House
Republican
Newsletter
March 21, 2007
Appropriations
Democrats Finally Release General Fund
Balance Sheet, Plan to Increase Spending by
10 Percent
On Monday, March 19, the Democrats finally released the General Fund balance sheet detailing all tax increases and spending, including the targets for the Standings bill and state employee salaries.
The total increase in the FY 08 general fund budget is $528 million, or 10 percent above the budget enacted last session. Even when the $62 million in supplemental appropriations are factored into the FY 07 budget, the increase for FY 08 is $467 million, or 8.7 percent compared to last year.
This level of spending increase is not sustainable in future fiscal years without significant tax increases.
The Democrats appear to have pulled a fast one on the cigarette tax increase. After approving SF 128, Democrats insisted the first $127.6 million of increased tax revenue flowed into the new Health Care Trust Fund ostensibly to fund health care priorities. If the Democrats’ own balance sheet is assumed to be truthful, 100 percent of the new revenue is being deposited into the General Fund, NOT into the Health Care Trust Fund.
No appropriation from the General Fund to the Health Care Trust Fund is shown in either the balance sheet or appropriations tracking information. That means Democrats are planning on either changing the budget targets at a later date (not likely) or notwithstanding the provisions of SF 128 in the Standings bill (very likely). Even if they were to change the targets to account for the $127.6 million, the best they could do is off-set current General Fund spending. Otherwise, they would violate the expenditure limitation.
The bottom line is that all cigarette tax revenue is going to the General Fund for new spending.
The target for the Standings bill is $70 million above the Governor’s level. While we don’t yet have the details, it is assumed that this is because they will propose spending $110 million on state employee salaries (which not coincidentally is exactly what the Governor had left in his ending balance for salaries). They did not follow the Governor’s request to fund $40 million of the property tax credits in FY 08. Instead, they fund the entire $159.9 million for the credits out of the FY 07 ending balance.
If the $110 million for state employee salaries is added and the $40 million for the property tax credits is subtracted, that would account for the $70 million difference between the Democrats and the Governor on Standings (of the $110 million, it is estimated that $40 million will go to the Regents for salaries.)
There are three major differences between the Democrats and the Governor on tax increases. While the Democrats agree with the Governor on the cigarette tax and tax amnesty, they are not planning to do the combined corporate income tax increase ($25 million) or the alternative energy fuel vehicle tax credit ($2 million). Also, in an apparent attempt to get more votes for the cigarette tax increase, they have increased the Earned Income Tax Credit from the Governor’s level of $4.3 million to $10.7 million.
Despite those differences with the Governor, the Democrats still plan to raise taxes by $144 million.
The Democrats have a balance of $142 million in the Senior Living Trust Fund (SLTF) in FY 08. This is $55 million less than the Governor’s recommendation. Also, they did not reveal how much they are taking back out of the SLTF to fund the Medicaid budget in FY 08. It is likely they will use at least $74.8 million (the Governor’s recommendation), meaning that if the revenue does not continue to exceed the REC expectations, the SLTF could be completely drained in FY 09.
Between raising taxes, approving an unsustainable rate of spending growth and raiding trust funds, the budget blueprint put forth by the Democrats is fiscally reckless.
(Contact: Lon Anderson, 1-5184)
Agriculture
Senate Okays Habitual Livestock Trespass Measure
On Wednesday, March 14, the Senate amended and passed Senate File 200 by a unanimous 49-0 vote. SF 200 proposes to create a “habitual trespass” cause of action for livestock when such stock move onto a neighbor’s land or a public roadway three or more times in a year. The measure allows a local authority (county or city) to make a record of the occurrences. After a third occurrence, the neighboring landowner may request the responsible landowner where the livestock are kept to erect or maintain a fence on the land under the provisions of Code Chapter 359A. This chapter provides that an adjacent property owner may compel the building or maintenance of a partition fence in which each adjacent landowner is required to contribute an equal amount to pay for the fence. If the fence is not erected or maintained per the provisions of Chapter 359A, a local authority may make a written request to the board of supervisors to undertake constructing or maintaining a fence. The local board is authorized to recoup the expense by certifying the costs and including a 5% penalty that may be placed upon the tax book and collected as property tax. SF 200 originated in the Senate Judiciary Committee and has been referred to the House Agriculture Committee.
Senate Passes In-State Packer Measure
On Tuesday, March 20, the Senate amended and passed Senate File 504 by a largely partisan 34-16 vote. The bill proposes to require that certain covered packers that operate in this state reserve daily 20% of the swine produced in-state for purchase from unaffiliated producers using spot market sales. This 20% requirement is gradually phased in by incremental increases of 5% each two years starting at 10% by July 1, 2007, and reaching 20% by July 1, 2011. The bill was significantly amended by the Senate. The amendment lowered the unaffiliated purchase requirement from 25% to 20% and stretched out the phase-in period by an additional year from what the Senate Agriculture Committee passed. The adopted amendment added new language to the public records chapter of the Code (Chapter 22). Certain records of the Iowa Department of Agriculture and Land Stewardships or the Office of Attorney General concerning inspection of a covered packer to ensure compliance with the minimum unaffiliated swine producer purchase requirement are to be considered public records. This confidential record created by the IDALS inspection may be waived by the packer, acquired and used in an enforcement action by the Attorney General, or required by a subpoena or court order. The amendment also modified the definition of “covered packer” by replacing language approved by the Senate Agriculture Committee that specified that it be a packer that slaughtered at least 1,000 head of swine each business day. The new language defines “covered packer” to include a plant that slaughtered an average of 100,000 head of swine per year for the prior five years, or had the capacity to do so.
