House Study Bill 549 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON EDUCATION BILL BY CHAIRPERSON JORGENSEN) 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 of 3 state sales and use tax revenue, modifying uses for funding 4 received from the secure an advanced vision for education 5 fund, establishing a district equity supplement program, 6 making appropriations, and including effective date and 7 applicability provisions. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 5464YC (7) 86 md/sc

H.F. _____ Section 1. NEW SECTION . 257.16C District equity supplement 1 program —— appropriation. 2 1. A district equity supplement program is established to 3 provide additional funding for school districts with a regular 4 program district cost per pupil that is less than the highest 5 regular program district cost per pupil among all school 6 districts in the state for the same budget year. 7 2. a. For the budget year beginning July 1, 2017, and 8 each succeeding budget year, the department of management 9 shall annually determine a statewide adjusted district cost 10 per pupil not to exceed the statewide maximum district cost 11 per pupil. The statewide adjusted district cost per pupil 12 shall be annually determined, by taking into account amounts 13 appropriated under subsection 3, for the purpose of providing 14 district equity supplement aid for those school districts with 15 the highest cost per pupil differential. 16 b. Each school district that satisfies the requirements of 17 subsection 1 shall receive district equity supplement aid in 18 an amount equal to the school district’s budget enrollment for 19 the budget year multiplied by the difference between the school 20 district’s regular program district cost per pupil for the 21 budget year and the statewide adjusted district cost per pupil 22 for the budget year. 23 c. For purposes of this section: 24 (1) “Cost per pupil differential” means the difference 25 between a school district’s regular program district cost per 26 pupil and the statewide maximum district cost per pupil for the 27 same budget year. 28 (2) “Statewide maximum district cost per pupil” means the 29 highest regular program district cost per pupil among all 30 school districts in the state. 31 3. a. A district equity supplement fund is created as a 32 separate and distinct fund in the state treasury under the 33 control of the department of management. Moneys in the fund 34 include revenues credited to the fund, appropriations made 35 -1- LSB 5464YC (7) 86 md/sc 1/ 9

H.F. _____ to the fund, and other moneys deposited into the fund. For 1 each fiscal year beginning on or after July 1, 2017, there is 2 appropriated annually all moneys in the fund to the department 3 of management for purposes of making district equity supplement 4 aid payments under this section, as calculated under subsection 5 2. 6 b. If the balance of the fund exceeds the amount necessary 7 to make all district equity supplement aid payments, moneys 8 remaining in the fund at the end of a fiscal year shall be 9 transferred to the secure an advanced vision for education fund 10 and distributed to school districts on a per pupil basis under 11 section 423F.3, subsection 3. 12 4. District equity supplement aid payments shall be paid by 13 the department of education at the same time and in the same 14 manner as foundation aid is paid under section 257.16, and may 15 be included in the monthly payment of state aid under section 16 257.16, subsection 2. 17 5. District equity supplement aid payments received under 18 this section are miscellaneous income and shall be deposited 19 in the general fund of the school district. However, the 20 district equity supplement amount shall not be included in 21 district cost. A district equity supplement under this section 22 shall not affect the receipt or amount of a budget adjustment 23 received under section 257.14. 24 6. a. Amounts received by a school district under 25 this section shall be excluded from collective bargaining 26 as provided in chapter 20 and shall be used solely for 27 instructional expenditures and shall supplement, not 28 supplant, existing school district funding for instructional 29 expenditures. 30 b. (1) For purposes of this section, “instructional 31 expenditures” means any of the following: 32 (a) Textbooks, as defined in section 301.1. 33 (b) Library books. 34 (c) Other instructional materials and equipment used 35 -2- LSB 5464YC (7) 86 md/sc 2/ 9

