♪♪ [Kay Henderson] A $4 billion dollar property tax bill, a signature piece of this year's legislative session, is now law.

We'll discuss that and more with Senate Majority Leader Mike Klimesh on this edition of Iowa Press.

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♪♪ [Announcer] For decades, Iowa Press has brought you political leaders and newsmakers from across Iowa and beyond.

Celebrating more than 50 years on statewide Iowa PBS, this is the Friday, May 22nd edition of Iowa Press.

Here is Kay Henderson.

[Henderson] After a marathon 34-hour day that ended the 2026 legislative session.

For the past two weeks, we've heard from the House speaker, then we heard from the minority leader in the Iowa House, Brian Meyer, last week.

This week, we're hearing from the Republican floor leader in the Iowa Senate.

Senator Mike Klimesh is a republican from Spillville.

He served as mayor of Spillville for a total of 22 years.

In 2020, he won a state Senate seat, and last fall, his republican Senate colleagues selected him to be Senate Majority Leader.

Mike Klimesh, welcome to Iowa Press.

[Senator Mike Klimesh] Thanks for having me, Kay.

[Henderson] Also joining our conversation, Stephen Gruber-Miller of the Des Moines Register.

[Stephen Gruber-Miller] Senator, at the start of the legislative session in January, you proposed a bill on pipelines and eminent domain that had a very specific plan to widen the corridor where the pipeline could be built.

The theory being that they could talk to more landowners and avoid eminent domain.

The session ended without a vote on that.

What happened?

[Klimesh] That's a great question.

So, you know, the bill we introduced that I introduced in the first week of session, did a lot of things right.

It established what was a voluntary easement corridor.

It also changed how pipeline companies could interact with property owners, giving them the keys to those interactions.

And I was really clear early on, you know, in all my conversations about it, it's building a consensus, right?

I mean, there's two different ideologies in the Iowa Senate caucus, Republican caucus as to how to approach that.

And, you know, last year we had the conversation on 639, House File 639 and so, you know, this year I wanted to introduce something that actually could respect property owners rights on multiple different levels.

And then we continue those conversations.

I visited with my colleagues, and the goal was to get enough votes to move it to the floor.

Senator Alons, late in session, introduced an amendment that took some pieces from my amendment, actually.

So, and I had conversations with Senator Alons great conversations with him about that.

At the end of the day, just neither one of us could get the 26 votes we needed in our caucus to move the legislation forward.

And we had great conversations around both pieces.

The primary ideological difference is Senator Alons still had no eminent domain for CO2 pipelines, which was dealing in absolutes, right?

Where my approach was, why didn't that corridor give voluntary easements and opportunity to play out?

And I felt that we would get way north of 90% voluntary easements, which was a benchmark we had a couple of years ago.

So, and Senator Alons came back, like I said, he took some portions of what was my amendment, and again, placed in there the provision of eminent domain for CO2 pipelines.

And so those two conversations took place in our caucus.

Great conversations.

And at the end of the day, neither one of us could reach a consensus to bring enough votes to the floor.

[Gruber-Miller] So, there are some critics who say the longer this waits, the longer the that we go without action on this, the better it is for Summit Carbon Solutions, which is trying to build this pipeline.

There's more time for them to get their project going.

You know, are you going to try again on your proposal next year or is it too late?

[Klimesh] No, I don't think it's never too late to pass good policy, right.

I mean, so again, you know, the thing with the amendment that I proposed was it didn't just deal with Summit Carbon Solutions, right?

I mean, it dealt with all linear infrastructure being built in the state.

I think it's really important for us to have that conversation.

Apart from the summit pipeline conversation, which has been going on for several years, we want to make sure we have good policies in place.

So, the next pipeline that's built, maybe it's an oil pipeline, maybe it's a natural gas pipeline.

So, the next companies that that's, you know, looking to build infrastructure in the state can follow those same guidelines to provide relief for property owners that don't want to have their property taken or don't want to enter into a voluntary easement.

