Vander Linden Capitol Update for April 30
Rep. Guy Vander Linden (R)
Property Tax Reform’s Impact on School Funding
The latest narrative being built is that the commercial property tax reform bill approved in 2013 is strangling school districts by reducing the amount of property tax revenue they receive. This argument is not supported by facts. According to the non-partisan LSA, the 2013 bill did several things:
• Created a business property tax credit. This has no impact on school finance.
• Rolled industrial, commercial, and railroad property down to 95% and then to 90% of assessed value. This is 100% reimbursed by the state for the first few years of the bill’s implementation so it also has not had any impact on school finance.
• Reduced the allowed growth in residential and agricultural property taxed value from a maximum of 4% a year to 3% a year. This does reduce the amount a dollar of school tax rate can generate. However, the school aid formula then dictates a higher tax rate, so for the parts of school budgets determined by the formula, school budgets are not impacted. They do see reductions on the parts of their rate NOT controlled by the formula, but they have the ability to set a higher rate unless the rate is somehow limited.
• Decreased telephone utility property taxed value. This has a similar type of impact as the point directly above and the result is the same. A higher tax rate can be set.
• Created a new multi-residential property class. This has not yet taken effect so this item has not
impacted school finance.
House Moves Forward with Budget that Spends No More than State Takes In As National Data Shows
Economy Slowing Down
House Republicans continued their progress on passing a budget that lives within ongoing state revenue at a time when national indicators point to an economic slowdown.
By the end of the week, the House will have debated the five budget bills it is responsible to start: Federal Block Grants, Transportation, Infrastructure (RIIF), Administration & Regulation, and Education. Additionally, the House Appropriations Committee is expected to have considered four of the budget bills started by the Senate: Agriculture & Natural Resources, Economic Development, Judicial Branch, & Justice Systems. This will leave two bills yet to begin the process – Health and Human Services and Standings. Both of these bills are to start in the Senate.
All of the budget bills moved by the House will be funded within the on-going revenue estimate for FY 2016 of $7.1755 billion. The need to keep on-going state spending within this amount was evident again on Wednesday when the U.S. Commerce Department released figures on the first quarter’s gross domestic product.
First quarter GDP for calendar year 2015 slowed to 0.2 percent growth. The Washington Post stated that the national economy “ground nearly to a halt.” The actual growth rate was well shy of the 1.0 percent growth predicted for the quarter and the 2.4 percent growth rate experienced in 2014.
The causes for the sudden slowdown are varied. Exports took a significant drop in the first quarter, with the export of goods and services going down 7.2 percent. Part of the blame for this is the stronger dollar, which has made goods for export more expensive in foreign markets.
Another issue was the 2015 winter and its severe impact on certain areas of the country. While Iowa’s winter was bearable, the northeastern US was repeatedly hit with massive snowstorms. This impacted consumer spending as New Englanders chose to stay warm in their homes instead of heading to the malls.
Construction and manufacturing related to homes were stagnant during the quarter and the number of new hires grew, that growth was almost half of what was experienced in the last quarter of 2014. The fact that Americans continue the trend of reducing their debt load and saving more also impacted GDP growth.
The sluggishness of the economy is sending cautionary signals to economists and policymakers across the country. Here in Iowa, the recent discovery of avian influenza in major turkey and chicken flocks has the potential to have a major impact on the ag economy. And state revenue growth for Fiscal Year 2015 still remains below the figure projected by the Revenue Estimating Conference.
House Republicans’ efforts to pass a budget that spends less than the state will take in shows a commitment to common-sense budgeting practices that Iowans across the state are putting to use in their own homes. This stance presents a stark difference when compared to the position of House Democrats who continue to insist that Iowa should spend every penny it has. It is clear that their budget positions are “out of step” with the national economy and the every-day practices of the Iowans they serve.
