Senators Dan Dawson and Pam Jochum

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An Iowa legislative session heading into spring adjournment with plenty of bills left of the docket. We sit down with Iowa Senators Pam Jochum and Dan Dawson on this edition of Iowa Press.

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Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks. With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow. Learn more at IowaBankers.com.

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For decades Iowa Press has brought you political leaders and newsmakers from across Iowa and beyond. Celebrating 50 years of broadcast excellence on statewide Iowa PBS, this is the Friday, March 25th edition of Iowa Press. Here is Kay Henderson. 

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Henderson: Our guests for this episode of Iowa Press were some of the leading voices in the debate in the Iowa Senate about a tax bill that has already become law when the Governor signed it on March 1st. But there are a host of other issues pending in the Senate Ways and Means Committee. Our guests today are Dan Dawson, he is the Chairman of the Senate Ways and Means Committee, he is a republican from Council Bluffs. Also with us, Senator Pam Jochum, she is a democrat from Dubuque and she is the ranking democrat. Senators, welcome to this episode of Iowa Press.

Jochum: Thank you.

Dawson: Pleasure to be here, thank you.

Henderson: Joining the conversation are Stephen Gruber-Miller of the Des Moines Register and Erin Murphy of the Gazette in Cedar Rapids.

Murphy: Senators, one of those other bills is the return of the bottle bill. We're once again working on the state's recycling program and was sort of an annual tradition at the Statehouse. I wanted to ask you both, and Senator Dawson we'll start with you, is this the year that something gets done and something is passed and sent to the Governor's desk?

Dawson: I don't know.

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Dawson: And we say that every year. I do think momentum is building towards getting something finally done on that. I don't know that this is the year or not. But I do think that post-pandemic a lot of Iowans are starting to take a look at how we recycle and maybe trying to find a way to refresh the old system. I think there is support for the bottle bill out there to keep the nickel deposit out there and continue this recycling program but there's got to be a better way to do it. Once we closed down the grocery stores or even the Governor's proclamation during the pandemic, a lot of people decided to opt out, they wanted to just put it in their blue bins. My area in Council Bluffs, I'm one of those families that we've never gone back to the store since and there's a lot of people like that as well that are wanting something a little more convenient than what is there right now. And the system does need to be refreshed. It's 40 years old. And in the end, made comments earlier on that it's a nickel tax on Iowans. I don't get to go to a store and buy a can of Coke and say if I want the one with the 5 cent or one without, I have to pay for that 5 cents there. That might have a different way I might want to recycle my cans. So I think it's a conversation that is probably at a higher level I've ever seen it before. There's a lot more people talking about it. I said last year, I think we had 8 total bills in the bottle bill between both chambers. When there's that much conversation, it means something is probably going to happen at some point in time but I wouldn't predict this is the year yet.

Murphy: And maybe just real quick, what are your goals? What changes would you like to see happen?

Dawson: Well, I think we have to one, focus on the redemption centers. Our redemption centers are starting to dwindle as the years have gone on there. And if we're going to have a recycling program, particularly for rural Iowa, there has to be a robust redemption center system out there. And that comes through additional funds through them and that is where the whole nickel becomes important. Additionally, I think we, Senator Jochum we've had some conversation before of how do we work on the urban areas? It's a lot more convenient for my blue bin on the curb to recycle that way than it is to maybe take them to a grocery store. But maybe there are some other options not to take it to a grocery store, but there's different types of programs out there that might work. So that would be some ideas out there.

Murphy: Senator Jochum, what has to be in a bottle bill before democrats will vote to move it forward?

