Sales tax option may go statewide

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By Dan Gearino | Sunday, February 4, 2007 12:42 AM CST | () comments

DES MOINES — If ballot measures pass later this month in Johnson and Linn counties, the local-option sales tax for school construction will be in effect in all 99 counties.

The milestone would underscore the initiative’s enormous popularity and also may nudge state lawmakers to make the tax permanent and statewide — removing the “local-option” part of the deal.

This widespread use of the tax is far beyond what early backers of the plan expected when the option was created in 1998. School officials in the first few counties that approved the tax — including Woodbury, Scott and Black Hawk — wanted a way to improve school buildings without big increases in property taxes.

The 1-cent school tax — which is tacked onto the 5-cent statewide sales tax and any other locally approved sales taxes — has raised $1.2 billion since its inception.

“It’s been huge,” said Waterloo School Superintendent Dewitt Jones, whose district has built four new schools and remodeled another four since the tax was approved.

Some of the top legislators on education issues say it’s time to give districts the predictability of knowing the tax will never go away, while at the same time changing its formula to give all districts the same payout per student.

Sen. Frank Wood, D-Eldridge, co-chairman of the House-Senate committee that oversees education spending, said a permanent tax would allow schools to make long-term plans and know the money will be there. Schools can’t do this now because voters need to renew the tax every 10 years.

“It’s guaranteed. They’ll know how much money they’re going to have,” said Wood, who is also an associate principal at North Scott High School in Eldridge.

The co-chairwoman of the committee, Rep. Cindy Winckler, D-Davenport, said the idea of making the tax statewide “has wide support” among legislators and school officials.

One person who still needs to be convinced is Gov. Chet Culver. He said Friday that he’s not planning to tinker with the tax — a view that puts him at odds with many fellow Democrats. He made his comment on the Iowa Public Television program “Iowa Press.”

A move to a statewide formula would take away the local components of the tax. School officials would no longer need to campaign for the measures, and county voters would no longer have the power to approve or reject the plans.

That worries Jeff Boeyink, president of Muscatine-based Iowans for Tax Relief.

“Our biggest concern is if it goes statewide and become permanent, you’ve removed that local accountability from the process,” he said.

Or, to put it another way, once the state gets its hands on the money, there’s no telling what it will be used for.

Larry Williams, Sioux City school superintendent, said the county-based version of the tax has worked largely because it was narrowly tailored to cover school construction or renovation.

“We think it should stay fairly true to those original purposes,” he said.

But other school officials want to see the uses of the tax broadened to include technology or new academic programs.

Boeyink thinks this is a conversation that will inevitably head toward using the money for everyday school expenses.

Here come the stragglers

The voters of Linn and Johnson counties will play a role in the debate when they decide Feb. 13 whether to adopt the 1-cent tax.

If it passes in both counties, state legislators say they will have a green light to make the tax permanent across the state. Even if the measures don’t pass in one or both counties, there are legislators who say the need for the statewide tax is great enough that it still may become law, so the counties would pay the tax anyway.

Linn County voters rejected the tax in 1999 and haven’t tried again until this month. Johnson County voters have never voted on the tax.

Senate Minority Leader Mary Lundby, a Republican who lives in Marion, which is in Linn County, said the tax has faced strong opposition in the past from people who didn’t think the money was needed and were worried the tax would harm businesses.

But she senses a change this year. She said backers of the tax are doing a good job of outlining exactly how the money would be spent and selling the plan to voters.

“I think it has a better opportunity to pass this time,” Lundby said.

Help for the property poor

The legislators and local leaders who came up with the idea for the tax imagined that it would appeal mainly to communities with low property values and little capacity to raise property taxes.

“It all started as an effort to remedy the inequity that is out there, particularly for property poor communities that had no way to pay for school infrastructure,” said House Minority Leader Christopher Rants, R-Sioux City, who was one of the leading proponents of the plan.

Some legislators viewed the sales tax as a “Sioux City bill,” meaning it was drafted to cater to narrow regional interests. Sure enough, Woodbury County, which includes Sioux City, was the first to vote on, and pass, the 1-cent tax, just months after the option became law in 1998.

But the interest didn’t stop at the Woodbury County line. By the end of 2001, 42 county votes had been held, 23 of which passed. The success rate for the tax grew as more counties got in on the act and voters could see how it was working in other areas.

Voters were making a 10-year commitment to the tax, after which it would expire or be renewed in another referendum. If school boards didn’t use all the proceeds for school construction, the leftovers were required to be used to lower property taxes.

Lawsuit brings overhaul

At first, schools got all of the proceeds from their county’s 1-cent tax, meaning counties that had bustling retail activity had much larger payouts than rural counties. This led to a lawsuit from a coalition of rural counties who argued that the setup was unfair.

In 2003, the Legislature overhauled the tax in an attempt to end the urban-rural rift. Under the new system, counties that approved the tax after April 1, 2003, would get no more than $575 per student. If the proceeds from a county are greater than $575 per student, the excess goes into a state pool that is distributed to counties with less retail activity.

Counties that had approved the tax before 2003 were allowed to continue under the old system until their initial 10-year commitments expired. But when those counties went back to voters to renew the tax — which Woodbury and Black Hawk and several other counties have already done — they did so knowing that once they entered the second 10 years of the tax, they would receive no more than $575 per student.

Looking ahead, the transition of the largest counties to the $575 cap will pump tens of millions of dollars into the state pool. Lawmakers who want to make the tax permanent say the move should coincide with an increase of the cap.

The Iowa Association of School Boards, a leading supporter of making the tax permanent, estimates that a statewide tax would raise enough money to give each district a maximum of $730 per student.

Winckler, the Davenport Democrat, thinks that’s a good, fair deal.

“I think it’s a good idea, and it seems like everyone involved, all of the districts, are in favor of that equalization,” she said.

Dan Gearino can be contacted at (515) 243-0138 or dan.gearino@lee.net.

By the numbers

$1.2 billion — Money raised statewide by the               1-cent local-option sales tax for schools since the option became legal in 1998.

$302 million — Money raised last year by the tax, when 97 of the state’s 99 counties either had the tax or were in the process of approving it.

$149 million — Scott County voters passed the           1-cent tax in March 1999, and it has raised this much money since, including             $23 million last year.

$25 million — Muscatine County voters passed the            1-cent tax in 2000, and it has raised this much money since, including $4.6 million last year.

$24.4 million — Clinton County voters passed the          1-cent tax in 2001, and it has raised this much money since, including $5.7 million last year.

$5.9 million — Jackson County voters passed the           1-cent tax in 2001, and it has raised this much money since, including $1.7 million last year.

$3 million — Cedar County voters passed the 1-cent tax in 2004, and it has raised this much money since, including $1.6 million last year.

$2.3 million — Louisa County voters passed the           1-cent tax in 2004, and it has raised this much money since, including $1.2 million last year.

Sources: Iowa Department

of Revenue, Iowa

Department of Education