And also, the other provisions we put in there that actually kind of gave those property owners the ability to say, no, I don't want to talk to you anymore.

You know, those things are all important in the future.

They're important.

So yeah, I intend to continue to try to move that piece of policy because from our perspective, you know, it's important to provide those safeguards to property owners.

[Henderson] This week, Governor Reynolds signed a property tax plan into law.

You were there back in January.

Senate Republicans had their own distinct plan, which is not what wound up being the final version.

You had sort of an inflation factor that would limit property tax growth at the city and county level.

This has kind of a really hard 2% cap.

Are you comfortable with that?

[Klimesh] You know, so there was a lot of conversations around that.

Kay.

Right.

So, I mean, our approach initially was 2% cap with the CPI, right?

Allowing CPI and the way our CPI was staggered.

And there was some confusion, I think, on it.

It wasn't like if, you know, if we went up 3.1% in the CPI index, we didn't automatically allow for 3.1% growth.

There was stair steps, approaches going up as to where you could actually feel that relief from CPI.

At the end of the day, I think what we passed will work very well for small communities, medium sized communities.

I think by carving out.

So, when we talk about a hard cap and soft cap, and I know it gets confusing, right?

So, I'm not going to talk about it that way.

I'm gonna talk about a 2% growth in growth cap.

And then what we didn't cap was those trust and agency accounts that cities rely on.

That's to pay for our insurance, our employees benefits, our IPERS payments.

All those things are still uncapped.

And then we also uncapped the stuff in the counties in their supplemental levy, which would mirror those same components in the cities.

So, dealing with insurance premium increases, employee benefits, all those things we left uncapped in the final product.

So, while we put the cities and the counties on a 2% hard cap for growth, we allowed them the ability to have fluctuation in the caps on those things that they can't control.

I mean, it's no fault of the city of Spillville that we see a 26% increase in our insurance premiums, right?

So, what we didn't want to do was have to have those communities make those decisions and say, do I pay my insurance premium?

Right?

Or do I plow snow?

So, we wanted to leave that variable in there.

And so, I think at the end of the day, when we look at the product that we passed and Senate Republicans goal always was to focus on Iowa homeowners to provide relief for Iowa homeowners.

That was our primary goal.

And the bill did change a lot.

We had the CPI indexing in there.

We had the portion that if you were 60 or over and owned your home, you paid no more property taxes.

But at the beginning, we had our version and the governor's version and the House's version.

We negotiated through those three, you know, having conversations about which components each chamber liked, which ones we didn't like, how far can we push the needle here?

What can we do if we don't provide more revenue to widen the base out?

At the end of the day, we came up with a proposal, actually a bill that was signed into law just yesterday that I think checked all those boxes for us.

[Henderson] You also had a gas tax component in it.

That, again, was a little bit complicated, gave the legislature sort of a veto power, but it would have every year maybe done a little incremental increase in the gas tax.

Why did you propose that in the beginning?

And what is your thought about what's happening with Iowa roads right now?

[Klimesh] Yeah, that's a great question.

So, I mean, it goes back to our previous what I was talking previously about, our approach to property taxes to begin.

Right.

So, the Senate's plan was very aggressive.

I mean, you know, like I said, 60 and over.

If you owned your home, you didn't pay property taxes anymore.

You know, we were and part of that was having that gas tax indexing and the ability for those communities to vote on additional lost revenue.

That was also in our original bill.

So, we wanted to try to widen out the base for those communities.

Right?

I mean, from Spillville perspective, one of the most difficult things we do is build roads, right?

I mean, by the time small towns like that build a chunk of road service, the debt, it's time for us to build another chunk of road.

So, we really felt that by indexing the fuel tax, which a lot of states went down that road when they did major gas tax adjustments, most states that have done major gas tax adjustments in the last ten years have indexed.

Iowa didn't do that in 2015.

