As the 2016 Session of the Iowa General Assembly approached, the issue of school funding took center stage as leaders from both Chambers and both political parties suggested early resolution of this issue would be key to finding common ground on a whole host of other, unrelated issues.
At the end of the 2015 Session, Governor Branstad used his line-item veto to remove $55 million of one-time funding for K-12 schools in Iowa. His message at that time echoed earlier themes from his administration – namely, that he would not approve the use of one-time revenues to fund on-going expenditures. That veto set off a firestorm in the education community and it became clear that finding resolution on that issue early in 2016 was a high priority for both the House and Senate.
To that end, the House this week took up two bills on education spending that would set K-12 spending growth for the fiscal year beginning July 1, 2016 (FY17) at 2.0%. Both bills passed on largely party line votes. In response, the Senate sent back the same legislation with a growth level of 4.0% and both bills are now headed to conference committee. Expect the conference committee to begin work next week.
Of additional note, Governor Branstad, in his proposed FY17 budget, proposed a growth level of 2.45% for K-12 schools in FY17.
Annually the state of Iowa normally advances legislation to ensure that key components of the Iowa tax code are synced with similar statutes at the federal level. The process wherein the codes are brought into alignment is called “coupling” and it is normal for the General Assembly to consider legislation to mirror changes that are made at the federal level in the Iowa code. That said, most changes to the tax code have a fiscal impact and the annual Iowa revenue code update to couple with the federal tax code changes does impact state revenue in either a positive or negative manner.
This year the federal government made a number of changes, the most significant of which was the decision to extend the Section 179 expensing provisions, permanently. At the state of Iowa level, coupling with that change would result in a revenue reduction of nearly $100 million. Governor Branstad, in his proposed budget, declined to offer coupling with the federal tax code on this issue, determining the cost this year was too great given the tight budget year that is anticipated.
This week, the Iowa House moved forward HF 2092, a bill that would indeed couple for the 2015 tax year the Section 179 expensing provisions in the Iowa revenue code. The vote was a bipartisan 82-14 in favor of passage and the measure now moves to the Senate.
Efforts on Behalf of Community Bankers of Iowa: