House Study Bill 548 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON SANDS) A BILL FOR An Act relating to education funding by extending the period of 1 time for collecting sales tax for deposit in the secure an 2 advanced vision for education fund, modifying allocations 3 of state sales and use tax revenue collections, specifying 4 uses for certain funding received from the secure an 5 advanced vision for education fund, creating a district levy 6 reduction fund, and making appropriations. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 5511YC (6) 86 md/sc

H.F. _____ Section 1. Section 76.4, Code 2016, is amended to read as 1 follows: 2 76.4 Permissive application of funds. 3 Whenever the governing authority of such political 4 subdivision shall have on hand funds derived from any other 5 source than taxation which may be appropriated to the payment 6 either of interest or principal, or both principal and interest 7 of such bonds, such funds may be so appropriated and used and 8 the levy for the payment of the bonds correspondingly reduced. 9 This section shall not restrict the authority of a political 10 subdivision to apply sales and services tax receipts collected 11 pursuant to chapter 423B for such purpose. Notwithstanding 12 section sections 423F.3 and 423F.5A , a school district may 13 apply tax receipts and funds received pursuant to chapter 423F 14 for the purposes of this section . 15 Sec. 2. Section 423.2, subsection 11, paragraph b, 16 subparagraph (3), Code 2016, is amended by striking the 17 subparagraph and inserting in lieu thereof the following: 18 (3) (a) Of the one-sixth of the remaining revenues: 19 (i) Transfer to the secure an advanced vision for 20 education fund created in section 423F.2, an amount not to 21 exceed the product of the statewide budget enrollment for 22 the current school budget year multiplied by the per pupil 23 amount distributed to school districts under section 423F.2, 24 subsection 3, for the fiscal year beginning July 1, 2015. 25 (ii) Following the transfer under subparagraph subdivision 26 (i), transfer the remaining amount to the district levy 27 reduction fund created in section 423F.5A. 28 (b) This subparagraph (3) is repealed January 1, 2047. 29 Sec. 3. Section 423.2, subsection 14, Code 2016, is amended 30 to read as follows: 31 14. The sales tax rate of six percent is reduced to five 32 percent beginning on January 1, 2030 2047 . 33 Sec. 4. Section 423.5, subsection 5, Code 2016, is amended 34 to read as follows: 35 -1- LSB 5511YC (6) 86 md/sc 1/ 9

H.F. _____ 5. The use tax rate of six percent is reduced to five 1 percent beginning on January 1, 2030 2047 . 2 Sec. 5. Section 423.43, subsection 1, paragraph b, Code 3 2016, is amended to read as follows: 4 b. Subsequent to the deposit into the general fund of 5 the state and after the transfer of such revenues collected 6 under chapter 423B , the department shall transfer one-sixth 7 of such remaining revenues to the secure an advanced vision 8 for education fund created in section 423F.2 and the district 9 levy reduction fund created in section 423F.5A, in amounts 10 proportionate to the transfers to such funds under section 11 423.2, subsection 11, paragraph “b” , subparagraph (3) . This 12 paragraph is repealed December 31, 2029 January 1, 2047 . 13 Sec. 6. Section 423F.3, subsection 1, paragraph d, Code 14 2016, is amended to read as follows: 15 d. For any authorized school infrastructure purpose or 16 project of the school district as defined in subsection 6 , if 17 the total cost of the authorized infrastructure purpose does 18 not exceed one million dollars . 19 Sec. 7. Section 423F.3, subsection 3, Code 2016, is amended 20 to read as follows: 21 3. a. If the board of directors adopts a resolution to use 22 funds received from the secure an advanced vision for education 23 fund under the operation of this chapter solely for providing 24 property tax relief by reducing indebtedness from the levies 25 specified under section 298.2 or 298.18 , the board of directors 26 may approve a revenue purpose statement for that purpose 27 without submitting the revenue purpose statement to a vote of 28 the electors. 29 b. If the board of directors intends to use funds for 30 purposes or projects other than those listed in paragraph 31 “a” , or change the use of funds to purposes or projects other 32 than those listed in paragraph “a” , the board shall adopt 33 a revenue purpose statement or amend an existing revenue 34 purpose statement , subject to approval of the electors, listing 35 -2- LSB 5511YC (6) 86 md/sc 2/ 9

