SILO Repeal and Penny Replacement 2008 Legislative Session

Iowa Association of School Boards Legislative Priority Supports repealing the school infrastructure local option tax and replacing it with a statewide penny sales tax distributed on a per pupil basis, recalculated annually to adjust the statewide average revenues per student.

SILO Repeal/Penny Replacement Policy Details Replaces SILO with a state penny Grandfathers in existing revenues until first SILO expires (protects Blackhawk County schools from losing revenue through Sept 30, 2009) Replaces current $575 ceiling with a rolling average recalculated annually (would be $730 in FY 2008)

SILO Repeal/Penny Replacement Policy Details Requires public process for local district revenue purpose statement to define allowable expenditures. Cant change without future notice and process. If a revenue purpose statement isnt approved, default property tax relief of certain levies is required (debt, PPEL, PERL) Maintains existing purposes of infrastructure and property tax relief Requires 2/3 rd of a future legislature (both House and Senate and signed by the governor) to alter uses of pooled revenue.

SILO Repeal/Penny Replacement Policy Closes consumer use tax loophole on out of state purchases. Requires that revenue ($50 million) to lower property taxes in districts with the highest additional levies in the state. Penny on cars goes into the Road Use Tax Fund for TIME 21 purposes, for roads and bridges – estimated at about $50 million.

Tax Base Differences/Opportunities Consumer and Business Use Tax – between $50 and $60 million with the statewide penny – Currently items purchased out of state are taxed at 5%. With most border counties at 7 cents, this creates an incentive to buy from outside the state. Leveling the playing field for Iowa retailers and manufactures of goods helps some businesses. Collection of use tax is good tax policy, supported by the Iowa Taxpayer Association and included in Iowas agreement as part of the multi-state consortium with 42 states. Property tax equity: Since the use tax revenue isnt needed in the school infrastructure pool – it is used as state aid to lower school additional property tax levy rates above the state average (such as Waterloo.) TIME 21: 6 th penny applied to car sales, to the road use tax fund, will help with an estimated $220 million deficit in the fund. Residential utilities – taxed by SILO but not by state penny. Legislators can champion this vote as tax relief for all Iowans – estimated between $10 and $20 million.

School Infrastructure Local Option (SILO) Today $10 million state appropriation funds up to an estimated $470 per pupil ( ). Local Option pool cant function long-term without all counties in it. School districts have significant infrastructure backlog, debt to be repaid, construction for growth purposes, technology and transportation equipment needs. Lower revenues, increased construction costs, and unmet needs all prove 10 years will not be enough. All 99 counties have SILO. Over 22 counties have extended. Woodbury got 75% and Black Hawk 78% voter approval to extend. The state penny proposal is about equity, stability, and facilities designed for student learning.

USAIowa total expenditures$495,235,283,000$4,212,858,000 capital outlay$51,493,912,200$528,556,000 capital outlay % of total9.62%12.55% interest$20,665,657,213$65,496,000 interest % of total4.17%1.55% infrastructure total %13.79%14.10% per pupil infrastructure $ $1,489$1,242 per pupil expenditure rank 37 Source: NEA Rankings and Estimates, June 2005 Iowa is behind the rest of the nation in infrastructure expenses. By 2005, all but Linn and Johnson counties were in the pool.

State Penny Proposal Election year politics require bi-partisan support to pass it. Certain elements must be included: –Protected by 2/3 rd majority to change existing purposes –Fix definition of rolling average –Local process for voter input (reverse referendum) –Revenue neutral proposal: expanded tax base goes for property tax and residential sales tax relief.

Closes Use Tax Loophole Use tax is tax paid by businesses and consumers on items purchased out of state. Mirrors the state sales tax. Helps some Iowa businesses to be competitive. Must collect it per our agreement with multi-state consortium to tax internet sales. How the use tax is spent is a political issue. For strong bi-partisan support, any proposal must be revenue neutral to avoid perception of a tax increase.

SILO Repeal/Penny Replacement Additional information and Resources Advocacy process flow chart District specific data Issue brief Key messages Resolution to support proposal Press release Letters to the editor Contact IASB with Questions: Margaret Buckton, Associate Executive Director, Public Policy, (800)