James Van Fossen - Iowa State House Representative

Jamie Van Fossen

The Week In Review
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January 27, 2006 E-mail: jamie.van.fossen@legis.state.ia.us	Session Week 3 Fax: 563-355-9954
PENSION and SOCIAL SECURITY PHASE-OUT IMPACT RELEASED On Monday, January 23, the Fiscal Services Division (FSD) released the revised fiscal estimate associated with HF 2045, the five-year phase-out on pension and Social Security benefits. The revised estimate is based on tax model simulations provided to FSD by the Iowa Department of Revenue (IDR), and provided an explanation of the difference between the fiscal estimate for last year's HF 461 and HF 2045. The previous fiscal note issued for House File 461 was based on tax year 2000 income tax returns even though tax years 2001 and 2002 were also available. The rationale for using the earlier year was that tax years 2001 and 2002 were impacted by the recession of 2000-2001 and this greatly decreased the amount of investment and interest income reported on tax returns for those years. Basing the income tax model on a recession year would most likely result in underestimating the impact of the phase-out, since most years are not recession years. For HF 2045, the income tax model uses information from actual state and federal tax returns filed each tax year, for the purposes of this model, tax year 2003 returns were used. From this database, the department selected only tax returns showing at least one of the two impacted income sources (pension and/or Social Security) of which there were 329,029 affected returns. The estimated first tax year impact for HF 461 was $26.3 million, but for HF 2045, the estimate was $41.5 million this change is likely attributed to model refinements and the characteristics of the tax returns included in the model. In determining the estimate of HF 461, the department did not assume any impact on income tax withholding. However, for HF 2045, the department assigns 38.2% of the impact to withholding receipts and of that percentage, one-half would affect the first half of the tax year (FY 2007). For the HF 461 estimate, IDR assumed a much greater percentage of the impact would take place. HOUSE REPUBLICANS BEGIN WORK ON FY 2007 BUDGET TARGETS In December, the House Republicans released a plan to get the FY 07 budget in place prior to the 100^th day of session (April 18). According to that plan, House GOP budget targets need to be set by next Friday, February 3. In order to receive the necessary input from the budget sub chairs and the caucus, the committee began work on setting the targets late last week. The first step of the plan was for the Governor to release his budget recommendations during the first week of session. The good news is that he released his budget on the same day as the Condition of the State speech. The bad news is that the Governor’s tax and spend budget plan would not only increase general fund spending by over 10 percent in FY 07, it would leave the next Governor with a gigantic budget mess due to all of the Governor’s proposals for built-in spending increases. Here is how the targets will stack up in each of the four areas: Be based on the December REC estimate (no tax increases). The December REC estimate of three percent means that there is $261.7 million available to spend in FY 07. This is after the 99 percent expenditure limitation is calculated and after supplemental appropriations. This figure will allow for full funding of four percent allowable growth and substantial increases for Medicaid and public safety.	Repay funds borrowed during the economic downturn. The House GOP budget will include a payment from the General Fund to the Senior Living Trust Fund (SLTF), a payment from the taxable bonds proceeds to the SLTF, and will leave another $33.4 million in the FY 07 ending balance to be transferred into the SLTF. No matter what happens in the negotiations, some funds will be repaid to the SLTF. Leave room to negotiate with the Governor and Senate. There is a cushion within the $261.7 million figure to negotiate with the Governor and the Senate. Obviously, they will want additional funding for state employee salaries, teacher salaries, Regents and other areas. Some of the $261.7 million can be shifted to reach a budget compromise but the bottom line is that the increase cannot exceed that figure. Get the budget done prior to the 100^th day of session. The plan calls for budget targets to be released by early February, budget subcommittees will approve the budget bills, the Appropriations Committee will approve the bills by early March, and the full House will approve the bills by mid-March. This is an aggressive timeline (and may need to be pushed back one week due to the first funnel deadline) but one that needs to be followed if we want to get a budget prior to the 100^th day of session. The bottom line is that unlike last session, this year we have a plan that will not only allow the session to end by the 100^th day but also not have huge spending increases that will put the state’s financial future in jeopardy. HOUSE BOOSTS EDUCATION FUNDING BY MORE THAN $100 MILLION The Iowa House on Wednesday passed a four percent increase in allowable growth for the third time in as many years, meaning $103 million more in funding for students in K-12 education. In all, the Republican-led House has garnered an additional $300 million in allowable growth funding for Iowa’s schools in the past three years. “This is a significant and early increase that will assist administrators and school boards in shaping their budgets,” said House Education Chair Rep. Jodi Tymeson, R-Winterset, floor manager of the bill. The increase means a total of $2.1 billion in state aid for fiscal year 2008. Students in Iowa’s educational system will see a $205 increase in per pupil investment, bringing the total to $5,333 per pupil. “When added in with the more than one billion dollars that property taxpayers contribute, education is undeniably the top priority of Iowans and this Legislature,” said House Speaker Christopher Rants, R-Sioux City. “With this funding set, we now have a solid foundation from which to construct the rest of our budget. Again, education came first in our budget process.” Rants noted that education is receiving a four percent increase at a time when the state’s general fund is only increasing by 3 percent. The move comes one week after House Republicans introduced an educational reform bill that focuses on parental involvement, student performance and accountability to the taxpayer. The bill now moves to the Senate. Ways & Means Update Bills introduced in committee this week: No Bills were introduced in committee this week. Bills passed out of committee this week: No Bills passed out of committee this week.
Week in Review Archives 2006 Session 01-20-06 01-13-06 2005 Session 05-20-05 05-13-05 05-06-05 04-29-05 04-22-05 04-15-05 04-08-05 04-01-05 03-25-05 03-18-05 03-11-05 03-04-05 02-25-05 02-18-05 02-11-05 02-04-05 01-28-05 01-21-05 01-14-05 2004 Session 09-07-04 04-28-04 04-16-04 04-09-04 04-02-04 03-26-04 03-19-04 03-12-04 Rep 03-05-04 02-27-04 02-20-04 02-13-04 02-06-04 01-30-04 01-23-04 01-16-04 2003 Session 06-04-03 Special Session 05-30-03 Special Session 05-02-03 04-25-03 04-18-03 04-11-03 04-04-03 03-28-03 03-21-03 03-14-03 03-07-03 02-28-03 02-21-03 02-14-03 02-07-03 01-31-03 01-17-03 01-24-03 2002 Session 05-28-02 Special Session II 05-10-02 Special Edition 04-22-02 Special Session I 04-12-02 04-05-02 03-29-02 03-22-02 03-15-02 03-08-02 03-01-02 02-22-02 02-15-02 02-08-02 02-01-02 01-25-02 01-18-02 2001 Session 05-04-01 04-27-01 04-20-01 04-13-01 04-06-01 03-30-01 03-23-01 03-16-01 03-09-01 03-02-01 02-23-01 02-16-01 02-09-01 02-02-01 01-26-01 01-19-01 01-12-01 2000 Session 04-28-00 04-21-00 04-14-00 04-07-00 03-31-00 03-24-00 03-17-00 03-10-00 03-03-00 02-25-00