H.F. _____ the proposed use of the funds. If the board of directors 1 intends to use funds for a school infrastructure purpose or 2 project that was approved by the board on or after July 1, 3 2016, the total cost of which exceeds one million dollars, 4 the board shall adopt a revenue purpose statement or amend 5 an existing revenue purpose statement, subject to approval 6 of the electors, to specifically authorize the use of funds 7 for that school infrastructure purpose or project. Both the 8 ballot presented to the electors and the revenue purpose 9 statement shall describe each school infrastructure purpose or 10 project that has a total cost exceeding one million dollars, 11 specify the estimated commencement and completion dates for 12 each such purpose or project, and specify a maximum amount of 13 funds received under this section that may be used for each 14 such purpose or project. School districts shall submit the 15 statement to the voters no later than sixty days prior to the 16 expiration of any existing revenue purpose statement or change 17 in use not included in the existing revenue purpose statement. 18 c. The board of directors may use funds received from 19 the secure an advanced vision for education fund under the 20 operation of this chapter for a joint infrastructure project 21 with one or more school districts or one or more school 22 districts and a community college established under chapter 23 260C , for which buildings or facilities are constructed 24 or leased for the purpose of offering classes under a 25 district-to-community college sharing agreement or concurrent 26 enrollment program that meets the requirements for funding 27 under section 257.11, subsection 3 . If the board intends 28 to use funds received from the secure an advanced vision 29 for education fund under the operation of this chapter for 30 such a joint infrastructure project, the board shall adopt a 31 revenue purpose statement or amend an existing revenue purpose 32 statement, subject to approval of the electors, stating the 33 proposed use of the funds. 34 d. The board secretary shall notify the county commissioner 35 -3- LSB 5511YC (6) 86 md/sc 3/ 9

H.F. _____ of elections of the intent to take an issue to the voters 1 pursuant to paragraph “b” or “c” . The county commissioner of 2 elections shall publish the notices required by law for special 3 or general elections, and the election shall be held on a date 4 specified in section 39.2, subsection 4 , paragraph “c” . A 5 majority of those voting on the question must favor approval 6 of the revenue purpose statement. However, if the proposed 7 revenue purpose statement or proposed amendment to an existing 8 revenue purpose statement authorizes the use of funds received 9 from the secure an advanced vision for education fund for a 10 school infrastructure purpose or project the cost of which 11 exceeds one million dollars, sixty percent of those voting 12 on the question must favor approval. If the proposal is not 13 approved, the school district shall not submit the same or new 14 revenue purpose statement to the electors for a period of six 15 months from the date of the previous election. 16 Sec. 8. Section 423F.3, subsection 4, Code 2016, is amended 17 to read as follows: 18 4. The revenues received from the secure an advanced vision 19 for education fund pursuant to this chapter shall be expended 20 for the purposes specified in the revenue purpose statement. 21 If a board of directors has not approved a revenue purpose 22 statement, the revenues shall be expended in the order listed 23 in subsection 1 except that the payment of bonds for which the 24 revenues have been pledged shall be paid first. Once approved, 25 a revenue purpose statement is effective until amended or 26 repealed by the foregoing procedures. A revenue purpose 27 statement shall not be amended or repealed to reduce the amount 28 of revenue pledged to the payment of principal and interest 29 on bonds as long as any bonds authorized by sections 423E.5 30 and 423F.4 are outstanding unless funds sufficient to pay 31 principal, interest, and premium, if any, on the outstanding 32 obligations at or prior to maturity have been properly set 33 aside and pledged for that purpose. 34 Sec. 9. NEW SECTION . 423F.5A District levy reduction fund. 35 -4- LSB 5511YC (6) 86 md/sc 4/ 9

