Capital Update 2012 End of Session

Lake Delhi Funding

As you have probability heard by now both the House and Senate have approved the funding for Lake Delhi.  The state will fund $2.5 million in FY13 and FY14 for a total of $5 million. Some of the key considerations for the Iowa House was the impact on the Maquoketa Valley School District’s education system, and the amount of additional money the state would have to spend through the school aid formula to replace lost property values. The Lake Delhi Community accounts for 20% of all of Delaware County and a substantial portion of the School District property tax base.

Let me explain how the destruction of the dam has and would continue to affect the state’s general fund.

Currently, the State of Iowa provides about half of the cost of educating our young people through the School Aid Formula. This formula has three parts. First, the basic property tax levy is $5.40/ $1000, which is split between the State and local school district, depending on the amount of property value in the district. The second part is state aid that brings each school district up to a statewide average of 87.5% of the average per pupil cost statewide. The third part is a second property tax levy that generates the final 12.5% of funding, so that Iowa spends an equal amount on each child as the courts have ruled. Currently, that amounts to about $6,000 per pupil.

Maquoketa Valley generated more property tax money because the Lake Delhi Community made it a “property rich” district in terms of assessed valuation. Without the dam, the drop in property values of the Lake Community would decline in property value. This would mean two things: the state would have to put more money into the school district, and the Maquoketa Valley property tax payers would have to pay more property taxes to make up for the lost Lake Community value.

The projected cost to the State of Iowa would have been approximately $300,000 to $500,000 for every year going forward. The Legislature chose to make a one-time $5 million investment to restore the dam and maintain the property tax base for the school district. From a budget perspective, it made more sense for the one-time investment than paying more money going forward for generations to come.

School Reform

The school reform bill was agreed upon this week. The efforts of school reform began last summer with the Education Summit was called by Governor Brandstad.  Governor Brandstad, in his State of the State address, laid out a very aggressive plan toward school reform. Many of the Governor’s suggestions were set aside and the Legislature did pass a slate of reforms with implications for teachers, administrators, and students at all levels.

The center piece of the bill emphasizes early literacy. This was one of the most important issues of Governor Brandstad’s proposals. The bill would emphasize the use of remedial reading, beginning in the early grades and up through the end of the third grade. It would encourage strong efforts to prevent a struggling student from falling behind. As to retention, this is left up to parents. They would have a choice of either the student taking an intense reading course in summer school before entering the fourth grade, or being retained for another school year in the third grade. This is to ensure all of our students have the proper reading tools for life before moving on with their education

Property Tax Reform

This Legislature struggled with the issue of property tax reform. Twice the House sent over aggressive plans that would provide property tax relief to all property owners. Early proposals by the Governor would have neglected the home owner in his proposal. The Senate, in their proposal, provided much less property tax relief and it came in the form of tax credits rather than actual property tax reduction.

The House, in their last plan, would back fill much of the impact that property tax reduction would have on city budgets. But concern in the Senate of the eventual impact that a property tax reduction would have on city and school budgets caused the negotiations to break down and ultimately fail.

Wrap Up of the Session

The 2012 session ended on Wednesday evening. I was honored to run the very last bill of the session. I had floor managed the bill early in the session, but the Senate had amended it and returned it to the House for our approval of their amendment. It was technical bill clarifying sales tax exemption on agriculture equipment. I was brief in my opening remarks. I encouraged the House to approve the amendment and told the Speaker it was time to head back to the farm to plant the crops.  The bill passed with 91 ayes.

With that, the 2012 session came to a close. As always, if you have any concerns or issues that need addressing, please contact me. My email address is lee.hein@legis.state.ia.us or my phone is 319-480-1997.

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