H.F. _____ directly by students. 1 (2) “Instructional expenditures” does not include the 2 salary, benefits, or other compensation of any school district 3 employee. 4 Sec. 2. Section 257.15, subsection 4, paragraph b, Code 5 2016, is amended to read as follows: 6 b. After lowering all school district adjusted additional 7 property tax levy rates to the statewide maximum adjusted 8 additional property tax levy rate under paragraph “a” , the 9 department of management shall use transfer any remaining funds 10 at the end of the calendar year to further lower additional 11 property taxes by increasing for the budget year beginning the 12 following July 1, the state foundation base percentage the 13 district equity supplement fund created in section 257.16C . 14 Moneys used pursuant to this paragraph shall supplant an equal 15 amount of the appropriation made from the general fund of the 16 state pursuant to section 257.16 that represents the increase 17 in state foundation aid. 18 Sec. 3. Section 423.2, subsection 11, paragraph b, 19 subparagraph (3), Code 2016, is amended by striking the 20 subparagraph and inserting in lieu thereof the following: 21 (3) (a) Of the one-sixth of the remaining revenues: 22 (i) Transfer to the secure an advanced vision for 23 education fund created in section 423F.2, an amount not to 24 exceed the product of the statewide budget enrollment for 25 the current school budget year multiplied by the per pupil 26 amount distributed to school districts under section 423F.2, 27 subsection 3, for the fiscal year beginning July 1, 2016. 28 (ii) Following the transfer under subparagraph subdivision 29 (i), transfer one-half of the remaining amount to the property 30 tax equity and relief fund created in section 257.16A. 31 (iii) The amount remaining after the transfers under 32 subparagraph subdivisions (i) and (ii), shall be transferred to 33 the district equity supplement fund created in section 257.16C. 34 (b) This subparagraph (3) is repealed January 1, 2050. 35 -3- LSB 5464YC (7) 86 md/sc 3/ 9

H.F. _____ Sec. 4. Section 423.2, subsection 14, Code 2016, is amended 1 to read as follows: 2 14. The sales tax rate of six percent is reduced to five 3 percent beginning on January 1, 2030 2050 . 4 Sec. 5. Section 423.5, subsection 5, Code 2016, is amended 5 to read as follows: 6 5. The use tax rate of six percent is reduced to five 7 percent beginning on January 1, 2030 2050 . 8 Sec. 6. Section 423.43, subsection 1, paragraph b, Code 9 2016, is amended to read as follows: 10 b. Subsequent to the deposit into the general fund of 11 the state and after the transfer of such revenues collected 12 under chapter 423B , the department shall transfer one-sixth 13 of such remaining revenues to the secure an advanced vision 14 for education fund created in section 423F.2 , the property tax 15 equity relief fund created in section 257.16A, and the district 16 equity supplement fund created in section 257.16C, in amounts 17 proportionate to the transfers to such funds under section 18 423.2, subsection 11, paragraph “b” , subparagraph (3) . This 19 paragraph is repealed December 31, 2029 January 1, 2050 . 20 Sec. 7. Section 423F.1, Code 2016, is amended to read as 21 follows: 22 423F.1 Legislative intent. 23 It is the intent of the general assembly that the increase 24 in the state sales, services, and use taxes under chapter 423, 25 subchapters II and III , from five percent to six percent on 26 July 1, 2008, shall be used solely for purposes of providing 27 revenues to local school districts under this chapter and 28 chapter 257 to be used solely for school infrastructure 29 purposes , or school district property tax relief , or to address 30 school funding inequities . 31 Sec. 8. Section 423F.3, subsection 6, paragraph a, Code 32 2016, is amended to read as follows: 33 a. For purposes of this chapter , “school infrastructure” 34 means those activities authorized in section 423E.1, subsection 35 -4- LSB 5464YC (7) 86 md/sc 4/ 9

