DES MOINES — Legislation to create what is believed to be the largest single investment in education in Iowa’s history moved forward in the Iowa House on Thursday.
The bill extends the 1 percent sales tax to support school infrastructure and property tax relief until 2050.
Rep. Zach Nunn, R-Bondurant, floor manager of House File 2438, said the extension of the sales tax would put $16 billion in the Secure an Advanced Vision for Education — or SAVE — fund by 2050.
“That’s a lot of taxpayer-invested money in making sure Iowa schools are well-cared for for the next generation,” he said at a hearing on the bill.
Local districts use the tax to reduce levies for bonds and to pay for physical plant and equipment improvements, educational and recreation programs and other authorized infrastructure projects.
Extending tax beyond the current 2029 expiration is a major priority of the the Sioux City school district, which has spent in excess of $200 million in sales tax revenues to finance more than 16 renovation or construction projects.
Nunn indicated the Ways and Means Committee will consider modifications before sending the bill to the full House. Among them will be language to make clear the funds can be used for to improve school security.
The bill also would adjust the amount of funds being directed into the Property Tax Equity Relief fund.
In years when the SAVE sales tax revenue grows by 2 percent over the previous year, the amount going into the property tax relief directed into the property tax fund will increase by 1 percent until it reaches 10 percent of SAVE funds.
With fewer than 10 years left for SAVE, school districts are starting to run up against their bonding capabilities, according to Rep. Cecil Dolecheck, R-Mount Ayr, the bill’s sponsor.
Without a guaranteed funding stream, he said, they face difficulty in selling bonds — generally repaid over 20 years — for new projects.
With the existing expiration date, the Sioux City district has nearly reached its limit of bonding authority to fund additional projects. That list includes finishing the job of replacing its antiquated elementary schools and modernizing the three high school buildings, which will be nearly 60 years old when the current tax would expire.
The idea for a sales tax dedicated to school infrastructure projects originated in Sioux City as local leaders looked for an alternative to raising property taxes to replace aging school buildings, with local voters first approving the tax in 1998.
Lawmakers created SAVE in 2008 to replace the School Infrastructure Local Option Sales Tax Act (SILO) that could be used for many of the same infrastructure purposes, but allocations then were based on county sales tax receipts. That system, however, caused inequities between urban and rural school districts.
SAVE was intended to fix that imbalance caused, in part, by rural Iowans inflating urban counties’ sales tax revenue by shopping in larger retail centers.
No one spoke against the extension Thursday.
However, Farm Bureau Federation lobbyist Matthew Steinfeldt offered some suggestions the group’s members think might improve the bill, specifically, increasing the allocation to the property tax relief fund.
“There’s no doubt that the public school system and property taxpayers are better off when the SAVE penny is in place,” he said.
In fiscal 2015, 2.1 percent of the SAVE revenue went into the property tax fund, and the rest was distributed on a per-pupil basis to school districts.
The property tax relief fund — along with $24 million from the general fund — is used within the state school aid formula to reduce the additional property tax levy for districts with the highest property tax rates.
For fiscal 2018, the 2.1 percent generated $9.7 million that was distributed across 61 school districts with the highest additional property tax rates.
It would go even further, said Emily Piper of the Iowa Association of School Boards, if instead of using the statewide average property tax levy, the Legislature used the 75th percentile.
If 5.1 percent of the SAVE revenue was put in property tax relief, all districts would benefit after three years, she said.