Jochum: Well, certainly I think that the democrats want to make sure that we have more redemption centers for sure. We used to have 300 when the bottle deposit law became law and over the years it is now down to less than 100. I got many phone calls during the interim from people who are very angry because they couldn't find a place to redeem their cans. The grocery stores are not taking them back even though they are supposed to be and we only had one redemption center and they were only open 18 hours a week, which is actually not meeting the demands of the law either, supposed to be open 20 hours a week and at least on a Friday night or a Saturday. And they just didn't have the personnel to do that. So people were very angry that they could not get their cans redeemed. I'm also one of them that has been putting my cans either in my recycling bin, although our Veterans Freedom Center is collecting those cans, so I've been taking them there and then they redeem them and get the money back for programs that help our veterans in our community. Certainly we want to do more to make sure redemption centers work. I think we need to do a whole lot more as a state to improve recycling programs in our state. Many of our cities have some. I will say a little toot on my horn for Dubuque because Dubuque probably has the most comprehensive recycling program in the state. We do food waste, we do yard waste, they even pick up oil from the restaurants to recycle. So we have a very comprehensive recycling program. People in my community are very in tune with it and we're finding school children are very much in tune with it in their school system. And they go home and they say, what are you putting that in the garbage for? That's supposed to be in the recycling bin. So the kids are really into it as well and that is really good and to me that tells us our future is really going toward recycling like it should be.

 

Murphy: Just real quick, one of the ways this gets done is having agreement with the House. It seemed to be taking slightly different tracks. Are the Senate and the House seeing eye to eye on this?

Dawson: I think there are some areas of agreement where we want to modernize the system. I think the areas of disagreement, just putting it right out there, is probably on the unredeemed cans. I think the Senate has a viewpoint that those unredeemed monies are taxpayer monies and we need to start focusing on because that is taxpayer money, it's a compelled tax for that nickel, we should start treating it like other taxes and have a little more oversight of that system. I think the House might have a different take on that a little bit. I'm not saying their tact is wrong on that but that is probably where the big areas of disagreement might be right now on this.

Jochum: It's to a point where you've either got to make it work or we need to figure out some other system because it's really truly not working right now. But the House passed a very different bill. I think it came out of committee this week and very different than what came out of the Senate committee, which no offense, but I did not support that bill. It just doesn't even come close to what we need to be doing if we're going to resurrect and keep alive that law.

Gruber-Miller: So I wanted to pick up on something that you were both talking about, about the number of redemption centers. There's only about 60 left in Iowa. And the Senate bill and also the House bill have options for grocery stores and other retailers to opt out of taking back cans and bottles. So I'm wondering if you let them do that, you are increasing the fee for redemption centers, but how are there enough options for Iowans that this program can survive?

Dawson: Well, one thing is I can't speak to the House bill, I haven't seen all the details in that. One of the things in the Senate bill that the bill manager is really insistent on was having a bin drop program. And so one of the thought processes of that is that redemption centers can actually buy into these programs and put bins throughout the community so it's not a hard brick and mortar facility throughout Iowa and this is something where you just throw your cans in a bag, you have a UPC code where you scan it in, the money is deposited in your account within 5 to 7 days or something along those lines. And the distributors would also have the option for that as well, within the system as well. So that is when we talk about modernizing maybe we don't need brick and mortar recycling redemption centers throughout Iowa, maybe there is a way to do smaller little sub-packages there that feed into the larger redemption centers.

Henderson: No offense to both of you, but you live in urban areas, and many of our viewers don't, they live in rural areas. Senator Jochum, how do you provide a place for someone who lives in a rural area to redeem their nickels?

Jochum: That has been a challenge for this state for many, many years when you went from 300 down to 60. Certainly we need more redemption centers whether they be mobile or whatever. But I also know that if it isn't convenient that people aren't going to use it. And so that means you need to have lots of it and you need mobile and other options for people to return it. Like I said, either we make this thing work and increase the number of places where people return them or we need to figure out another system. I think that all of us have had some concern, we've heard it over the years that for all of the number of cans that are not being returned for the nickel back and that number dropped down to maybe 25% return rate since this pandemic started. And that means that 75% of the cans are somewhere else, they're in our recycling bins or they're in the landfill. And someone has got that money because we all paid that nickel. And who has it? And how much is it? And that money could probably be getting used for numerous environmental programs that we have in this state, unmet needs, not to mention if we want the bottle deposit law to work to help us get more of those redemption centers that are very convenient for the consumer.

Gruber-Miller: Would it help make the law work if the law were expanded to include containers like water bottles and sports drinks that aren't currently covered? That doesn't seem to really be part of the discussion this year, but that is something people have called for in the past.