So, we felt that all those components were essential for us to widen out the base so those communities could provide the services they wanted to.

As we made some fairly deep cuts in property taxes for homeowners in Iowa.

[Gruber-Miller] The governor said this week that the state won't be releasing all the details of what happened with the two top IPERS officials, who resigned or were fired recently after a misconduct investigation.

Do you think the public deserves to know more information about what happened?

[Klimesh] Well, from my perspective, it sounds to me and I know no more than average public does.

It sounds like it was an HR issue that took place.

I'm being told that there was, you know, nothing that occurred would have been detrimental to the funds themselves.

I mean, Iowa's IPERS are solid, they're strong.

They're mostly fully funded, almost fully funded.

I don't know what I don't know.

So, but I do know that there's no, there appears to be no concern about the IPERS fund itself.

And if these are internal HR issues, that's where they're going to lay.

[Henderson] One of the decisions that legislators made was to reserve $3 million for pediatric cancer research.

And at the Senate's suggestion, it's connected to an increase in the tax on vape products.

E-cigarettes, and the vapor product that's put in it to make the vapor.

Why did that get added to it?

[Klimesh] Well, so Iowa was again, one of the few states that wasn't taxing nicotine pouches or vapor products, right.

Vaping products, all the surrounding states that we have Wisconsin, Minnesota, Nebraska, they all have a nominal fee, some sort of tax structure on those products.

We really wanted to shine the light on pediatric cancer research because it's very important in state of Iowa.

Cancer research in general is important to the state of Iowa.

But we were realized we were spending a lot of money on adult cancer research, but very little on pediatric cancer research.

So, we had a conversation about taxing these products last year, actually, I introduced legislation when I was chair of Health and Human Services to tax them last session.

And so last session continued into this session, and we just pivoted and said, look, we have an ability here to institute a new tax that doesn't make us not competitive with surrounding states.

So, we're not higher than Nebraska or Wisconsin or Illinois.

But yet we can take that revenue and we can use that to fund pediatric cancer research, which is going to give us $3 million annually.

Going towards that important research at the University of Iowa, additional revenues will go into the Medicaid Trust Fund to help make sure that we keep our Medicaid system solvent.

So, there was a move to go beyond that and actually tax cigarettes.

[Henderson] And governor proposed it $0.65 a pack.

[Klimesh] And we couldn't get traction on that.

We could get traction on the vape pouch, vaping pouch tax.

That was something we could get traction on.

I'm sure there'll be conversations next year about looking at a more holistic approach to increasing tobacco taxes in the state.

But for us this year, vaping pouch tax was something that was not new.

We introduced it last year and we had a target of $3 million for pediatric cancer research.

And that fit right in that box really nice for us.

[Henderson] Last year, the legislature, at the governor's request, reserved $1 million for the University of Iowa to sort of research a handful of cancers to try to figure out why Iowa has such an alarming rate of cancer.

There's no more money from the state going to that research.

Why?

[Klimesh] Well, I think that research actually yielded us the information that we were looking for.

I mean, you're talking about the map, the interactive map that you can go to.

I can go into that map and I can look at Winneshiek County, I can look at the cancer rates, you know, all the different types of cancer they research and they interactive map really gave us the ability to look across the state and pinpoint where we're seeing increased levels of certain cancers, right.

And I think then once that work has been done, now it's worked.

Now it's incumbent upon us to continue to fund cancer research.

The University of Iowa, to provide, you know, the medical support needed to treat those cancers.

And I think, you know, that map provided the information that we needed from it.

[Gruber-Miller] One of the things that was announced towards the end of the session was a deal on water quality funding.

So, this rearranges a lot of sort of existing state funds.

And so, 25 million is going to go to Central Iowa Water Works to upgrade their nitrate removal.

There's some more money for central Iowa projects and various other programs that that the governor says these are the programs that are working.

If you were to put this on a spectrum, right, I mean, is this a good start?

Is this going to be enough to address the problem?