Opposition to the bill arises out of concern that this action and requirement by the state interferes with open and unfettered free markets and could in the long run encourage packers to move their operations to states with a more friendly business environment. Conversely, proponents of this legislation argue that if too much a packer’s input is through captive supplies, the function of a open market is impaired to the point that producers wish to sell on a spot market basis can not only no longer receive a competitive bid for their products, they may have no market access at all. The legislation is further contorted by efforts to craft the provisions in a way that lessens the likelihood of the measure being deemed as an interference with interstate commerce.
(Contact: Lew Olson, 1-3096)
Commerce
Senate Moves Cable Franchise, Credit Union Bills
A number of bills began their journey to the Commerce Committee Tuesday, as the Senate spent Tuesday afternoon concentrating on financial and communications issues.
Efforts to provide more competition in the cable television market has gotten the most attention from the media. Senate File 554 creates a statewide franchise system for cable television. The process would be handled by the Iowa Utilities Board, and would allow for communities to have multiple cable providers vying for subscribers. The main proponents of the bill – telephone companies – argue that the current system is providing consumers little choice in services and cost.
Opposition to the bill came from the Iowa League of Cities, which fears that the implementation of a statewide franchise will take away a city’s ability to establish franchise parameters that meet their citizens’ needs. Also, it may reduce city revenue.
Iowa’s cable providers have remained neutral on the bill, a first in this ongoing debate. The bill requires that all franchisees in a community operate under the same requirements. If a phone company were to come into a community under a statewide franchise, the incumbent franchisee would be able to have their existing franchise amended to have the same terms.
Iowa would not be the first state to implement a statewide cable franchise. According to the National Conference of State Legislatures, 12 states have already implemented changes.
The Senate also took action to allow credit unions to offer small consumer loans. During the previous General Assembly, the financial services industry was challenged to offer an alternative to car title loans and payday lending. In response, several credit unions have come forward with offerings of small consumer loans.
Due to the size of the loans (less than $500) and the short duration, the feasibility of offering this product is marginal. So the credit unions have sought permission to require an application fee for this type of loan. Senate File 347 allows credit unions to assess a fee that is the lesser of ten percent of the loan amount or $30. The House Commerce Committee has passed out companion legislation – House File 500.
(Contact: Brad Trow, 1-3471)
Economic Growth
Iowa Power Fund is in Economic Growth
The bill relating to the much talked-about Iowa Power Fund was discussed today in a subcommittee held for Economic Growth. HF 498 began in the Commerce committee.
Among the many things the bill will do are the following:
- Establish a new Code chapter entitled “Iowa Energy Independence Act”, with the objectives of enhancing the quality of life of Iowa citizens through increasing the autonomy of the state as a self-sufficient source of non-resource depleting alternative or renewable energy; the independence of the state from reliance upon outside sources of energy; the efficiency of the state in maximizing opportunities to achieve energy efficiency through energy conservation measures and practices and providing economic growth and the creation of new jobs.
- Establishes an Iowa Energy Independence Advisory Council to assist with the plan, provide public energy education and outreach, and oversee and coordinate state agency energy efficiency and conservation efforts.
- Establishes the Iowa Power Fund, which will be administered by the Department of Economic Development with the assistance of the Iowa Energy Independence Office and its council.
o This fund will have $25 million appropriated each year for the fiscal period beginning July 1, 2007, and ending June 30, 2011.
The subcommittee will meet again at 9:00 a.m. on Monday, March 26, to discuss HF 498 further. For more information on the Power Fund bill, please refer to the March 14 edition of the Caucus Newsletter.
(Contact: Kristin Gray, 1-3026)
Education
Compulsory Age to 18 – Compromise in the Works
House File 6, the infamous bill raising compulsory school age to 18 years, is now House File 779. The bill raises the compulsory attendance age for students in school districts and accredited nonpublic schools from age 16 to age 18. The bill takes effect one year from now, on July 1, 2008.
The goal of HF 779 is to send the message that a high school diploma is the minimum essential for workplace success.
Individual reasons for dropping out vary widely including boredom, family, juvenile justice involvement and money issues. In subcommittee, legislators expressed concern whether the funding and necessary wrap-around services are available to adequately help current dropouts in school. Some members are concerned about enforcement once students reach majority.
Check out amendment H-1392, by Dolecheck and Wise:
This compromise amendment raises the age to 17 years but doesn’t make it easy for an 18 year-old to drop out. The bill requires the student to do three things. If the 18 year-old does not do these things then the student is still considered compulsory age:
The 18 year-old shall:
1. File a formal declaration of intent to terminate school enrollment
The local school board must approve this form upon which the 18-year-old acknowledges that terminating school enrollment is likely to reduce the individual’s earning potential. The school must make every effort to inform the student’s parents of the intent to drop out.
2. Participate in an exit interview
The guidance counselor or other school personnel shall conduct an exit interview to determine the reasons for the individual’s decision to terminate school enrollment and inform the individual of opportunities to continue the individual’s education in a different environment, including adult education and preparation to get a GED.
3. Complete a survey providing reasons and data on the student’s reasons for terminating enrollment and the student’s perception of the actions taken by the school to keep the individual enrolled.
This is a compromise that works in Florida and just might work here.
(Contact: Ann McCarthy, 1-3015)
Environmental Protection
Senate Okays Small Community Multiple NPDES Permit Consolidated Fee
On Tuesday, March 13, the Senate approved Senate File 405 by a 48-0 vote. SF 405 is the Senate companion bill to House File 824, originally sponsored by Rep. Lukan. The bill proposes to tweak legislation enacted last year that codified National Pollution Discharge Elimination System (NPDES) permit fees at significantly higher levels than previously charged, but about one-third lower than the amount that DNR proposed through the rulemaking process. The change would allow communities with 250 or fewer residents, but that have more than one NPDES non-storm water permit, to pay one consolidated $210 fee for all applicable NPDES permits.