Dawson: Well, my personal opinion is I don't think that would help just from trying to get something done. And the reason why I say that is I've always described this program as, the whole problem with the bottle bill or the solving or coming up with the answer to the question is you have about a third of Iowans who want it the way it is, about a third who want it gone and about another third who wouldn't mind expansion, taking it to 10 cents, these are all the ideas we hear all the time. But I think post-pandemic there is enough frustration out there just with the current nickel and what Senator Jochum referred to, all the unredeemed money, where that cash is out there, I don't think an expansion is in the cards right now when we can't even get our hands wrapped around where the current unknown money is at.

Henderson: Erin?

Murphy: Senator Dawson, you this week brought back the plan to fund the state's natural resources and recreation trust fund, involves a little bit of sales tax swaps there. This was originally pitched by the Governor and then later by Senate republicans as part of a broader package involving the income tax cuts. Those have since been passed and now the trust fund piece is kind of standing on its own. Can you pass it that way? Can that stand on its own and pass on its own not separate from the income tax cuts?

Dawson: Well, I think with the subcommittee here yesterday and judging by the support I think it's something personally you could pass on its own. But when it comes to tax policy I think that's always, like in our initial Senate tax plan the tax system isn't just micro target to one thing. You have your corporate, you have your income, you have your credits and exemptions and you have your sales tax. So you pull one lever, there's always a cause and effect there. I think it always works better with larger bills and I think that there's probably a lot more of a conversation with inside this, but I think judging by the support we saw in subcommittee the first time as well as yesterday, this is something that could pass itself. There is a lot of republicans and I think even people across the aisle that you get positive feedback on. Now, the details do matter and that's why I met with the subcommittee yesterday. Senator Jochum brought up a point that was never brought up before there and we've had this bill out for three months and it caused me to go back and do my homework on it a little bit.

Murphy: Well, let's go across the aisle. Senator Jochum, democrats have pushed for this trust fund to be funded over the years. Is this a mechanism that democrats can get on board with?

Jochum: We need to have a lot of changes to the bill to get a lot of our support even though I heard clearly in yesterday's meeting that -- what I heard yesterday in the meeting was a tremendous amount of frustration from people who have been waiting for 12 years to get the money in that trust fund. And they finally saw some glimmer of hope that we might get money into that fund. And I understand that because probably everybody who watches this program probably went to the polls in 2010 and voted to authorize this trust fund. I was one of them and you probably were as well. But here was the problem that we're having with the bill and that is that when that passed our idea as taxpayers when we said yes we want to do this was that this would be all new money to not supplant or replace existing funds but rather expand existing programs and then of course new efforts to help with water quality and natural resources, REAP, trails, outdoor recreation. My take on reading the bill, and I certainly could have read it wrong, but number one it's a very creative scheme, kind of a shell game on how the money is actually brought in and it moves into this account. But at the same time saying that, it also about half of the money actually replaces current general fund dollars into existing programs. And I'll just pull out one example and that is of course trails because we always hear trails, at least in the cities. Under the proposed law, current law, it says that that trust fund is supposed to provide about $20 million in bike and water trails. Under the bill that came out of our subcommittee the other day, the amount of money that would flow into trails would drop to about $8.3 million. So that is quite a bit of difference, that's a $12 million difference on what we thought we were going to have in that trails account than what this bill actually outlines. So the bill not only has a very creative scheme in how it's going to pay for different things, but it also changes the entire formula. And it is the formula that is causing us tremendous heartburn, number one. Number two, cities and counties are very, very nervous that we are scooping their local option sales tax and then promising that we're going to give it back because the legislature has broken its promises more than once and our commitments to repay local governments on funding.

Murphy: Senator Dawson, you've heard those challenges. You also have challenged Governor Reynolds on this program a few weeks ago, said she was hesitant to support something like this because it would increase a tax, it may be offset otherwise, but that is how she phrased it, she wasn't eager to raise taxes on Iowans. What gives you optimism that this could pass despite these myriad challenges?