I mean, what does this show Iowans about, how serious republicans are about tackling this issue?

[Klimesh] That's a good question.

I think it's important we have the conversation in water quality to realize we put, you know, on a normal year, $54 million into water quality right from our coffers, go into water quality.

What we saw was an opportunity to improve on that right, to add additional water quality sensors to the Department of Natural Resources, help central Iowa Water works with the nitrate reduction system.

And then also we part of that big part of that package, which is extremely beneficial, was, was a grant program that would be able to grant money to small, mid-sized communities that are building new infrastructure, upgrading their existing infrastructure.

And there was also added on late a small loan, I think around $10 million went into a loan fund that would be loaned out and then paid off at a nominal interest rate.

So, the goal was to deal with nitrates.

We see with Central Iowa Water Works, which services about 700,000 Iowans.

So, it's a large chunk of Iowans that get their water from Central Iowa Water Works.

And then we also want to be able to say, you know, cities like Spillville who just put a new water system in last year, just finished it about a $2 million project to be able to say, if you're doing this, you're improving your infrastructure, you're making these large financial decisions.

Let's be helpful.

Let's be a partner in this, right through a grant program with a cap on that and through a loan program different than the SRF money, which is already able to be tapped by small and medium sized communities.

So, the state revolving loan, we have that, and then we have these two new funds we created on top of the additional money we put in for water sensors.

So, I think it was just adding to the already pot that we build to show that we are concerned about making sure we have great water quality in the state of Iowa, which we which we do, and continue along that path.

[Gruber-Miller] You're from northeast Iowa.

You were talking about some of the efforts that will go toward central Iowa, and that was one of the criticisms, is a disproportionate or more of the money is going into central Iowa rather than across the state.

Do you think that's a fair criticism?

[Klimesh] I do not actually know.

I mean, the $25 million going to Central Iowa Water Works, obviously, is a large single sum investment, right.

But the other two funds that we created in there, the grant program and the loan program, will benefit small and mid-sized communities all across the state of Iowa.

So, I think the folks in northeast Iowa are looking to do improvements and upgrades.

We'll have access to those dollars.

But again, like I said earlier, we wanted to make sure that Central Iowa Water Works services 700,000 Iowans, which is almost a third of our population.

So, you know, we felt it was important to point a light on that and give them additional funding while the other two funding streams, along with the SRF money that still exists, provides, you know, financial relief and opportunities for small communities to upgrade their systems.

[Henderson] There was also a big debate about monitoring the water quality and investing in that.

And the money apparently is going to the Iowa Department of Natural Resources.

They could give it to the University of Iowa, which has a rather robust system that's been operating for a few years.

What's your preference for where that money goes?

[Klimesh] So, the University of Iowa Flood Center, right, which is one of the conversation that you were talking about, DNR, the flood center.

So, the flood center in northeast Iowa, where I'm at on the Cherokee in the Upper Iowa, does an amazing job on flood sensors.

I mean, I've worked with those folks.

We have flood sensors on the Cherokee.

We've added flood sensors on the Cherokee over the last several years.

Some of the tributary creeks, we've added flood centers, flood sensors on those.

So, the University of Iowa Flood Center does a great job building, helping us to build mitigation strategies and plans for flooding.

The DNR has been and will continue to do water quality initiatives, so we wanted to keep those two buckets individually where they were at.

The DNR was doing water quality testing, and the flood center was helping with flood mitigation.

So, we wanted to keep those buckets filled and those respective locations.

[Henderson] Switching to a subject, I know that you're interested in, hydrogen.

The legislature passed a bill to set some new ground rules for development of hydrogen.

Perhaps, maybe new derricks in the state that will bring it up from way, way deep in in Iowa, we had a we had a geologist here a few weeks ago explaining that their underground pools of hydrogen, perhaps likely under Iowa, and that companies want to drill down and bring it up.

Do you think that Bill answered all of the questions about property rights and the disclosure of what those companies may or may not be doing?

