Iowa Gov. Kim Reynolds called for a flat income tax, cuts to unemployment benefits, and state-funded scholarships for students to transfer to private schools in her Condition of the State speech Tuesday evening.
She said the condition of the state is strong.
“We’re strong because we’ve been guided by the lights of common sense, fairness, and freedom,” Reynolds said. “By the knowledge that bold action isn’t always government action. It’s Iowans making their own decisions for their own families and future.”
She highlighted last fiscal year’s $1.2 billion budget surplus and nearly $1 billion cash reserves.
“That’s good,” she said. “We kept spending down. But it also means that, despite the historic 2018 tax cuts, we’re still taking too much from Iowans’ paychecks. That needs to stop now.”
Reynolds called for phasing in a 4 percent flat income tax over the next four years, eliminating the current differences in tax rates for different income levels. The flat tax would take effect in January 2026. The state would see a $1.6 billion reduction in revenue in the first year of a 4 percent flat tax, according to the governor’s office.
Reynolds said the average family will pay about $1,300 less in income taxes after the plan is fully phased in. That’s in addition to what she says is a $1,000 average family tax cut from cuts that were already enacted and will take effect in 2023.
“Yes we’ll have less to spend once a year at the Capitol, but we’ll see it spent every single day on Main Street, in grocery stores, and at restaurants across Iowa,” Reynolds said. “We’ll see it spent in businesses instead of on bureaucracies. We’ll put our faith in Iowans, and they won’t let us down.”
According to Reynolds’ office, they don’t plan to tap into the nearly $2 billion that’s expected to be in the Taxpayer Relief Fund at the end of this fiscal year. Administration officials say the relief fund could act as a safety net if state revenues don’t follow the average growth rate of the past 20 years.
Reynolds also announced a plan to repeal state taxes on retirement income for retired Iowans who are 55 and older, including retired farmers and people who received stock in their company.
Addressing the workforce shortage
The governor highlighted her Future Ready Iowa workforce training program, saying it has awarded scholarships to nearly 17,000 Iowans since the fall of 2019, and expanded apprenticeship programs.
But she said the need for child care is a barrier to work for some Iowans, and she is expanding the Child Care Challenge program to create another 5,000 child care openings on top of the 4,000 in the original program.
As another strategy for addressing the workforce shortage, Reynolds announced she will propose a bill to cut unemployment benefits so that they last for 16 weeks instead of the current 26 weeks. According to her office, there will be an exception for plant closings.
“There are many reasons for the worker shortage, but we need to recognize that, in some cases, it’s because the government has taken away the need or desire to work,” Reynolds said. “The safety net has become a hammock. Don’t mistake me; this isn’t the only cause. But it’s a growing problem, and it’s not just an economic one.”
She said she is also creating a separate re-employment division with Iowa Workforce Development that will be focused on helping unemployed Iowans find jobs. And she is asking the legislature to put more funding toward existing loan repayment programs focused on expanding the health care workforce in rural areas.
Education
Reynolds said public schools don’t always fit the values or meet the needs of all families.
“Some even believe that it’s a school’s responsibility to not just teach kids to learn but to control what they learn—to push their worldview,” she said.
Reynolds said some parents have highlighted books with “vulgar and sexually explicit material involving minors.”
“So the parents who are listening tonight, who are frustrated with what’s happening: Know that I and members of this legislature have heard you loud and clear,” Reynolds said. “Enough is enough. Parents matter, and we’re going to make sure you stay in charge of your child’s education.”
Reynolds is proposing legislation that will require schools to post lesson information and a full list of school library books on their website. But her proposal will not change the current law that directs school boards to have their own process for handling challenges to school materials.
“Because when our parents are fully informed, they can make informed choices,” Reynolds said. “And ultimately, that’s what every parent deserves: a choice. Even when the school is doing what it should, that doesn’t necessarily mean the unique needs and values of every student are going to be met.”
Reynolds is again proposing state-funded scholarships for public school students to transfer to private schools, with some changes from last year’s bill.
This year, her proposal would give about $5,300 to students who have an IEP (Individualized Education Program) or whose families earn up to 400 percent of the federal poverty level. Last year, she proposed only offering these scholarships to students at the lowest-performing schools, but that’s not the case this year.
Reynolds said about a third of the money the state spends per student will be held back in a fund dedicated to small, rural school districts. And the scholarships would be limited to 10,000 students to start.
She announced she’ll use federal funding to give $1,000 retention bonuses to teachers who sign on to continue teach next year.
And she’s proposing a 2.5 percent increase in per-student K-12 school funding, a 2.5 percent increase in community college funding, and a 2.5 percent increase in regent university funding for the next fiscal year.
Reynolds said she will use federal pandemic relief funds to give $1,000 bonuses to all law enforcement and corrections officers in the state.
Legislative leaders react to Reynolds' speech
Top Republican lawmakers expressed general support for Reynolds’ ideas but said they need to see the details.
Senate Majority Leader Jack Whitver, R-Ankeny, said he’s excited to work on the governor’s plan for a flat tax.
“Our goal is to get to zero [income tax], and you don’t get to zero overnight,” Whitver said. “And so if this is a step we can take to get to one flat tax in the state of Iowa, that’s the next step we need to take to get where we want to go.”
Asked what he thinks about cutting 10 weeks from jobless benefits, House Speaker Pat Grassley, R-New Hartford, said addressing the workforce shortage will take a holistic approach.
“I don’t think anyone’s going to say, if we pass a bill that would reduce the weeks, that all of a sudden that has fixed the problem,” Grassley said. “But I think it needs to be a part of us working towards the solution.”
Democratic leaders criticized a lot of the governor’s ideas.
House Minority Leader Jennifer Konfrst, D-Windsor Heights, said solving the workforce shortage isn’t just about keeping people from getting unemployment benefits.
“Affordable child care, affordable housing, making sure Iowa is a welcoming state—all of this matters to Democrats, and we didn’t hear a lot of that from the governor tonight,” Konfrst said.
Senate Minority Leader Zach Wahls, D-Coralville, said Democrats support the federally-funded bonuses for law enforcement and teachers. But they oppose the governor’s other education proposals.
“Democrats oppose using public dollars for private school,” Wahls said. “We don’t think this is going to be an effective way of trying to keep teachers in the profession or making public school teachers feel like they’re being respected.”
Reynolds is expected to introduce her bills over the next few days for lawmakers to consider over the next several weeks.