H.F. _____ 1. A district levy reduction fund is created as a separate 1 and distinct fund in the state treasury under the control of 2 the department of revenue. Moneys in the fund include revenues 3 credited to the fund, appropriations made to the fund, and 4 other moneys deposited into the fund. 5 2. The moneys available in a fiscal year in the district 6 levy reduction fund shall be distributed by the department of 7 revenue to each school district on a per pupil basis calculated 8 using each school district’s budget enrollment, as defined in 9 section 257.6, for that fiscal year. 10 3. a. The director of revenue by August 15 of each fiscal 11 year shall send to each school district an estimate of the 12 amount of tax moneys each school district will receive for 13 the year and for each month of the year. At the end of each 14 month, the director may revise the estimates for the year and 15 remaining months. 16 b. The director shall remit ninety-five percent of the 17 estimated tax receipts for the school district to the school 18 district on or before August 31 of the fiscal year and on or 19 before the last day of each following month. 20 c. The director shall remit a final payment of the remainder 21 of tax moneys due for the fiscal year before November 10 of the 22 next fiscal year. If an overpayment has resulted during the 23 previous fiscal year, the November payment shall be adjusted to 24 reflect any overpayment. 25 4. A school district receiving revenues from the district 26 levy reduction fund shall expend the revenues for one or more 27 of the following purposes: 28 a. Reduction of bond levies under sections 298.18 and 29 298.18A and all other debt levies. 30 b. Reduction of the regular and voter-approved physical 31 plant and equipment levy under section 298.2. 32 c. Reduction of the public educational and recreational levy 33 under section 300.2. 34 5. a. A school district shall include as part of its 35 -5- LSB 5511YC (6) 86 md/sc 5/ 9

H.F. _____ financial audit for the budget year beginning July 1, 2016, 1 and for each subsequent budget year the amount received during 2 the year pursuant to this section. In addition, the financial 3 audit shall include the amount of bond levies, physical plant 4 and equipment levy, and public educational and recreational 5 levy reduced as a result of the moneys received under this 6 section. The amount of the reductions shall be stated in terms 7 of dollars and cents per one thousand dollars of valuation and 8 in total amount of property tax dollars. 9 b. The auditor of state may prescribe necessary forms and 10 procedures for the consistent collection of the information 11 required by this subsection. 12 Sec. 10. Section 423F.6, Code 2016, is amended to read as 13 follows: 14 423F.6 Repeal. 15 This chapter is repealed December 31, 2029 January 1, 2047 . 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanation’s substance by the members of the general assembly. 19 This bill relates to education funding by extending the 20 period of time for collecting sales tax for deposit in the 21 secure an advanced vision for education (SAVE) fund, modifying 22 allocations of sales tax revenue collections, specifying uses 23 for certain funding received from the secure an advanced vision 24 for education fund, and establishing a district levy reduction 25 fund. 26 Code section 423.2 imposes a state tax of 6 percent upon 27 the sales price of all sales of tangible personal property, 28 consisting of goods, wares, merchandise, and other items 29 designated by statute, sold at retail in the state to 30 consumers, except as otherwise provided by Code chapter 423. 31 Generally, by operation of law, a sale subject to the sales tax 32 is also subject to the use tax. Following transfers currently 33 required by statute, one-sixth of the remaining state sales 34 tax revenue from the 6 percent tax is transferred to the SAVE 35 -6- LSB 5511YC (6) 86 md/sc 6/ 9

