House

Republican

Newsletter

March 7, 2007

Appropriations

Revenue Continues to Exceed REC Estimates

On Thursday, March 1, Fiscal Services released the General

Fund revenue numbers through the end of February. As has

been the case for the past three fiscal years, gross General Fund revenue continues to exceed Revenue Estimating Conference (REC) estimates.

Through February, total General Fund revenue increased by $225.3 million, or 6.2 percent above FY 06. The REC estimate for the entire year is $285 million, or 4.9 percent compared to FY 06. The 6.2 percent growth rate matched the growth through January so while revenue has leveled off, there is no evidence to indicate that the actual revenue growth will not exceed the REC estimate.

The REC will meet again on April 6 to review and revise the revenue estimates. If revenue continues to exceed the REC estimate, it is possible that the REC will increase the estimates again in April.

Once again in February, all major parts of General Fund revenue increased compared to FY 2006.

Personal income tax receipts were up by $112 million, or 6.4 percent compared to FY 06. Income tax withholding payments increased by 5.6 percent, income tax estimate payments were up 9.4 percent and payments with income tax returns were up a whopping 24.2 percent. The last increase is primarily due to taxpayers not having enough tax withheld during the course of the year but also due to a substantial increase in capital gains due to the growth in the stock markets.

Sales and use tax receipts are up $31.1 million, or 2.4 percent compared to FY 06. Sales tax receipts for February were up $5.9 million, or 2.5 percent compared to February 2006.

Despite the sales and use tax receipts being up compared to a year ago, there are some warning signs. First, the increase in February means that only four of the first eight months of FY 07 have shown positive sales tax growth. Also, the overall increase of 2.4 percent is below the REC estimate of 2.7 percent. This is the only major General Fund revenue source that is not outperforming the REC estimate.

Corporate income tax revenue continues to exceed expectations. Through February, corporate income taxes (which are based on the profitability of the state’s corporations) were up $64.8 million, or 37.5 percent compared to FY 06. That is well above the REC estimate of 24.3 percent growth. Something to keep an eye on, however, is that corporate tax revenue was up only 3.3 percent compared to February, 2006. It is too early to tell whether this was a timing issue or whether corporate profits have peaked.

While therecontinues to plenty of good news on the revenue side, it appears that there is no end to the appetite of those who want increased state government spending. The REC estimates give the Governor and legislative Democrats plenty of money to spend but despite that, they have to raise taxes by another $170 million to make their budget plan work.

The concern is that increasing taxes and spending at an uncertain time for the economy is a recipe that sets the state up for a fiscal mess in the coming years.

(Contact: Lon Anderson, 1-5184)

Agriculture

Senate Panel Okays Packer Minimum Spot Market Purchase Provision

On Tuesday, March 6, the Senate Agriculture Committee amended and passed Senate Study Bill 1001 by a unanimous 15-0 vote. The gist of this legislation is that it requires that when a covered packer purchases swine, it must reserve 25 percent of its daily reported kill for the purchase of swine from nonaffiliated producers on the spot market. This 25% requirement is gradually phased in by incremental increases of 5% each year, starting at 10% by July 1, 2007 and reaching 25% by July 1, 2010.

The bill was amended by the Senate committee to change its scope to more narrowly focus on swine produced or slaughtered in this state in order to lessen the likelihood of running afoul of interstate commerce concerns. This amendment was crafted with the apparent advice of the state Attorney General. Most aspects of the committee-approved bill are similar to negotiated consent agreements the Attorney General has made in the past 18 months with several major national packers that also contract for the care and feeding of swine in this state. These agreements were made following a series of court action involving a suit filed by Smithfield/Prestage-Stoecker challenging Iowa’s prohibition against packer-produced swine in Iowa. This case resulted in a ruling that enjoined the Iowa A.G. from enforcing a state ban on packers producing pigs on January 23, 2003. This result was appealed by the state and it was overturned and remanded back to the lower federal court by the Eighth Circuit on May 21, 2005. On September 16, 2005, the Iowa A.G. threw in the towel on the issue and agreed to a consent decree with the plaintiff. Since then, comparable agreements have been reached with Cargill and Hormel.