Dawson: Well, not to correct the Governor, but I think she has said that she would be open to it at some point in time, just not in this inflationary environment with this current what we're looking at right here. I've had a lot of positive conversations with the Governor's Office as well too as this type of potential and how we would do it. So, I think here's the reality is this has been out here for 12 years and, like Senator Jochum said, we had frustration yesterday. What I think is probably unique about this and why I do think there is optimism for this is that the formula was just discussed there, this wasn't something that the Senate came up with or the House came up with and said we're going to change the formula from 2010. It was all these groups out there whether it be Pheasants Forever or whether it be county conservation, all the groups that had a stake in this back then knew that the old formula wasn't going to receive the political support needed to get across the finish line. So back in 2019 and 2020 you had two dozen groups come to the table there and say, how can we make a new formula? And the reality is the sales tax revenues have changed dramatically from 2010 to now because of the way we modernized the digital age, and even from 2019 to now it has grown even further. So the pies have to change, the wedges there and there's still more money going to trails than currently right now is mentioned there. There's going to be a lot more money going to water quality. I think in the system overall we're over $100 million of current general fund obligations, but we do IWILL you're going to have about $220 million. So that means $120 million more dollars is going to go into these systems there, it's going to build out for the future.

Gruber-Miller: Okay, we could probably do a whole show on each of these subjects but I want to move on. So, another one of the Governor's priorities is a bill that would require gas stations with compatible equipment to sell gasoline with higher ethanol blends. That bill passed through the House early this year, it now sits in your committee, Senator Dawson. Are you going to pass it this year?

Dawson: I think there's the opportunity to do something in reference to that. And you're talking about the E-15 standard here. But I do think that from a Senate standpoint that we want to make sure we get this done right. And the impacts that these gas stations, the retailers out there, needs to be heard. And I think the Governor has done a lot from the initial bill that was proposed last year that did not make it out of the Senate at all to going back to working with the groups there and coming up with a lot more focused, a lot more narrow in scope to achieve the overall goal. And I think our caucus does, I think the Senate on both sides, we want to support ethanol, we want to make sure that Iowa has a voice in the national stage when we talk about renewable energies here. But there's a lot of details that need to be worked out. I don't think anyone is against ethanol but we want to make sure that how we're developing the product and how it actually gets to the end user, there's a lot of rungs along there and those are important rungs that we need to make sure we hear all the voices.

Gruber-Miller: So Senator Jochum, in the House when this passed democrats were on board, they were eager to pass it. Is this something in its current form that democrats would support in the Senate?

Jochum: I think the democrats in the Senate are looking much more closely at the bill right now. When you consider what happened in the House, it went from start to finish in 9 days and that is a very fast moving bill and I'm not so sure they all had time to really digest everything that the bill contained. We've now had that time. And so now we're getting a lot more feedback from people like independent, small gas station owners in more of our rural and smaller towns that are saying whoa, you're going to have to help us a whole lot more with the finances in order to change the tanks and the pumps and the dispensers because E-15 needs a whole different kind of equipment, infrastructure to make it work. And we're talking like $300,000 per dispenser, tank, etcetera and these little operators just don't have that kind of cash nor is that amount of money currently in the infrastructure account to help them with those costs. So that has been one of the stumbling blocks that we have ran into in the Senate since this came to us from the House. So there are a lot of other issues that have emerged that we need to work through now to see if we can even make it work and if we can make it work at this session.

Murphy: Senator Dawson, Kay mentioned the tax bill at the top. We now have had our first revenue estimating conference since that tax bill passed. And in one of the out years we do start to see a reduction in state revenues. Senate republicans said when this bill was passed that it would not harm future state budgets. Why is that still the case given what we've seen from the REC now?

Dawson: Well, I would say when you talk about the REC, the REC does not reflect the $2 billion we're going to have in the taxpayer relief fund. When we constructed the tax bill, it was a five year bill, four years to get to the flat income tax and there's a few other things that phase down on the credits and exemptions we are phasing out. In our budget, we do not really tap into that taxpayer relief fund and we're expected to have about $2 billion until year five. And we have a smoothing mechanism that we built in there too to make sure that if revenues fall below 3.5% growth each year, that we have that $2 billion there. So it's the overall financial picture, right, when we have our rainy day funds that are topped off, we have our economic emergency fund topped off, we have $2 billion in taxpayer relief fund that we'll barely be even touching by end of year five, we're well prepared to implement this bill.

