DES MOINES --- As lawmakers return this week to Des Moines, the state’s school districts are banking on the Iowa Legislature to extend a sales tax they rely on to pay for building projects — and hope changes to the tax code don’t dampen other sources of K-12 funding.
Lawmakers came close last year to extending the tax — the House approved a 20-year extension 95-3 in April — but the Senate did not take up the measure in the final days of the 2018 legislative session.
“It was a huge disappointment,” said Emily Piper, a lobbyist for the Iowa Association of School Boards. “There’s no doubt about it.”
The 2029 sunset of SAVE, which stands for Securing an Advanced Vision for Education, has put districts “under a time crunch,” Piper said, as most issue bonds against 20 years of the tax’s projected revenue.
A 20-year extension of the existing 1 percent sales tax is expected to provide more than $16 billion to school infrastructure projects and property tax relief.
The Solon Community School District holds an example of what can happen without it.
The district opted to build just two-thirds of a new school building that opened this academic year. Solon Intermediate was supposed to have the third, fourth and fifth grades — but instead opened to only grades four and five. The land meant to be the third-grade wing still is an empty field.
The pause in construction, Solon Intermediate Principal Zach Wigle said, has put the district in an undesirable spot.
“We could really end up spending a ton more money on the same exact stuff,” Wigle said. “And it’s really hard to swallow for the school board, and it should be for our community. We should have that being built right now.”
Without a 20-year timeline, Iowa districts can no longer borrow against SAVE funds, said Dave Wilkerson, government relations director of School Administrators of Iowa.
“That is a priority for everyone,” Wilkerson said, adding that without sales tax revenue more districts are turning to property tax-funded general obligation bonds for construction — if voters approve the bond issues.
“ … It’s really a priority if you’re a district that’s growing — like a Linn-Mar over there — those SAVE funds are just critical to meet demands of growth.”
The Cedar Rapids Community School District, where enrollment has dropped, also is relying on SAVE to pay for a sweeping 20-year facilities plan that would close eight elementary schools and build or renovate 13 larger elementaries.
If lawmakers do extend SAVE, school districts could have access to a growing pool of funds thanks to changes passed last session that broadened which goods, especially those sold online, the state collects sales tax on. The Legislative Services Agency estimated tax changes will increase SAVE revenue by more than $20 million by fiscal 2020.
“That definitely is going to increase SAVE dollars,” said Shawn Snyder, associate executive director of government relations and school finance of the Iowa Association of School Boards.
But how cuts to other tax revenue will impact Supplemental State Aid — schools’ primary funding source — remains unknown. Net tax revenue growth for Iowa is estimated to be about 1.8 percent, or $140 million more, for next fiscal year, according to the Iowa Department of Management.
The current fiscal year, which ends June 30, n the other hand has an estimated growth rate of about 4.7 percent, almost $345 million.
The growth rate for fiscal year 2020, the year legislators will set a budget for this session, “isn’t really very robust,” Snyder said. “But I still think potentially the legislature would have some room to provide some funding for Supplemental State Aid.”
“We’re not just talking K-12 schools,” School Administrators of Iowa’s Wilkerson added. “When you talk about all the services the state budget has to provide, (it) isn’t a lot. And we’re all going for the same dollar.”
Republican Gov. Kim Reynolds has said there will be enough money to fund her priorities, though she noted challenges could arise because “people want more money in education.”
She is expected to outline her priorities for the state’s $7 billion-plus budget Tuesday during the Condition of the State address to lawmakers.
K-12 education typically is the budget’s largest line item, netting more than 40 percent of available state dollars. Last year, more than $3.1 billion was allocated to public education.
Although some education groups have not set a preferred growth rate for K-12 funding this session, most agree a 3 percent increase would let most school districts “break even.”
“The money, as it has been in the last few years, the money is going to be an issue,” Wilkerson said.