The bill originally proposed to require the Iowa Department of Agriculture and Land Stewardship (IDALS) to establish an electronic packer reporting system to automatically receive purchase and slaughter data reported for swine by the United States Department of Agriculture (USDA) and provided by packers on a daily basis. This part of the bill was stricken by an amendment. The bill defines the terms “packer” and “covered packer”, with the latter term originally being a person who engages in buying swine for slaughter purposes and who is required to report purchase and slaughter data to USDA. This definition was changed by the adopted amendment, which restated this latter term as a person who slaughters at least 1,000 animals per day in this state. The bill requires that when a covered packer purchases swine, it must reserve 25 percent of its daily reported kill for the purchase of swine from nonaffiliated producers on the spot market. An nonaffiliated producer is defined as a person who all of the following applies:

  • The producer has less than 1% equity interest in a packer;
  • If the producer is a business association, a packer has less than 1% interest in a producer;
  • The producer is not an officer, director, employee, or owner of a packer;
  • The producer does not owe a fiduciary responsibility to the packer;
  • If the producer is a business association, the packer does not have an equity position in the producer;
  • The adopted amendment added additional restrictions to:
  • Prohibit a producer from having a relationship with a packer—
  • when the packer directly owns controls, or operated a producer’s swine operations in Iowa;
  • when the packer finances the producer’s swine operations in Iowa, or
  • when the packer finances a person who directly or indirectly contracts for the care and feeding of swine produced in-state at the producer’s Iowa swine operations.

The committee adopted a second degree amendment to the primary amendment which included a new wrinkle. It requires that the purchases from unaffiliated producers must achieve daily spot market sales that would be incrementally phased-in over the next three years, starting with 10% on July 1, 2007 and escalating to 25% by July 1, 2010. A spot market sale is defined as a situation in which: the price for the swine is established less than 14 days before the delivery for slaughter of the swine; the price may be equated with a fixed-dollar amount; and a reasonably competitive bidding opportunity exists on the date the sale is agreed to.

The bill also provides some enforcement mechanisms, such as the ability of a nonaffiliated producer to bring legal action against a covered packer who violates the bill’s provisions in which civil penalties may be imposed for such violations. In addition, the Attorney General’s office is the primary agency responsible for enforcing the bill’s provisions, and it may apply to district court for injunctive relief; subpoena contracts, documents, and records; and bring action in district court to impose and collect civil penalties. The bill’s House companion (House File 59) appears to be inactive, with no subcommittee having been assigned despite it being introduced nearly two months ago.

(Contact: Lew Olson, 1-3096)

Commerce

Democrat Power Fund Legislation Moves Out of Commerce Committee

On Tuesday night, the House Commerce Committee approved House File 498. The bill calls for Iowa to be independent of foreign sources of energy by 2025 and establishes the Iowa Power Fund. The final version adopted by the Committee varied significantly from the original version introduced less than two weeks ago. Even with these changes, the bill was best described by David Yepsen of the Des Moines Register in his blog entry yesterday afternoon when he wrote:

Democrat legislators say the bill is a “work in progress.” Which is good. Right now, this fund is more a “piece of work.”

As stated before, the bill still creates the Iowa Power Fund. Unfortunately, the bill remains very light on any legislative intent for where the money is spent. House Democrats are talking about using the fund to encourage the development of ethanol and biodiesel plants. Since the Iowa Values Fund has already provided substantial resources for many of these projects. And it’s a point of contention for Yepsen, who wrote “That’s an unnecessary subsidy to corporations. Ethanol and biodiesel plants are attracting all sorts of money from private investors.”

The Democratic members of the subcommittee did agree to change the composition of the Iowa Energy Independence Advisory Council. Instead of going with a group loaded with bureaucrats, the council will now be comprised of Iowans with practical experience in the related fields.

