Work on new Iowa laws almost complete

DES MOINES — The annual work of state lawmakers appeared near its conclusion Wednesday after four months as a lengthy legislative session continued into the night at the Iowa Capitol.

Work on the next state budget taking effect July1 and final policy considerations was ongoing Wednesday evening as lawmakers worked toward adjourning the 2025 session of the Iowa Legislature. After they adjourn, they are not scheduled to return until the January 2026 session.

This will be a session remembered for, among other things, a new law that removed legal protections for transgender Iowans from the state’s Civil Rights Act, and for a heated debate over property rights.

As of dinnertime Wednesday, lawmakers still had not passed legislation dealing with lowering Iowans’ property taxes — despite that being a top priority of many lawmakers.

Tensions still high in Senate

Tensions among Iowa Senate Republicans were apparent two days after the chamber passed legislation dealing with property rights, eminent domain and pipeline infrastructure projects.

The bill divided Senate Republicans, and contributed to a confrontation on the Senate floor early Wednesday.

In an email to all legislators, Sen. Mark Lofgren, R-Muscatine, alleged he was removed as floor manager from a bill and that other bills he has been advocating for will not be voted on as retribution from Senate GOP leaders for his vote in support of the property rights and eminent domain bill — which Senate Republican leaders opposed.

“I find this to be a very vengeful way of doing business and am sure the general public would be appalled that our state government is being run using bullying tactics and threats,” Lofgren wrote, adding later, “… maybe we need to have an ethics course for legislators in the future.”

Shortly after the email was sent, Sen Dan. Dawson walked onto the Senate floor and yelled at Lofgren. The two then went into a room just off the Senate floor, where their argument still could be heard.

Lofgren was among 12 Senate Republicans who pledged to withhold their support for budget bills until leaders called up the property rights and eminent domain legislation for debate and a vote. That debate occurred late Monday, and the bill passed with 13 Republicans voting for it and 21 against it.

“I basically was trying to talk. He wanted to yell and scream and swear,” Lofgren told The Gazette of the confrontation with Dawson, a Council Bluffs Republican. “… It was very aggressive and uncalled-for, and I’ve had a lot of legislators contact me and then said they’ve never really witnessed somebody acting like that.”

Lofgren called Dawson a “nice guy” who “just got a little carried away.”

Lofgren said he and other Senate Republicans who supported the pipeline and eminent domain restrictions feel disrespected and “ran over” by leadership, and that members of the GOP caucus need to work on mending fences.

“When we get done, I’m sure we’re going to have some conversations and everything,” Lofgren said. “… We have some bright people here, and I think we need to just communicate better.”

He compared it to a dysfunctional marriage.

“It’s almost like people that are married. They’re not communicating. They get divorced. This is kind of what happens, you know? So, yeah, I think that’s the weakness that I see,” Lofgren said. “I think people need to kind of realize that we can do much better.”

State budget

Work also continued on state general fund spending. Republican leaders have agreed to spend more than $9.4 billion on the next state budget, using the general fund but dipping into some reserve funds.

State revenue is projected to be roughly $8.5 billion, below current and proposed state spending levels, in large part due to recently enacted state income tax reductions.

To cover that difference, Republican lawmakers are using money from the state’s $2 billion general fund surplus and $4 billion in the Taxpayer Relief Fund, which was created for covering general fund budget deficits resulting from the tax cuts. Leaders said they expect state revenue to grow again to exceed state spending.

Throughout Wednesday, legislators passed budgets for the state’s Health and Human Services Department, and the state’s public safety and judicial systems.

Still left to approve Wednesday evening were the budgets for infrastructure and “standings,” which is a grab-all fund that includes allocations of all kinds from education to mental health services.

Unemployment insurance tax

A proposed reduction in state unemployment insurance taxes — which are levied on Iowa businesses and fill the state fund used to provide unemployment benefits to laid off Iowa workers — is on its way to Gov. Kim Reynolds, who made the proposal.

The Senate and House on Wednesday both debated and passed Senate File 607. The proposal from Reynolds cuts the taxable wage base in half and lowers unemployment taxes to a maximum rate of 5.4 percent on wages up to about $19,000 per employee, as opposed to the current 7 percent on wages up to about $38,000 per employee.

The bill also would reduce the number of tax tables, effectively cutting overall tax categories, and encourage businesses to reinvest savings into their employees.

Reynolds’ office estimates the cut would save Iowa employers nearly $1 billion over five years.

Iowa’s Unemployment Compensation Trust Fund had a balance of $1.9 billion at the end of 2024, according to the state’s nonpartisan Legislative Services Agency.

Using an assumption that unemployment trends continue at their current levels — Iowa’s unemployment level in March was 3.4 percent — the proposed legislation would reduce the Unemployment Compensation Trust Fund by roughly $63 to $77 million annually and would leave the balance at an estimated $1.8 billion in 2030, according to the agency’s projections.

Sen. Adrian Dickey, R-Packwood, said Iowa Workforce Development officials told him the proposed measures would reduce the trust fund balance to $969 million by 2032.

Statehouse Republicans have said those balances are why the state can reduce its unemployment insurance tax burden on businesses.

Reynolds, in a statement issued after the bill’s passage, said the trust fund’s balance shows the state is “overcollecting” and said the state’s unemployment tax has “needlessly punished Iowa business.”

“Thank you to our legislators and key stakeholders for their support to help attract new business to Iowa and place existing businesses on a level playing field with our neighboring states,” Reynolds said.

Dickey defended Republicans’ previous changes to limit the state’s unemployment benefits and the current proposal to lower the taxes on businesses.

State workforce officials “have more tools now to help our citizens aspire to desire something more than an unemployment check,” Dickey said during debate in the Senate. “The facts and the numbers prove that what we have done in Iowa is working.”

Democrats have argued it would be reckless to reduce the trust fund under the current, uncertain economic conditions, and that statehouse Republicans already weakened the unemployment system in 2023 when they reduced the number of weeks that unemployed Iowans are eligible for benefits.

During debate, Sen. Janet Petersen, D-Des Moines, read a list of layoffs in Iowa in the past year.

“These are real Iowans facing real job losses just this year, and instead of helping them you want to pull money out of Iowa’s unemployment insurance system to give another corporate tax break to companies that are laying them off,” Petersen said.

Dickey had previously proposed a 10 percent surcharge for employers whose workers withdraw more than 25 percent from the unemployment trust fund than they contribute over a three-year period. That provision was removed from the bill Wednesday.

In the House, Republican Rep. David Young, of Van Meter, the bill’s floor manager, said the estimated savings for businesses would allow them to invest more in employee salaries and benefits.

“The sound argument is being made that we’ve been overcollecting, especially compared to other states,” Young said.

House Democrats proposed a series of amendments for the bill, including one that would increase weekly benefits for workers when the state’s unemployment rates rise. All amendments were unsuccessful.

“Unemployment continues to go up and we continue to see more economic downturn in this state,” Democratic Rep. Jeff Cooling of Cedar Rapids said. “Workers will not be able to afford to take care of themselves and their families.”

The bill passed the Senate on a party-line, 32-16 vote with only Republicans supporting and only Democrats opposing. Later Wednesday it passed the House, 59-27, along party lines.

Comments: (515) 355-1300, erin.murphy@thegazette.com

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