Words From Windschitl

 

School Infrastructure Local Option Repeal (SILO)

The history and proposed changes

 

There has been a lot of talk on the School Infrastructure Local Option Tax (SILO) repeal and replacing it with a permanent statewide penny tax for schools.  Let us first understand the current law and then look at the proposed changes.

 

SILO HISTORY

The Legislature enacted the Local Option Sales Tax in 1998; with this counties can asses a one percent sales tax on any goods sold within the county.  To enact a SILO it must pass voter approval in its respective county and the law states it will sunset after ten years from approval.  After ten years, it needs another vote to continue or it expires.  All revenues collected from this tax are collected by the county, divided per pupil, and redistributed to the schools in the county.  Funds can only be used for construction, renovation, repairs, and to buy down existing property taxes.

 

In 2003, the Legislature created the SAVE fund, after a lawsuit was filed by rural counties. This adjusted the way the SILO was distributed between the retail rich and retail poor districts.  Local control was maintained and a SILO must still be approved by the local voters. Any county enacting a SILO after April 1, 2003 must pool the monies collected by the tax with other counties and distribute it equally per pupil.  Counties enacting a SILO before April 1, 2003 are grandfathered in and are not required to pool the tax collected in their counties until voters decide to renew their SILO after ten years.

 

The policy changes in 2003 also required school districts to provide a certificate of need to outline how the schools will spend the collected money.  The bill also expanded appropriate expenditures for the tax to include technology, equipment, and buses.  The state also agreed to appropriate $10 million a year for ten years to bring equity into the system during the time it would take for all counties to renew their SILO and begin contributing into the statewide pooling system.

 

Currently all 99 counties in Iowa have approved a SILO generating about $360 million annually for school infrastructure and property tax relief.  Eight counties had voters renew their SILO for another ten years.  These eight counties are currently contributing their one percent local tax revenues into the statewide pooling system.  Once the SILO’s are renewed by the voters in all 99 counties as they sunset, every county will be contributing into the statewide pooling system.  This will create equity in the funding system where there is currently a disparity caused by the difference between retail rich and retail poor districts.

 

 

SILO REPEAL PROPOSED CHANGES

House File 2066 passed out of the House Education Committee this week.  This bill will dramatically change the current SILO law by shifting its collection and distribution to school districts.

 

Some of the changes to the School Infrastructure Local Option Tax would be:

• Convert the current local option SILO tax into a permanent one percent increase in the state sales, consumer use tax, and motor vehicle use tax.

 

• Deposit new Consumer Use Tax proceeds into the SAVE Fund ($40 million).

 

• Deposit new Motor Vehicle Use Tax proceeds into the statutorily created TIME-21 Fund ($53 million).

 

• Require a two-thirds vote of the Legislature to expand or otherwise change using the tax for school infrastructure or property tax relief. NOTE: This will not effectively guard the money from being re-appropriated for other uses.

 

• Require voter approval if a school district changes its revenue purpose statement (which defines how a school district plans to spend the money on infrastructure needs), to anything other than property tax relief.

 

• Create a Property Tax Equity Fund.  After bringing all districts to a statewide per student average any excess SAVE fund dollars are transferred into this newly created fund.  Proceeds are used to equalize or buy down the additional levy rate in property poor districts to a statewide average.  Any remaining funds are used to raise the school foundation base percentage and this increase would provide property tax relief to all school districts.

 

• Change the current $575 per student cap to an annually calculated statewide per student average.  The FY09 per student averages is an estimated $774 per student.  Important Note: Under HF 2066, all counties keep all SILO revenue until the expiration of the county’s first SILO.

 

• Repeals ability to levy a SILO.  No sunset of new sales or use tax.  It will be a permanent tax increase.

 

CONCERNS WITH PROPOSED CHANGES

While this proposal will help to bring equity and some stability to the way we fund our current educational infrastructure needs, we must address some problematic issues before it is passed into law.  The major problems that I, and others, in the Legislature see are;

 

• Voters in all 99 counties approved a SILO with the expectation they would still retain local control of the funds and would have another chance to vote to approve or disapprove the tax once the SILO came to its ten year sunset mark.  If the Legislature passes the proposed bill we would take away the local control and the option for voters to approve or disapprove of the tax, it would be a permanent statewide tax and would never be removed.

 

• While the proposed bill calls for a two-thirds majority vote of the Legislature to change the use of the new taxes, it does not provide adequate protection.  The Legislature has proven over the years that it cannot be trusted to leave specified funds alone.  It has used now-withstanding language time and time again to scoop revenues from funds that have specific funding sources.  The one and only way to solve this problem and secure the money is to add a Constitutional Amendment to the bill that would completely prohibit the Legislature from scooping the money and using for other purposes.

 

BIG PICTURE BUDGET OVERVIEW

In previous newsletters, I have highlighted some major problems in the Iowa budget; the majority party has been quite frankly spending us into a deficit.  We are seeing record revenue growth, which is a good sign that our economy is strong, but with the growth, the Legislature has been enacting record spending increases.

 

The Iowa budget has grown by over $1 billion in two years; this growth in spending has been unsettling for many Legislators.  If our economy slows down and we see a decrease in revenue the Legislature will be faced with having to cut programs, raise taxes, or raid funds currently appropriated to other programs.  With this situation looming over Iowans heads I am hesitant to allow the Legislature any more access to your tax dollars than is absolutely necessary.  That is why I cannot support the SILO repeal without a Constitutional Amendment, which would protect your tax dollars for your school from being scooped or diverted into other programs.

 

I appreciate your input on the many issues facing the Legislature this year so please contact me with any questions or concerns, my number at the Statehouse is 515-281-3221 and at home is 712-642-4334 or e-mail me at matt.windschitl@legis.state.ia.us.

 

Government's view of the economy could be summed up in a few short phrases by Ronald Reagan, “If it moves, tax it.  If it keeps moving, regulate it.  And if it stops moving, subsidize it.”


 

Matt Windschitl

Iowa State Representative

House District 56