Unfortunately for the utility ratepayers of Iowa, Democrats did not change the bill in a manner to prevent rate increases. While the mandatory increase in rates to fund the IowaEnergyCenter was removed, the bill still contains new mandates on municipal utilities and rural electric cooperatives. It also contains new “objectives” for renewable energy use in the state. Today’s objective is tomorrow’s mandate, which means Iowans’ will see bigger bills in the future.

The bill will now move on to the Economic Growth Committee. It is expected that this group will put in significantly more time in refining and improving a bill that today remains a “piece of work”.

(Contact: Brad Trow, 1-3471)

Economic Growth

Economic Growth Action

The following bills in the Economic Growth Committee survived the funnel:

HF 100 – This bill removes prison populations from the population count that is taken in order to qualify to be an enterprise zone.

HSB 168 – A corrective bill to include the insurance industry into the targeted industries able to utilize the new jobs tax credit. The insurance agency was inadvertently left out when the bill was constructed.

HF 246 - Requires the Department of Revenue to establish and administer a Tax Credit Certificate Transfer Program for purposes of allowing a biotechnology enterprise or a targeted industry business with 75 or fewer employees to transfer a tax credit certificate to another taxpayer in return for private financial assistance for a net operating loss carryover.

HF 282 - The bill increases the percentage of receipts paid to the State Treasurer that are transferred to the Shelter Assistance fund from 5 to 10 percent. The bill decreases the percentage of receipts deposited in the General Fund of the state from 95 percent to 90 percent.

HF 411 - This bill creates a Film, Television, and Video Project Promotion Program and fund and an Iowa Film Advisory Board, provides for tax credits and income exclusions, and includes effective and retroactive applicability dates.

HF 456 - Relates to art, culture, and entertainment by providing income tax deductions for certain related income contributions.

Expanding Iowa’s Access to Renewable Fuels

Infrastructure Board makes 31 awards

The Renewable Fuels Infrastructure Board (RFIB) has awarded $729,900 to Iowa retailers installing pumps for E-85 ethanol and biodiesel fuel, terminals installing biodiesel blending equipment, and tank wagons for farm delivery having dedicated compartments for E-85 and biodiesel.

The 31 projects approved at the RFIB meeting (Feb. 22) are as follows:

Company / Location
Agriland FS / Harlan
AgVantage FS / Hampton
Cobb Oil / Washington
East Central Iowa Coop / Hudson
Farmers Coop / Glidden
Galva Holstein Ag / Holstein
GQK Co./CountyLine Mart / Keota
Great Lakes Coop / Milford
Hy-Vee Gas / West Des Moines
Kum & Go / Ames
Kum & Go / Coralville
Kum & Go / De Soto
Kum & Go / Eldora
Kum & Go (2 locations) / Grimes
Kum & Go / Grinnell
Kum & Go / Johnston
Kum & Go / Lamoni
Kum & Go / Neola
Kum & Go / Pleasant Hill
Kum & Go / StoryCity
Kum & Go / Urbandale
Logli’s Store / Fairfield
MaxYield Coop / Emmetsburg
Mid-Iowa Coop / Beaman
Molo Oil / Dubuque
Mulgrew Oil / Dubuque
Mulgrew Oil / Maquoketa
New Alliance FS / Oskaloosa
Pilot Travel Centers / ClearLake
Two Rivers Coop / Pella

Since it was formed last year the RFIB board has assisted installation of 32 E-85 fueling sites, three combination E-85 and biodiesel fueling sites, 16 biodiesel dispensers, three terminals and one partitioned tank wagon.

Over a three year period, $13 million in financial incentives will be allocated by the RFIB to expand consumer access to renewable fuels. So far, more than $1.3 million has been awarded. Owners or operators of retail motor fuel sites or biodiesel terminals submit applications for the awards to the Iowa Department of Economic Development. The RFIB will meet to consider applications again on May 24, 2007.