[Klimesh] Yeah, I think it did.

Honestly.

So, I mean, when we talk about hydrogen development, we had an existing code section already dealing with pooling orders, right?

So, Iowa's had pooling order law on the books for a long time, but it's out of date because Iowa has no subsurface mineral rights or resources.

Now we think we do we, you know, pretty optimistic.

So, for us, it was going back in and freshening up those existing code sections because let's say, for example, the cost recovery.

So, if I was encapsulated in a pooling order, which the DNR could have done prior to the passage of this bill, the drilling company had the ability to recover the costs from me as a property owner by putting a lien on my property.

So that was in the code.

So, what we went into was we went to the code and we said, okay, we need to upgrade our pooling order sections.

And then we took chunks from Oklahoma for surface land restoration.

We took chunks from other states that have had a lot more years dealing with mineral rights, oil and natural gas, to make sure that, you know, when a company approached a landowner that, that, that the landowner had, you know, the upper hand in those conversations when the companies were done drilling, that they had the ability to dictate the terms of putting that property back to the way it was prior.

The pooling order, we went with the 25% surface owner requirement.

So that means that you still have to have some folks that want to participate in the pool.

It can't be just an all-involuntary pool.

So, I think we stitched together a really good piece of policy, drawing from several states that have already been down this road.

And at the end of the day, we protected Iowa's land owners rights.

We protected the access to their mineral rights, we protected their ability or enhanced their ability to have conversations with those folks that are seeking to drill.

And so, at the end of it, that bill actually did improve Iowa's property owners rights when it comes to subsurface mineral rights, 100%.

[Henderson] You also interjected an idea of a severance tax this year in relationship to not only hydrogen and mineral rights underneath the ground, but for carbon capture pipelines.

It didn't get a robust reception.

[Klimesh] Yeah.

So, the severance tax on the CO2 pipeline kind of got caught up in the weeds with our conversation at large about the pipeline, right?

The severance tax piece is something, again, that other states that have, you know, oil and natural gas have severance taxes.

It's not uncommon.

Wyoming, Colorado, North and South Dakota, at the end of the day, you know that that is an opportunity for the state of Iowa to tax a natural resource that we've not had the ability to tax prior.

And we're hopeful that there's a large deposits underneath the state of Iowa.

We can draw that severance tax.

And that tax actually is one that we've structured.

In a way.

The bulk of it goes into the Taxpayer Relief Fund to help us drive down our state income tax, right.

That's our goal with that money, is to take those dollars, put it into the trust fund, drive down our income tax.

We also structured in a way where every county gets a taste of, of the tax, the counties in which the pooling order lies get enhanced level.

We also put some additional funding from there into water quality.

And I would say it's exceptionally fun to be able to write policy to spend money you don't have.

Right on the hope that you that you get it.

But the severance tax component, like I said, has nothing new.

Other states have done it.

And Iowa just wants to be in a position where after we find hydrogen, we have a taxing mechanism in place to benefit from us as a state for all Iowans.

[Gruber-Miller] So, speaking of state funding and the budget, you had proposed something that ended up not getting traction in the House, which was a measure that would have allowed state government funding to continue if lawmakers and the governor failed to agree on a budget.

The House made it pretty clear in their final vote rejecting this amendment that they weren't interested in that idea.

Is this the end of that plan, or could you bring it back?

[Klimesh] I think it's important to bring it back.

And for the same, you know, for the same reasons that I've talked about before, it's responsible, right?

It's responsible governing.

I mean, when and you hope it never happens or if the potential for it to happen that, you know, even between two chambers, both republican-controlled, were to run into loggerheads with each other.

It's important to make Iowans feel comfortable that the services they rely on will continue to be funded, even if government is unable to come to a consensus.

And I want to point out too that you know, as mayor, for 20 years, if I didn't arrive at a budget in code, it requires me to take last year's budget.

And that's the same way with the counties.

