Capitol Update Week Three

School Aid Growth Now and in the Past

With a new session comes the discussion about school aid growth, referred to as Supplemental State Aid (previously called Allowable Growth).  State law requires both the state percent of growth and the categorical state percent of growth for the school year beginning in the next calendar year be set by the General Assembly each year within 30 days following the submission of the Governor’s budget.  We’re nearing that 30 day deadline.

House Republicans, and the Governor, over the past several years have advocated for changing the law.  The current law isn’t helping to produce positive results for the state’s fiscal health.  Over the past decade it’s become evident that setting an increase in state aid to schools two years out without any certainty regarding incoming revenue the following year does not lend itself to stable budgets.  It has been a lesson learned the hard way.  Most recently, in 2010, when the state overpromised with a high Allowable Growth figure nearly two years out, an economic downturned caused Gov. Culver to issue a 10% across the board cut, devastating not only school budgets, but the budgets of cities, counties, and every agency.

Here’s a brief history of the budget instability:

  • FY02 – Across the Board Cut
  • FY03 – School Aid appropriation was underfunded by the state
  • FY04 – Across the Board Cut
  • FY09 – Across the Board Cut and School Aid appropriation was underfunded by the state
  • FY10 – Across the Board Cut and School Aid appropriation was underfunded by the state
  • FY11 – Legislature delayed setting Allowable Growth (SF 2045) to the next year

It was in FY12 that the legislature began setting two-year budgets, which included setting Allowable Growth for those two years as well.  This was again repeated in FY14, with two years of Supplemental State Aid being set.

House Republicans have outlined new budgeting principles over the last three years that made Iowa one the best run states in the nation.  House Republicans feel it is important that we honor our funding commitments while on-going expenses are funded with on-going revenue sources.  These two principles in particular are put in danger by the current school aid growth law.

House Republicans will continue to work with the Senate to change the law to set supplemental aid in the odd number years in line with the Governor’s two year budget which will make sure that we honor our commitments and provide the most stable funding for our schools and the rest of the state budget.

Fiscal Year  (school year) Percent Growth State Cost Per Pupil General Fund Increase
FY12    (11/12) 0% $5883 $178 million
FY13    (12/13) 2% $6001 $30 million
FY14    (13/14) 2% + 2% one-time $6121 $65 million + $57 million
FY15    (14/15) 4% $6366 $170 million (estimate)

Aside from the $443 million in increased school aid over the last 4 years (not counting the one-time funding of $57 million in FY14), the legislature also passed a teacher leadership package last year which will put an additional $150 million plus into the schools each year.  Much of that will go to hire hundreds of new teachers across the state.

Due to the actions of this legislature, Iowa is second in the nation for post-2008 recession recovery spending for education.  As opposed to the 34 states that are providing less funding per student for the 2013-14 school year than they did before the recession hit,  Iowa’s increase is one of two states over 10%, according to the study “NO RECOVERY HERE” by the Center on Budget and Policy Priorities.

Iowa has not moved clear of uncertain economic times yet.  And if you look back over the past decade and a half, you’ll see we rarely are.  With across the board reductions in FY02, FY04, FY09, and FY10 and school aid appropriation caps in FY03, FY09, and FY10, House Republicans will continue to be conservative in our budgeting approach.   This will ensure that we continue to fund our commitments, spend less than we take in, and provide a budget that keeps our rainy day funds filled and our state on the right track.

LP Shortage Causes Higher Heating Bills

House Republicans are being extra vigilant concerning the shortage of liquid propane fuel and its impact on prices.

I have been consulting with Governor Branstad and the Department of Human Rights about the adequacy of funding for the Low Income Health and Energy Assistance Program, better known as LIHEAP.

At this point, both the Governor’s office and the Department of Human Rights have said that they currently have sufficient funds in LIHEAP.  I will continue to monitor the situation with LIHEAP funding and work with Governor Branstad and the Department of Human Rights if action is needed.

Additional money to LIHEAP would not address the shortage of propane fuel.  LIHEAP funds are used to help lower-income Iowa families pay off their heating and electrical bills.  The state cannot use LIHEAP money to directly purchase propane and distribute it to those in need. People can apply for LIHEAP assistance through their local community action agencies.

On Monday, Governor Branstad asked President Obama to temporary lift restrictions on the transport of propane and to utilize presidential authority to limit exports of propane during this domestic shortage of the fuel.  The White House has yet to respond.

Debate on Gas Tax Begins

Many of you have probably heard in the last few years about the discussion to raise the state gas tax. People have differing opinions about the tax and how to fix Iowa’s deteriorating roadways. There was a subcommittee held this week for the gas tax bill. The bill would raise the tax a total of ten cents over three years- three cents the first year, three cents the second year, and four cents the third year. One thing most every Iowan agrees on is that our roadways and bridges are in bad shape. Iowa has 4100 bridges labeled as structurally deficient.

The legislature has researched different ways in the past couple years on how to address the issue. The first is taxing farm fuel, which is currently not subject to state tax. Another is increasing annual registration and licensing fees. We’ve also looked at closing less traveled roads. Every year, the DOT has made drastic efficiencies in their budget to better address construction needs. One thing to note about all these options is that with every one, someone ends up paying more to drive on our state’s roadways.

If nothing is done counties and cities will be forced take on debt by bonding to pay for road maintenance or replacement. By the time the bond debts are paid off, the roads will need repaired again. Continuing to allow our roads to crumble puts Iowans at risk who drive on them every day. I think we need to find some way to pay to fix our roadways. I have always said raising the gas tax would be an absolute last resort.

Next week I will be filing a bill that adds money to the road use tax fund. Under my bill, I’m proposing at the end of the fiscal year, after all reserves are filled, the state would deposit a maximum of $220 million into the road use tax fund if there is a surplus. The $220 million that is deposited would be used to repair roadways, instead of sitting in the general fund as it does currently.

State tax revenue fluctuates year to year, so there might not always be $220 million to transfer to the road fund every year. In my legislation, the gas tax would be raised only in the years the $220 million isn’t met. If, in one year, there is only $120 million available to transfer to the road fund, the gas tax would be raised to collect the other $100 million to equal $220 million. At the end of the year the temporary tax increase reverts back to zero. Then the process starts over again. The amount the gas tax would be raised is calculated by the amount still needed to equal $220 million.

I commend the Chairman of the House Transportation committee for starting the discussion on finding ways to fix our roads. I hope the Senate will enter into the discussion. Maintaining roads and infrastructure is a key part of state government. I believe raising the gas tax is the most conservative and fair way to spread the cost evenly upon the people who use our state’s roadways.

Rep. Stanerson (R- Linn) and I with a group of Kirkwood students

Rep. Stanerson (R- Linn) and I with a group of Kirkwood students

If you have any questions, comments or concerns about these topics or any others please feel free to contact me by e-mail at lee.hein@legis.iowa.gov or by phone at (515) 281-7330.

Sincerely,

Rep. Lee Hein

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