Iowa Gov. Kim Reynolds raised the possibility Friday that an overhaul of the state tax code could yield a solution to the inequity in education funding that's vexed school districts like Davenport.
The governor was in Davenport on Friday to tout her Condition of the State address. And in an interview, she said she's optimistic a bill can get through the legislature this year
"I know it’s really important and I know it’s something that needs to be addressed, so I’m hopeful that we can get it done this year," she said.
Davenport school officials have been lobbying lawmakers to address the per-pupil funding inequity that allows some school districts to spend more than others. A small number of school districts can spend up to $175 more per student than others.
The stumbling block has been coming up with the money. A Senate bill was approved last year that would have closed the inequity over 10 years, as well as addressed transportation funding problems. But it didn't get past the House amid revenue shortfalls.
Lawmakers still are dealing with revenue problems as they convened this week. But Reynolds said using money from the SAVE fund that pays for school infrastructure, technology and tax relief might be a possibility, suggesting a broader tax reform effort could bring in more revenue from online sales.
"You know, we're buying more and more things online, and it's kind of unfair ... for our Main Streets, so maybe we take a look at the growth in that," the governor said.
In her Condition of the State address this week, Reynold said she wants to lower tax rates, end federal deductibility and review state tax credits as part of an overhaul that could be spread out over several years.
No legislation has been introduced yet, but an internal memo prepared this past year for Senate Republicans mentioned, among a number of ideas, exposing more online sales to taxation. The SAVE account is funded by a statewide sales tax.
Sen. Roby Smith, R-Davenport, had broached the idea last year of using revenue in fiscal year 2019 that will come to state coffers as a result of federal tax reform.
Reynolds proposed in her budget using some of the federal windfall to help cover the revenue projected $34.7 million shortfall in the current fiscal year. But she, along with other lawmakers, are eyeing tax cuts for much of that money.
"We need to be sure and act so that we can make sure that the tax savings they're trying to pass on from the federal government we get to pass on to you at the Iowa level also," she told supporters Friday at the Iowa Machine Shed.
Davenport School Board President Ralph Johanson said Friday that he would have to review any specific proposal before commenting on using SAVE funds to help with the equity issue, but he added, "I'm glad that she's hopeful."
Educators have been pushing for an extension of the infrastructure fund, which is called Secure an Advanced Vision for Education. The fund is due to expire in 2029.
Reynolds said Friday she anticipated "some changes" but wasn't specific. Afterward, Joe Stutting, the North Scott School District superintendent, said he was concerned that conditions might get attached to the fund to require an additional public vote in order to spend money from the fund.
"Urban and suburban districts probably can still pass those kind of votes, but what about rural Iowa," he said, referring to a difficult rural economy.
Initially, public referendums held over several years created a range of local sales taxes to pay for school infrastructure. But the legislature replaced them in 2008 with a statewide sales tax that goes to the SAVE fund.
Reynolds, in her remarks Friday, said that the state is on a positive path. She and acting Lt. Gov. Adam Gregg, who accompanied her, cited a high graduation rate in the state and a low unemployment rate. Reynolds called the 2017 legislative session "the most pro jobs, pro growth legislative session in decades."
She also made a stop Friday in Maquoketa.