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Governor’s dagger into the Trust Fund

Governor’s dagger into the Trust Fund

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David Osterberg


Ten years after voters approved an amendment to the Iowa Constitution to designate new sales-tax revenues for outdoor recreation and water quality, there is finally some movement. But the movement toward the new trust fund is not what voters requested or expected, because Gov. Kim Reynolds wants to change the rules.

Legislators told voters what to expect from the trust fund because they passed a law before the referendum. And that law — Chapter 461 — showed how the funding would be apportioned among various purposes. It also specified that this would be new money. As the law states:

“Trust fund moneys shall supplement and not replace moneys appropriated by the general assembly to support the constitutional purposes provided in section 461.3.” [Italics added.]

This is the first violation of trust by the governor. Current law would direct $207 million from a new three-eighths-cent sales tax to “supplement” existing funding for the purposes voters wanted expanded by creating the trust fund.

Instead, she proposes to not apply the three-eighths-cent set aside to all new sales/use tax revenue, and then proposes — contrary to the understanding in 2010 — to use a majority of that revenue to merely replace rather than supplement funds that already go to natural resources. Because things like administration for the Department of Natural Resources will be paid from the fund under her plan, there would be only $70 million to $80 million in new dollars.

The second violation of trust comes with the governor’s plan to change, after the fact, the formula voters expected (from Chapter 461) before they voted. This is a bait-and-switch.

The 2010 law lays out the formula for use of the trust fund:

  • Natural resources establishment, restoration and enhancement, 23 percent.
  • Soil conservation and water protection, 20 percent.
  • Watershed protection, 14 percent.
  • Iowa Resources Enhancement and Protection fund (REAP), 13 percent.
  • Local conservation initiatives, 13 percent.
  • Trails design, maintenance and expansion, 10 percent.
  • Lake restoration and water quality improvement, 7 percent.

The governor’s proposed new formula gets rid of much of the outdoor recreation funding in the formula, and cuts trails, REAP, and much of the funding for the Department of Natural Resources. Funds are shifted to the voluntary Nutrient Reduction Strategy that pays agricultural interests to reduce water pollution.

Third, the governor is accepting the voters’ consent to a tax increase only if she can cut other taxes by a greater amount. Her proposed income tax cuts are guaranteed to hinder our commitment to other services, from education to corrections to safety-net supports — and make the overall tax system less fair to the poor and middle-income Iowans.

That was not what the voters approved in 2010. Yet, in a cruel irony, voters who backed the trust fund and sales tax to deal with ag-based water pollution will find that farm operations are the big winners in the Reynolds plan.

These operations will not pay the increased sales tax. From fertilizer and soil additives to combines and tractors, farm operations are exempt from sales taxes.

Put it together: Agriculture would not be required to pay the increase in the sales tax while the richest farm operations take an income tax cut at the same time. The governor’s plan is a dagger into the heart of what voters wanted, and — once again — agriculture will not be asked to clean up its own mess.

David Osterberg is co-founder and lead environmental researcher at the nonpartisan Iowa Policy Project in Iowa City. He served as a state representative from Mount Vernon from 1983-94.


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