H.F. _____ 3, Code 2007 , excluding the construction, reconstruction, 1 repair, demolition, purchase, or remodeling of a stadium unless 2 such stadium-related activity is specifically included in a 3 revenue purpose statement approved by the electors on or before 4 July 1, 2016 . 5 Sec. 9. Section 423F.3, subsection 6, Code 2016, is amended 6 by adding the following new paragraph: 7 NEW PARAGRAPH . 0d. For school budget years beginning on 8 or after July 1, 2017, “school infrastructure” includes the 9 payment of school district transportation costs not to exceed 10 an amount equal to the district’s actual enrollment for the 11 school budget year multiplied by the difference between the 12 district’s average transportation costs per pupil and the state 13 average transportation costs per pupil for the school year, as 14 determined under section 257.31, subsection 17, paragraph “c” . 15 Sec. 10. Section 423F.6, Code 2016, is amended to read as 16 follows: 17 423F.6 Repeal. 18 This chapter is repealed December 31, 2029 effective January 19 1, 2050 . 20 Sec. 11. EFFECTIVE DATE. The following provisions of this 21 Act take effect July 1, 2017: 22 1. The section of this Act amending section 423.2, 23 subsection 11, paragraph “b”, subparagraph (3). 24 2. The section of this Act amending section 423.43, 25 subsection 1, paragraph “b”. 26 Sec. 12. APPLICABILITY. The following provisions of this 27 Act apply to fiscal years beginning on or after July 1, 2017: 28 1. The section of this Act amending section 423.2, 29 subsection 11, paragraph “b”, subparagraph (3). 30 2. The section of this Act amending section 423.43, 31 subsection 1, paragraph “b”. 32 EXPLANATION 33 The inclusion of this explanation does not constitute agreement with 34 the explanation’s substance by the members of the general assembly. 35 -5- LSB 5464YC (7) 86 md/sc 5/ 9

H.F. _____ This bill relates to education funding by extending the 1 period of time for collecting sales tax for deposit in the 2 secure an advanced vision for education (SAVE) fund, modifying 3 allocations of state sales and use tax revenue, modifying uses 4 for funding received from the SAVE fund, and establishing a 5 district equity supplement program. 6 Code section 423.2 imposes a state tax of 6 percent upon 7 the sales price of all sales of tangible personal property, 8 consisting of goods, wares, merchandise, and other items 9 designated by statute, sold at retail in the state to 10 consumers, except as otherwise provided by Code chapter 423. 11 Generally, by operation of law, a sale subject to the sales 12 tax is also subject to the use tax. Following the transfer 13 of amounts required for the natural resources and outdoor 14 recreation trust fund, one-sixth of the remaining state sales 15 tax revenue from the 6 percent tax is transferred to the SAVE 16 fund created in Code section 423F.2. Moneys in the SAVE fund 17 are allocated to school districts on a per pupil basis to be 18 used for specified infrastructure and property tax reduction 19 purposes. Under current law, the sales tax rate of 6 percent 20 is reduced to 5 percent on January 1, 2030, and Code chapter 21 423F, along with other corresponding provisions, is repealed 22 December 31, 2029. 23 The bill extends the 6 percent sales tax rate and the 24 statutory repeal of Code chapter 423F until January 1, 2050. 25 In addition, the bill modifies the allocation and transfer 26 of sales and use tax revenues currently transferred to 27 the SAVE fund. Of the one-sixth of the remaining revenues 28 following statutorily required transfers, the bill requires 29 the following: (1) a transfer to the SAVE fund in an amount 30 not to exceed the product of the statewide budget enrollment 31 for the current school budget year multiplied by the per pupil 32 amount distributed to school districts from the SAVE fund for 33 the fiscal year beginning July 1, 2016; (2) following the 34 transfer to the SAVE fund, a transfer of one-half of the amount 35 -6- LSB 5464YC (7) 86 md/sc 6/ 9

