Iowa House committee takes another look at tax relief fund

Legislative Democrats on a House-Senate conference committee Wednesday agreed to accept a Republican call for creating a special fund designed to capture surplus state dollars for tax relief, however they significantly restricted the amount of excess revenue that would flow into the account beginning July 1, 2012, and insisted it be earmarked solely for property tax reductions.

The Democratic counter offer also agreed to a GOP proposal to direct a one-time $20 million appropriation to county mental health funding but moved back by one year to July 1, 2013, the date whereby the current mental health services delivery system would be ended – a deadline designed to force policy makers to transition to a new revamped model.

Sen. Joe Bolkcom, D-Iowa City, said proposed changes offered by Democrats were part of a concerted effort to forge a compromise agreement on Senate File 209 -- a mix of tax policy and spending issues that includes nearly $46 million in supplemental funding for corrections, public safety, community colleges, indigent defense, and human services. He said he believes the Legislature has provided tax relief without having a special fund dedicated for that purpose but Democrats are willing to consider an earmarked account for property tax relief given the GOP insistence.

“I know it's kind of a marquee issue that they want to have this new fund that they can point to that says tax relief fund on it, but we've been doing tax relief and we'll continue to do appropriate tax relief to get this economy going,” he said. “We think targeting this fund to property tax relief is exactly what Iowans would like us to do with this tax relief fund.”

Under the Democratic offer, the Legislature would create a new tax relief fund to receive 25 percent of excess money in the state's economic emergency fund once the state's separate cash reserve funds are full. Excess revenues that flowed into that account would be used to provide property tax relief as determined by the General Assembly, said Bolkcom, a conference committee co-chairman and leader of the Senate Ways and Means Committee.

GOP legislators have pushed for a special fund that would capture 100 percent of surplus revenue in the general fund's ending balance each fiscal year that would be returned to taxpayers. For the current fiscal year, projections call for more than $300 million to be unencumbered by June 30.

Conference panel co-chairman Rep. Scott Raecker, R-Urbandale, who also is chairman of the House Appropriations Committee, called Wednesday's movement a positive development that bolstered his hope the 10-member panel can reach an agreement to take to Republican Gov. Terry Branstad and both legislative chambers for consideration.

“We're really getting into some of the nuances of this right now. But at least on the bigger picture items I believe we're in alignment and we can work this out is my opinion. The fact that we've agreed that we need to have a tax relief fund and that that would be a good thing in the budgeting process is a good sign I believe,” he said. “Where we disagree still is exactly what would that fund look like, how much percentage, what year would it go into effect, and how it would be used. Those are items that I believe can be worked out.”

The 10-member conference panel plans to meet again on Thursday.

The S.F. 209 conferees already have agreed to couple the state tax code with federal changes and to increase the earned income tax credit for working families from 7 percent to 10 percent. Items that have been taken off the table included House-passed proposals to establish a minimum health insurance premium of $100 for all state employees and a prohibition on the state Department of Natural Resources purchasing land through the end of the current fiscal year while reducing Resource Enhancement and Protection (REAP) by a like amount.

“I think this conference committee is the first one dealing with state spending and tax policy,” Bolkcom said. “I think if we can get to conclusion here, it would be a good model hopefully for how we work through a number of thorny issues that we're going to have to tackle in the next few weeks.”