said is done in almost two-thirds of school districts’ middle and high schools and about half the elementary schools.
She also proposed expanding her Future Ready Iowa initiative to infuse Iowa workplaces with more skilled employees by adding $2.8 million each to the Last Dollar Scholarship and the Employer Innovation Fund, bringing the total investment to over $20 million.
“Childcare is the next workforce issue we need to tackle. It’s another barrier for families looking for a way up,” the governor said. “For some, it’s about affordability; for others, access is the issue; and for thousands of Iowans, it’s both. This year we need to act.”
To that end, Reynolds proposed making child care more affordable by expanding Early Childhood tax credits available to families making $45,000 or less to double that income threshold to $90,000. She also called on legislators to begin to address the “child-care cliff so that we are not punishing parents as they continue on a path to self-sufficiency” by implementing a tiered copay system.
Included in the governor’s workforce initiatives was her “second chance” approach to focus on prisoner re-entry and rehabilitation to break a “circle that leads back to prison” at a cost to taxpayers of $32,000 per year.
She also renewed her support to amend the Iowa Constitution so that it no longer bars felons from voting after they’ve served their sentence.
“I am grateful to the House for starting this process last year by approving the constitutional amendment with a strong bipartisan vote of 95 to 2,” she said. “I also appreciate the productive conversations we are having with senators, and I look forward to continuing to work with you to pass the amendment and craft an implementing statute that lets us avoid the confusion and lawsuits that have plagued other states’ restoration efforts. Together, we can help put returning citizens on a path to redemption. We can help them become productive members of society, reduce recidivism, and make our communities a safer place.”
The governor also called on legislators to make sure government isn’t stifling the ingenuity of Iowans by reforming the state’s professional licensure system.
She said it puts Iowa at a competitive disadvantage and costs 48,000 jobs and $290 million.
“We should never dismiss the importance of protecting the health and safety of the people, but it’s been far too long since we’ve modernized our licensing structure. That’s what I’m asking you to do today,” she told lawmakers, urging them to adopt universal licensing recognition and to waive fees for low-income individuals.
She also called for the creation of a commission that will — every four years — review every professional license requirement and the boards that oversee them.
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