Henderson: Senator Jochum?

Jochum: So yes, that is to me it was a big concern when the Revenue Estimating Conference came out and said that by 2024 they were projecting a negative 2.2% growth in our budget. And I know when this tax bill was brought to us we were told that this relied on a 3.5% growth in our economy and then a 2.5% growth in the budget. So even though inflation may eat 7%, the budget will increase by 2.5%. So that to me is an alarm, a little red flag. But here's the deal, a flat tax is not a fair tax. It may sound like it on the surface and a lot of people may think that and a lot of your people watching this program today may think that. But I actually dove into those numbers a little more and I'd be glad to share some of the spreadsheets, I got a new spreadsheet last week from the Department of Revenue and asked them now to give it to me by the federal adjusted gross income because taxable income is going to be, the definition will change next year. And so this gives us a much clearer picture of the distribution of that tax cut by income groups, by income brackets. Just to break it down real quick, so 82% of the money of the tax break goes to the top 26%. Break it down a little further, you've got about 3,400 millionaires in the state of Iowa. They will see on average about $62,000 a year cut in their taxes or about $1200 a week. Now, we have about almost 600,000 Iowans who earn less than $40,000 a year, which tells me that we're also a low wage state, most of them will see zero, nothing. And if they see anything it's $100 a year so we're talking $2 a week. Now look at $40,000 and $60,000 and the $60,000 about half of Iowans are $60,000 or less. They will see about $300 a year, comes down to $6 a week, a Big Mac. So it's really not a fair tax.

Henderson: Senator Dawson, you will hear this on the campaign trail. How will you defend your bill?

Dawson: You defend it by being honest merits and what I would say to this is we talked about this on the floor nationally, a flat tax is not a red state thing, you have states like Colorado, Pennsylvania, Massachusetts, Illinois next door, those are flat tax states because people understand that once you get on the same page, driving rates down further is a lot easier and I think people we talk about regressive or progressive taxes, the reality is the flat tax is a proportional tax. That means that you can have the same rate but someone who makes more is inherently paying more dollars than someone who makes less. And I think we will see Iowans support this resoundingly here in this next election as well going forward. Mentioning Illinois, they actually had a bill here a couple of years ago that tried to undo their flat tax and it was rejected by the voters. People understand flat taxes, they understand flat is fair.

Gruber-Miller: Okay, really briefly, we're almost out of time, I want to ask you both. Other states as we're seeing higher gas prices are doing essentially something to mitigate that, perhaps a gas tax holiday. I want to ask both of you very quickly, do you think that that's something Iowa should consider? Senator Dawson?

Dawson: I'm not sure if that's in the cards at this point in time. Typically, and this kind of goes back to my credits and exemptions pathway I'm on here, the drumbeat. When you do stuff like that it's hard to undo it and then it becomes, well when is the right time to undo those holidays so to speak? I think holistic tax reform is the better way to go about it.

Gruber-Miller: Senator Jochum?

Jochum: It has been discussed among us as democrats but obviously we're sitting with 18 out of 50 members so I'm afraid my friend here from Council Bluffs is going to be calling the shots on that more than I will. But we'd be glad to talk about it. I think the biggest concern is once you start doing that then it really does have a dramatic impact on the road use tax fund and does it delay any of the roads or bridges that we had planned to fix and does that mean it puts a stall on that? And then we're talking workforce problems again when we're trying to deal with a workforce problem because they at least were working to get those roads and bridges repaired during this coming season.

Henderson: Senators, I'm sorry to interrupt but we are out of time. Thanks for joining us on this edition of Iowa Press.

Dawson: Thank you.

Jochum: Thank you so much. Thank you to all of you.

Henderson: You bet. You can watch Iowa Press any time at iowapbs.org. For all of us here at Iowa PBS, thanks for watching.

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Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks. With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow. Learn more at IowaBankers.com.