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State
Auditor Calls
Governor’s
Budget Illegal
At
the request of Republican Legislators, State Auditor Richard
Johnson reviewed the revised Governor’s Fiscal Year 2002 budget.
As was the case with the FY 2001, Johnson verified that the
Governor’s budget is illegal.
According
to the Auditor Johnson, there are two major points of illegality
in the Governor’s budget.
For
starters, the Governor again relies on reversions to meet the 99
percent limitation. He
continues this fiscally reckless practice despite legislative
Republicans and Johnson having declared it illegal last year.
Johnson
states, “While some say that a budget which projects that a
balance will remain at the end of the year for transfer to the
established reserves is balanced, I do not believe this is proper.
I believe our existing law requires appropriation of no
more than 99% of estimated revenue…any other definition
diminishes the level of control the expenditure limitation is
intended to provide”.
The
second controversial aspect of the budget is that the Governor
proposes to transfer $120 million from the Economic Emergency Fund
(EEF) in FY 2002. The
law states that moneys from the EEF can be appropriated by the
legislature only in the fiscal year in which the appropriation is
made. Under current
law the legislature can only appropriate funds out of the EEF for
FY 2001 (since we are currently in FY 01) and therefore the
Governor is breaking the law by asking to appropriate money out of
the EEF for FY 02.
According
to Johnson, “the EEF was established to enable the state to
respond to critical needs in the year they arise, not to avoid
difficult decisions when there is adequate time to plan for the
effects of those decisions.”
He further adds: “In addition, I have strong reservations
about using the $120 million from the EEF to help fund the FY 02
budget because of the timely payment of state obligations,
including school aid payments…spending over half of the EEF on
annual appropriations will reduce the amount of money the state
can draw upon to pay its bills on time and increase the
possibility that school aid payments and other payments will be
delayed until next year.”
Ways and Means
Considers Property
Tax/ Fiscal
Reform Bill
Early
next week, the House Ways and Means Committee will be considering
HF 537, the House’s version of a local property tax reform bill.
The House Local Government Committee approved HF 537 just
last week. The Senate
is also planning on debating its own version of the bill
When
the Ways and Means Committee debates the bill, Representative
Hubert Houser will be offering an
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amendment
in committee that includes the following provisions:
·
If the state passes
an unfunded mandate, the local government is not required to comply
with it, or may establish a levy not to exceed $.27/$1,000 to pay
for an unfunded mandate
·
Provides for a choice
of years to use when calculating the base year; local governments
may choose between FY 98, 99, 00 or FY 99,00, 01. This provides flexibility due to extraordinary circumstances
in either FY 98 or FY 01
·
Requires an ending
fund balance not to exceed 25% of actual expenditures.
The portion that exceeds 25% has to be designated for a
particular purpose. If
the local government changes the designated purpose, they will be
required to seek voter approval for the change in designation.
·
Counties will be able
to levy a specific property tax for employee benefits (FICA, health
insurance, worker’s comp, unemployment compensation), property and
tort liability costs as needed because a specific levy is created
for costs such as these that are outside this limitation.
Currently, there is a county supplemental for these costs and
other costs which are unlimited once a county has reached its levy
limit for either its general basic ($3.50) or rural basic ($3.95). Cities have the ability to levy outside their $8.10 levy
limit for these same costs.
·
Those funds or levies
which are unaffected by this bill are for counties - debt service,
mental health, cemeteries, trust and agency-type costs; for cities -
debt service, trust and agency fund (health, pension, FICA), capital
improvement reserve, emergency levy, voted levies (non-voted levies
are included unless specifically exempted).
·
Creates a commission
to study state and local taxation. The membership will consist of 14 members, they include:
three Senators, three Representatives, one member appointed
by Iowa State Association of Counties (ISAC), the League of Cities,
an agricultural organization, a taxpayer organization, a business
taxpayers organization, a small business organization and a person
from the Department of Management (DOM).
The
Senate version does not contain state mandate language, treats trust
and agency funds differently in the base year calculation and
completely removes cities from the bill, all while not providing for
the choice of a base year and contains different ending fund balance
language.
Ways
& Means Update
Bills Passed In The Ways & Means
Committee
This Week:
HSB
187 An act relating to the administration of the tax and
related laws by the Department of Revenue and Finance.
HSB 244 An act establishing the new economy employment
initiative by providing for a partial deduction under the individual
income tax for the capital gain from the sale or exchange of capital
stock of a corporation.
HF 433 A bill for an act providing for taxes relating to
the sale of ethanol blended gasoline, making penalties applicable,
and providing
HSB 247 An act relating to a community renewal initiative
by establishing a community development program to provide tax
credits for income tax.
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