H.F. _____ fund created in Code section 423F.2. Moneys in the SAVE fund 1 are allocated to school districts on a per pupil basis to be 2 used for infrastructure and property tax reduction purposes 3 specified in Code chapter 423F. Under current law, the sales 4 tax rate of 6 percent is reduced to 5 percent on January 1, 5 2030, and Code chapter 423F, along with other corresponding 6 provisions, is repealed December 31, 2029. 7 This bill extends the 6 percent sales tax rate and the 8 statutory repeal of Code chapter 423F until January 1, 2047. 9 In addition, the bill modifies the allocation and transfer of 10 sales tax revenues currently transferred to the SAVE fund. 11 Of the one-sixth of the remaining revenues following the 12 current statutorily required transfers, the bill requires the 13 following: (1) a transfer to the SAVE fund in an amount not to 14 exceed the product of the statewide budget enrollment for the 15 current school budget year multiplied by the per pupil amount 16 distributed to school districts from the SAVE fund for the 17 fiscal year beginning July 1, 2015; (2) following the transfer 18 to the SAVE fund, a transfer of the amount remaining to the 19 district levy reduction fund established in the bill. 20 The bill establishes a district levy reduction fund under 21 the control of the department of revenue. The bill requires 22 that moneys available in the district levy reduction fund 23 be distributed to each school district on a per pupil basis 24 calculated using each school district’s budget enrollment 25 for that fiscal year, which is similar to the distribution 26 of moneys in the SAVE fund under Code chapter 423F. The 27 bill establishes estimating and payment procedures for the 28 department regarding distribution of moneys in the fund. 29 The bill requires school districts receiving revenues from 30 the district levy reduction fund to expend the revenues for 31 one or more of the following purposes: reduction of bond 32 levies under Code sections 298.18 and 298.18A and all other 33 debt levies, reduction of the regular and voter-approved 34 physical plant and equipment levy, and reduction of the public 35 -7- LSB 5511YC (6) 86 md/sc 7/ 9

H.F. _____ educational and recreational levy. 1 Similar to what is allowed under current law for revenues 2 received by a school district under Code chapter 423F, the bill 3 allows a school district to allocate funds derived from the 4 district levy reduction fund to the payment of principal and 5 interest on bonds if the levy for the payment of the bonds is 6 correspondingly reduced. 7 Current Code section 423F.3 provides that a school district 8 receiving revenues from the secure an advanced vision for 9 education fund under Code chapter 423F without a valid revenue 10 purpose statement shall expend the revenues for specified 11 purposes in the order prescribed by law. After required 12 reductions of specified property tax levies, such a district 13 may expend those revenues for authorized school infrastructure 14 purposes specified by law. The bill amends that provision to 15 allow only those authorized school infrastructure purposes or 16 projects the total cost of which is $1 million or less. 17 Code chapter 423F provides that if the school board intends 18 to use funds for purposes or projects other than for providing 19 property tax relief by reducing indebtedness from the levies 20 specified under Code section 298.2 or 298.18 or to change the 21 use of funds to purposes or projects other than those purposes 22 or projects, the board must adopt a revenue purpose statement, 23 subject to approval of the electors, listing the proposed use 24 of the funds. The bill specifies that an existing revenue 25 purpose statement may be amended to provide for such a change 26 in the use of funds, subject to voter approval. 27 Under the bill, if the school board intends to use funds for 28 a school infrastructure purpose or project that was approved 29 by the board on or after July 1, 2016, the total cost of which 30 exceeds $1 million, the board shall adopt a revenue purpose 31 statement or amend an existing revenue purpose statement, 32 subject to approval of the electors, to specifically authorize 33 the use of funds for that school infrastructure purpose or 34 project. The bill also requires both the ballot presented to 35 -8- LSB 5511YC (6) 86 md/sc 8/ 9

H.F. _____ the electors and the revenue purpose statement to describe each 1 school infrastructure purpose or project that has a total cost 2 exceeding $1 million, specify the estimated commencement and 3 completion dates for each such purpose or project, and specify 4 a maximum amount of funds received from the SAVE fund that may 5 be used for each such purpose or project. 6 The bill also provides that if the proposed revenue purpose 7 statement or proposed amendment to an existing revenue 8 purpose statement authorizes the use of funds for a school 9 infrastructure purpose or project the cost of which exceeds $1 10 million, 60 percent of those voting on the question, rather 11 than a simple majority, must vote in favor of approval. 12 -9- LSB 5511YC (6) 86 md/sc 9/ 9