So, all we really asking is for the state to abide by the same rules that we expect cities and counties to abide by.

And if there's a situation that doesn't allow you to get to a budget, then you fall back to last year's budget.

I think there's still great value in having that conversation.

I think it's very conservative piece of policy that's important.

Look at what's happening in Washington still to this day we have I'm not even sure what if DHS is fully funded or what parts not funded.

I can't keep track.

And taxpayers, whether they're federal taxpayers or state taxpayers, should expect more from us.

[Gruber-Miller] Do you think it will be difficult to agree on a state budget next year?

We've seen revenue challenges, right, where spending has outpaced the revenues coming in each year.

And obviously you have some money saved to offset that.

But we've been talking about taxes.

There's been a couple of sort of specific tax increases to offset some of these revenue reductions.

I mean, how difficult will it be to continue those services?

[Klimesh] No, I again, 3.8% flat tax.

You know, we have the TRF fund, 4 billion, 6 billion total amongst all the rainy day funds.

We knew we were going to spend those dollars down right as we relied less on Iowa's taxpayers input, we knew we were going to spend down the taxpayer relief fund because we over collected.

I felt comfortable about our budget this year.

I think you saw some very conservative budgeting.

I think we landed at a at a at a middle ground, at one for where we came in.

The Senate was at $1.2.

The governor was at $1.4.

The House was $1.6, or somewhere in that ballpark.

And we very c onservatively, conservatively budgeted this year.

And we'll very conservatively continue to budget because that's how we budget.

Our principles are not to take any more of Iowa taxpayers dollars than we absolutely need to, to provide those services and give the rest of it back to Iowans.

[Henderson] Iowans are seeing lawmakers in other states redo the district lines for members of Congress.

Do you anticipate doing that before the next census?

[Klimesh] You know, I always got a very unique process in place that I didn't even realize until I went through the last decennial census.

When I was in, I was I was actually a senator, the LSA draws our maps and our boundaries.

And, you know, there's, there's a process that takes place.

So, iteration one is given to both chambers for review.

If we kick that back, LSA goes back and gives us iteration two.

Not until we hit iteration three can we actually weigh in and make changes to that process.

So that process is in place.

And that process has worked extremely well for the state of Iowa.

And I don't see us making any changes to that process.

[Gruber-Miller] We're heading into the elections.

The primaries are a couple weeks away.

There are a lot of republicans who are not seeking reelection in the Senate.

How do you, as Senate Republican Leader, prevent defend those seats, prevent democrats from cutting into the republican majority?

[Klimesh] That's a great question.

We feel great candidates.

We feel great conservative candidates, you know, that have strong ties to their community.

You know, candidates that were county supervisors, school board members.

And we continue to go out there and deliver a message.

And that message is Senate Republicans.

And the trifecta we've had has moved us, you know, to top ten states for income tax climate, where we were in the bottom ten, right?

We'll be moving up the ladder dramatically with our property tax bill that was signed into law yesterday.

So that conservative policy and that conservative lawmaking and that approach resonates with Iowans.

Again, to my previous point, it leaves more money in their pocket at the end of the day.

And that's our goal, is to make Iowa better for those working families and to continue that policy.

So, we feel candidates that deliver that message, we feel very confident about where we'll end up after the primaries and after the election cycle in November.

[Henderson] Senator Klimesh, thanks for being here today.

That's the end of our conversation at this juncture.

[Klimesh] Thank you for having me.

[Henderson] You may watch other episodes of Iowa Press at iowapbs.org.

For everyone here at Iowa PBS, thanks for watching today.

♪♪ [Announcer] Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation.

[Announcer] The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure.

♪♪ [Announcer] The Bob and Doreen Sheppard Family, proud supporters of educational programming seen only on Iowa PBS.

♪♪ [Announcer] Banking in Iowa goes beyond transactions.

Banks work to help people and small businesses succeed, and Iowa banks are committed to building confident banking relationships.

Iowa banks, your partner through it all.