On the Hill with Klein, Week 2

January 18-22, 2016

The second week this year was like many in years past. Everyone is running around getting their personal bills finalized, committees are hearing presentations, and committee chairs are assigning bills to get the process off the ground. I have finalized my own bills, and decided which bills I will be co-sponsoring for the session. I will also continue to play a role in bill assignment and helping other members manage bills important to our district.

We are having some exciting conversations (at least I think so) about major changes in education funding streams, working on water quality, advancing public safety, property tax reforms, and vigilance over executive branch divisions like the DNR and DOT.

This week I will be focusing on education funding; not only is it first on House Republicans agenda, but it is also the largest part of our state budget. We can?t figure much else out until we know what our commitment will be to Supplemental State Aid (SSA). The House will keep our commitment as we have in the past to fund SSA and not pass the burden to property tax payers. It?s always important to remember SSA is spending authority for schools, not the actual state expenditure. The expenditure doesn?t happen until the near end of session and is not required to be funded. In the past SSA was not funded by the State and the local property tax payers footed the bills. However, this is a practice I am proud we ended; I think it?s important for the State to honor its commitments. While I may not always like some of the commitments, we still have a duty to honor our word if we cannot otherwise change the system.

The House Education Committee, like last session, made the first effort by passing a funding proposal out of committee this week. It?ll be eligible for floor consideration this coming Monday. The Senate has made no attempts at committee action at this point. As the Legislature moves forward, it?s worth summarizing where all the pieces lie at the moment.

Last year the Legislature approved a 1.25 percent increase for FY16, which funds the current 2015/2016 school year. This amounted to an $84.8 million increase in state aid for schools. In addition to the increase, the Legislature also approved a $55.7 million one-time payment meant to address immediate one-time needs of districts. The Governor, however, vetoed this funding after the session, taking it off the table.

There are a few bills floating around from last session that have the opportunity to move:

SF 174 and 175: The Senate sent a 4 percent increase over to the House last year on Feb. 10. Those are currently in the House Education Committee. The Committee passed both bills this week, amending them to 2 percent.

HF 664 and 665: The House sent a 2 percent increase over to the Senate last year on June 2. Those bills are currently in the Senate Education Committee. No action has occurred on them by the Senate.

In addition the House passed 2 percent and the Senate passed 4 percent proposals, the Governor also weighed in earlier this year, recommending a 2.45 percent increase within his overall budget proposal.

In order to see where we?re going, it?s worth noting where we?ve been. Here?s a snapshot of school funding over the past 5 years.

FY12, 0 percent growth, $5,883 cost per pupil, $178 million state increase.

FY13, 2 percent growth, $6,001 cost per pupil, $30 million state increase.

FY14, 2 percent growth +2 percent one time, $6121 cost per pupil, $65+$57 million state increase.

FY15, 4 percent growth, $6,366 cost per pupil, $148 million state increase.

FY16, 1.25 percent growth, $6,446 cost per pupil, $84.8 million state increase.

Total 5 year, $505.8 million + $57 million one time.

Looking ahead at FY17 numbers, here is where things land currently:

2 percent - House Passed

2.45 percent - Gov Proposal

4 percent - Senate Passed

School Aid

$80.9 million

$97.8 million

$154.7 million

Teacher Leadership

$53.0 million

$53.4 million

$55.0 million

Property Tax Replacement

$9.2 million

$10.9 million

$18.2 million

Total State Aid Increase

$143.1 million

$162.1 million

$227.9 million

The current revenue situation plays a determining role in the adoption of a FY17 school aid (SSA) number. The difference between FY16 actual spending and the FY17 revenue estimate is $153 million in additional growth. Any additional spending ideas from the Legislature must fit within that $153 million figure. This means that the Governor?s and Senate?s proposals for funding put us over budget on the first bill out of the gate for the legislature this year. All remaining budget items, over 50 percent of the state?s spending, must also fit within the $153 million growth figure. The House?s 2 percent proposal treats education very well, giving K-12 schools $143 million out of the $153 million available revenue.

Obviously school funding does not live within a vacuum. There are a few other factors currently being discussed that affect this discussion.

First and foremost, every other state budget item, from the Regents Universities, to Community Colleges, to Mental Health and Medicaid funding, prisons, state troopers, and any other state agency you can think of, are asking for increases as well.

Second, a decision on how to move forward with tax coupling with the Internal Revenue Code in tax years 2015 and 2016 will affect the revenues the state is going to be working with. The Governor has already recommended a plan for coupling that has a negligible effect on FY16 revenue while adding an additional $48.5 million to FY17. Until a decision on tax coupling is reached, the level of available revenue growth remains at $153 million. Plans on how exactly we?ll move forward are still being discussed.

Third, the legislature is also looking at how to proceed with the Secure an Advanced Vision for Education (SAVE) fund which provides sales tax revenue to school districts to meet infrastructure needs. The sales tax revenue is due to expire in 2029, and a number of proposals are on the table for how to proceed with this. Some of those proposals will likely have a significant impact on school districts, their budgets, and their taxing outlook.

Expect the House to move its education proposal on the floor early next week so an agreement can be reached, providing schools the information they need to make their budget decisions for next year as soon as possible.

If you need to reach me don?t hesitate to call or text me on my cell at 515-689-5430. My email address is jarad.klein@legis.iowa.gov, when you email please include your name and address so I know if you are a constituent.