There’s plenty of work ahead for Iowa lawmakers as the Legislative session convenes in Des Moines. But there will be no greater challenge than finding necessary savings in the state budget without shortchanging Iowa’s children, public safety or public resources.
Legislators will need to focus on the big issues, and the bigger picture, in the months ahead. Here’s how we think they should start.
Republican legislative leaders have made it clear since the election that tax reform, in some form, is among their top priorities. From there, details get murky.
Some GOP legislators are concerned about Iowa’s income tax structure, arguing that its complexities should be untangled and its rates lowered. Corporate income taxes could be another target for lawmakers who think Iowa’s rates put the state at a competitive disadvantage.
Does Iowa’s tax structure need an overhaul? It depends on who you ask. The left-leaning Iowa Policy Project cites a study by Ernst & Young showing Iowa’s state and local tax burden on businesses ranks in the middle of the pack nationally. The right-leaning Engage Iowa think tank, founded by Cedar Rapids Mayor Ron Corbett, cites a Tax Foundation study ranking Iowa’s business tax structure among the 10 worst, while also arguing Iowa is losing high income workers to other states.
But any effort to reduce taxes will run into the realities of a budget already tightened in no small part by past legislative tax reduction efforts. Tops among them is the 2013 commercial property tax reduction package that still requires the state to backfill a widening hole in local tax revenues.
Any tax reform undertaken by lawmakers must be, first and foremost, sustainable and responsible. It should not tie the hands of future legislatures, nor should it significantly reduce resources available for important future investments in education, health care, public safety and other areas.
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And any tax reform approved now should not simply be piled on top of a precarious pile of past giveaways, loopholes and tax breaks approved over the past two decades that have combined to tighten state budgets with little or no evidence of benefit. A top priority of any tax reform effort should be to clean up and weed out this hodgepodge of dubious tax breaks.
The Legislature is poised to keep K-12 funding at a 2 percent or less increase for the seventh time in eight years.
Republicans are also considering repeal of the Iowa law requiring state lawmakers to set school funding levels a year before schools set local budgets. The law was written to ensure public school funding remains a state priority, and to allow districts time to plan. But the law, which includes no punitive measures against lawmakers who disregard it, has been ignored year after year.
Those who support repeal say state revenue prediction is too difficult so far in advance. District leaders have argued that continued uncertainty puts their own budgeting efforts in a bind.
Heated debate over the amount and timing of Supplemental State Aid has become commonplace in Iowa, but there are also some wild cards in play this legislative session to further shake up the statehouse.
A Davenport lawsuit alleging discrimination was written into the state’s school funding formula is one such external factor. Districts with higher per-pupil spending at the time the formula was established continue to receive more state per-pupil funding. Education advocates and media leaders, including this board, have said state lawmakers should review the formula and end any disparities.
Since most local districts spend the majority of their budgets on personnel, pressure is building for a change in the state’s collective bargaining arbitration system. Specifically, districts would like mediators to have more flexibility in establishing wage increases, and the GOP majority has signaled its willingness to review current policies.
Also look for the GOP majority to consider moving the state to a voucher-type funding system. One proposal places state funds earmarked for individual students in education savings accounts that parents could use for public or private school costs. Parents who home-school may also be able to keep all or part of the funds.
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Supportive lawmakers say similar programs give families flexibility to home-school or to enroll children in private schools, and that market competition will improve statewide education offerings. Those opposed say such flexibility will come at the expense of public K-12 funding.
We believe any switch to voucher spending should include a guarantee that all students will continue to have equal access to quality, grade-appropriate education.
Roughly 60 percent of state revenue funds education. That means for every $100 million of tax cuts, $60 million would potentially need to be removed from education. Even in the best of economic times, it would be difficult for increased private investment and new business spurred by a lower corporate tax rate to make up a shortage of that magnitude. Future funding for Iowa schools and students cannot be built on hope that revenue cuts will result in a broader tax base.
We’ve repeatedly said lawmakers must fund education mandates and keep state investment in education a priority. Doing so in this session and within a shifting national political climate will be difficult, but not impossible. Lawmakers must carefully consider the repercussions of all proposed state changes, and create a cushion for the federal changes surely to come.
Many lawmakers in both parties are talking about doing something to address Iowa’s water quality. How that effort will take shape has yet to be seen.
We’ve made it clear for the better part of a year that we expect state leaders to identify a substantial, permanent and protected source of water quality funding that can address the issue for years to come. We want it to fund watershed-based efforts with clear objectives, timelines, benchmarks and measurable results. We’d like to see expanded water quality monitoring, with public disclosure.
We believe raising the sales tax to fill a voter-approved, constitutionally protected Natural Resources and Outdoor Recreation Trust Fund is the best way to provide sustainable funding. A broad coalition of environmental, recreation and agricultural interests agree.
But several top Republicans instead point to a plan approved by the Iowa House last year that would use state infrastructure dollars and a tax on metered water largely to fund existing programs administered by the Iowa Department of Agriculture. Unfortunately, the funding takes years to ramp up, is not protected against future legislative scooping and would go toward programs that lack the sort of benchmarks and accountability we believe are necessary for such a large public investment.
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Stringent review of the three private companies now managing the state’s Medicaid program must be the legislature’s top priority.
It’s worth repeating: Ensuring nearly 600,000 of the state’s most vulnerable residents are able to access the medical help they need and clear understanding of how $4.2 billion in taxpayer funds are spent requires transparency and public discussion. Both have been obscured by partisan bickering.
Democrats have rattled their political sabers while Republicans have generally supported Gov. Terry Branstad’s move to privatize the health care program. The Governor’s undocumented claims that the move will result in significant taxpayer savings and better health outcomes has been parroted and allowed to stand despite all facts to the contrary.
In front of this backdrop, two of the three managed care companies continue to report tens of millions in losses — even following a Branstad-approved state rate increase last year. Patients and providers have suffered under a barrage of red tape, denied services and unpaid claims.
This sweeping move to “modernize” the state’s health plan is unsustainable, and cannot morally or ethically be ignored by lawmakers of either political party.
If oversight is not provided, if the Republican majority refuses to look over Branstad’s shoulder, all other campaign promises will be shuffled off the table and trampled under the weight of skyrocketing taxpayer expense, medical business closures and poor patient health.
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