H.F. _____ remaining to the property tax equity and relief (PTER) fund; 1 and (3) after the first two transfers, a transfer of the amount 2 remaining to the district equity supplement fund created in the 3 bill. 4 Under current law, moneys in the PTER fund are used to 5 provide property tax relief by lowering the adjusted additional 6 property tax levy rates for schools to the statewide maximum 7 adjusted additional property tax levy rate. After lowering 8 all school district adjusted additional property tax levy 9 rates to the statewide maximum adjusted additional property 10 tax levy rate, the department of management is required to 11 use any remaining funds at the end of the calendar year to 12 further lower additional property taxes by increasing for the 13 next budget year, the state foundation base percentage. The 14 bill strikes the provision providing for the increase in the 15 state foundation base percentage and instead provides that 16 after lowering all school district adjusted additional property 17 tax levy rates to the statewide maximum adjusted additional 18 property tax levy rate, the department of management shall 19 transfer any remaining funds to the district equity supplement 20 fund created in the bill. 21 The bill establishes a district equity supplement program to 22 provide additional funding for school districts with a regular 23 program district cost per pupil that is less than the highest 24 regular program district cost per pupil among all school 25 districts in the state for the same budget year. For the 26 budget year beginning July 1, 2017, and each succeeding budget 27 year, the department of management shall annually determine 28 a statewide adjusted district cost per pupil not to exceed 29 the statewide maximum district cost per pupil. The statewide 30 adjusted district cost per pupil shall be annually determined, 31 by taking into account amounts appropriated from the district 32 equity supplement fund, for the purpose of providing district 33 equity supplement aid for those school districts with the 34 highest cost per pupil differential. 35 -7- LSB 5464YC (7) 86 md/sc 7/ 9

H.F. _____ Each eligible district shall receive district equity 1 supplement aid in an amount equal to the school district’s 2 budget enrollment for the budget year multiplied by the 3 difference between the school’s regular program district cost 4 per pupil for the budget year and the statewide adjusted 5 district cost per pupil for the budget year. The bill defines 6 “cost per pupil differential” and “statewide maximum district 7 cost per pupil”. 8 The bill creates a district equity supplement fund under 9 the control of the department of management and appropriates 10 annually all moneys in the fund to the department of management 11 for purposes of making district equity supplement aid payments. 12 If the balance of the fund exceeds the amount necessary to make 13 all district equity supplement aid payments, moneys remaining 14 in the fund at the end of a fiscal year shall be transferred 15 to the SAVE fund and distributed to school districts on a 16 per pupil basis under Code section 423F.3(3). The bill also 17 establishes the timing and procedure for making district equity 18 supplement aid payments. 19 District equity supplement aid payments received are 20 considered miscellaneous income, shall not be included in 21 district cost, and shall not affect the receipt or amount of 22 a budget adjustment received under Code section 257.14. The 23 bill also requires district equity supplement amounts received 24 by a school district to be excluded from collective bargaining 25 and requires such amounts to be used solely for instructional 26 expenditures, as defined in the bill, and to supplement, not 27 supplant, existing school district funding for instructional 28 expenditures. 29 As part of the restrictions on the use of revenues 30 received from the SAVE fund, Code section 423F.3 defines 31 “school infrastructure” to mean, in part, those activities 32 authorized in Code section 423E.1(3), Code 2007, which 33 includes the construction, reconstruction, repair, demolition, 34 purchase, or remodeling of a stadium. The bill excludes such 35 -8- LSB 5464YC (7) 86 md/sc 8/ 9

H.F. _____ stadium-related activities unless specifically included in a 1 revenue purpose statement approved by the electors on or before 2 July 1, 2016. 3 The bill authorizes school districts to use SAVE fund 4 revenues for the payment of school district transportation 5 costs if the district’s average transportation costs per pupil 6 exceed the state average transportation costs per pupil. 7 Such use of SAVE funds may not exceed an amount equal to the 8 district’s actual enrollment for the school year multiplied by 9 the difference between the district’s average transportation 10 costs per pupil and the state average transportation costs per 11 pupil for the school year. 12 Code section 423F.3, subsection 7, provides that the 13 general assembly shall not alter the purposes for which the 14 revenues received under Code section 423F.3 may be used from 15 infrastructure and property tax relief purposes to any other 16 purpose unless the bill is approved by a vote of at least 17 two-thirds of the members of both chambers of the general 18 assembly and is signed by the governor. 19 The sections of the bill amending the sales and use tax 20 allocation and transfer provisions of Code sections 423.2 and 21 423.43 take effect July 1, 2017, and apply to fiscal years 22 beginning on or after that date. 23 -9- LSB 5464YC (7) 86 md/sc 9/ 9