Source:

(Contact: Kristin Gray, 1-3026)

Education

Teacher Quality Bill Moves to the House

Senate File 277, the $70 million in new money for teacher, passed the Senate Monday night by a vote of 44-5.

25th in the Nation by FY09

Senator Gronstal said on the floor that SF 277 will bring Iowa to 25th in the nation by FY 09. The Legislative Services Agency (LSA) differs.

According to LSA, the $140 million in NEW money for teacher salaries over the next two years still leaves Iowa $200 million short of the goal.

The LSA estimate does not include the 4% allowable growth in FY 08 and FY 09. Senator Gronstal hopes, perhaps, that allowable growth is exclusively dedicated to teacher salaries. Remember, however, that allowable growth is general growth in school funding intended to defrays inflationary costs in school districts operation including energy costs and insurance premiums NOT just exclusive to salaries.

Senate Amendments

Senate Republicans, with Senator Wood, successfully moved the professional development money out of collective bargaining. As such under the amended SF 277 professional development funding operates as per current law.

Market Factor Pay, however, stays under collective bargaining. Current law gives the school district management exclusive decision making authority over these funds. An Appropriations Committee amendment did restore current Code language saying that the market factor pay can be used to enhance salaries. SF 277 changed purpose to teacher incentives but not salary. The Appropriations Committee amendment says the funds can be used for both.

The Senate adopted two additional amendments:

  1. Added the teachers at the Braille and SightSavingsSchool and the School for the Deaf to the provisions of the Teacher Quality law.
  2. Created an “Iowa Elite Teacher” program with 4 pilots. The top 10 percent of the teachers in a selected school district get bonus. The local district sets up an Elite Teacher Selection Committee that develops criteria and ranks teachers in the district. Those in the top 10 percent get an “extended contract” which includes a higher salary and participate in summer school activities.

Senate Republicans offered amendments to properly fund the counselors, librarians and nurses mandate and to extend the one-year, one-time only waiver from this mandate. The amendments failed on a party line vote leaving districts two choices – fund these new employees from current revenue or pay for the salaries from property taxes.

A brief summary of the amended SF 277 is as follows:

SSB 1118 as amended by a 16 page strike-everything

  • Subjects market-factor dollars to collective bargaining. Professional development is not subject to collective bargaining.
  • Mandates that school districts employ a qualified guidance counselor and school nurse. A one-year, one-time only waiver is provided
  • 2006 Teacher Quality mandated teacher librarians thanks to Christie Vilsack. 115 school districts needed a waiver from this requirement this school year
  • 40 school districts currently do not have a “qualified” guidance counselor. “Qualified” means that the guidance counselor has a master’s degree in school counseling. Your district may have guidance counselor but is that person “qualified”?
  • 85 districts do not have a school nurse
  • Allows districts to pay the salary of the teacher librarian, guidance counselor or nurse with property taxes.
  • This is the first time that schools will be allowed to pay for salaries with property taxes.
  • District applies to the School Budget Review Committee for the property taxing authority to pay the librarian, counselor and/or nurse.
  • District may pay for this staff year after year from property taxes. One report said this is a one-year deal. It is NOT.
  • $70 million increase in FY 08 and another $75 million increase in FY 09.
  • Pilot career ladder. No implementation of career ladder in current law. No guarantee of better teaching. What are our students getting for $70 million?
  • Raises minimum beginning teacher salary to from $25,500 to $26,500.

Other provisions include:

  • Creates an Administrator Quality program including administrator performance standards, required evaluation and professional development. Your school boards should be concerned about losing the at-will status of their superintendents and principals. Your district could do these ‘best practices” without codifying them.
  • Expands Teacher Quality pay plan to cover more AEA staff at a cost of $3.8 millionand teachers at the Braille and Sight Savings schools.
  • Funds Teacher Academies at $1.85 million. These are summer intensive professional development opportunities.
  • Creates a new “Iowa Elite Teacher “ pilot program. The top 10 percent of the teachers in a selected school district get bonus.

House Education Bills on the Move