Reynolds backs major water quality initiative, reviews mixed

Iowa Gov. Kim Reynolds on Tuesday called for a sales tax increase to fund $150 million in annual  water quality, conservation and outdoor recreation work.

The 1 percentage point increase in sales tax would be offset by accelerated cuts in income taxes and trims in property taxes associated with mental health programs, which also would be paid for by the sales tax increase. Reynolds presented her agenda during her Condition of the State address before a joint session of the House of Representatives and the Senate.

The move was widely praised, but drew some concern among Democrats who don’t want to change a spending formula laid out before voters approved the Iowa Natural Resources and Outdoor Recreation Trust Fund in 2010. 

Reynolds noted that she voted as a state senator to support the Iowa Water and Land Legacy (IWILL) program and its spending formula. That was before the public voted in 2010 to approve a constitutional amendment to protect the fund. It was to be filled with the first 3/8 cent of any sales tax increase, but no increases have been approved since. But Reynolds said the program needs to be tweaked a decade later.  

“The challenges we face today and will face tomorrow are different than what we understood them to be 10 years ago, so it’s time to amend the formula,” Reynolds said. Farm groups have pushed hard for a formula that would allocate less to trails and more on water quality projects on farms.

Reynolds proposed the Invest in Iowa Act, which would through the sales tax increase:

•       Significantly cut income taxes,

•       Create a sustainable funding source for the mental health system,

•       Reduce property taxes

•       Fund the Natural Resources and Outdoor Recreation Trust

Reynolds said the 1 percentage point increase in the sales tax associated with IWILL and the related cuts would raise nearly $100 million a year for water quality work — representing 58% of the trust fund. Another $52 million would go to conservation and outdoor recreation efforts, a gain of 14.6% from the current spending. At the same time, raising the sales tax a full penny — not just the 3/8ths of 1% to cover IWILL, would provide money to pay for regional mental health services now paid by local property taxpayers.

Sen. Ken Rozenboom, R-Oskaloosa, chairman of the Senate Natural Resources and Environment Committee, said he supports the governor’s proposal. He added that IWILL would take the place of earlier water quality spending increases the governor supported. That would include doing away with a special tax on water use. 

Rozenboom supports Reynolds’ plan as long as the finished product is revenue neutral or cut overall taxes and the formula is changed to focus more on water quality work and less on trails. “No one ever asks me about more money for trails,” he said. 

Senate Majority Leader Jack Whitver, R-Ankeny, said he’s still catching up with details on divvying up the sales tax. “I think that there’s a lot of work to be done there,” Whitver said after Reynolds’ speech. “I haven’t seen the formula or any of the other changes.”

Some business groups, including the Greater Des Moines Partnership, have supported trails as a quality of life amenity that could help draw needed workers to Iowa, where a low unemployment rate and lack of population growth have tested workers.

It’s time to vote on IWILL, Rozenboom said. In eight years, he hasn’t voted on the issue. “The group that passed it didn’t put effort into how to fund it,” Rozenboom said. “Talk is cheap. We’re actually going to try to fund this,” he added.

The governor’s proposal would cut the percentage of sales tax receipts going to trails to 4% from 10%. Lake restoration would bump up 3 percentage points, to 10%. The Resources Enhancement and Protection program (REAP), would get 10%, down from the original 13% but still could get significantly more than the $11 million it usually gets through appropriations, Reynolds said.

Soil and water conservation’s share would rise to 34% from the original 20%.

Sen. Rob Hogg, D-Cedar Rapids, ranking member on the Senate Natural Resources and Environment Committee, said he is leery of changing the original IWILL formula — the product of years of negotiations among ag interests, environmentalists and government officials — which was presented before voters approved the IWILL measure. 

“We should honor the original formula,” Hogg said.

Then there’s the matter of the tax offset. Hogg sees it as trouble. “We would be offsetting this with a massive tax cut for the wealthiest Iowans,” Hogg said.

Some organizations and others following the issue immediately praised the governor’s approach. 

Polk County Conservation Director Richard Leopold led the task force that created IWILL in 2006-07. He unsuccessfully ran for governor as a Democrat after serving as Iowa Department of Natural Resources director under Democratic Gov. Chet Culver. Reynolds is a Republican.

“I am very encouraged,” Leopold said in an interview. “The governor had been quite bold. She is all in. I have been talking to lawmakers for months. They feel a sense of urgency. This seems to be Reynolds’ big push this year.”

Fred Long, president of the Iowa Conservation Alliance and state board chairman of the Iowa Chapter of the National Wild Turkey Federation, said Reynolds is on the right track. “I totally support everything she said and so does our group,” Long said. “I’ve been working seven years on this issue.”

Long’s only concern — extending REAP beyond its legislative end in 2021. “We need to remove the sunset on REAP,” Long said. “I have a high level of concern about changing the formula and moving REAP under IWILL.”

The Iowa Environmental Council applauded the support for IWILL, but also raised questions about the change in formula. “Iowans approved making our water, land, and air a priority a decade ago and thus far have not seen meaningful improvement, Ingrid Gronstal Anderson, water program director, said in a statement. “IEC has long been a proponent of funding IWILL, and in recent months emphasized that upholding the integrity of the formula is key. We await more detail on the governor’s proposal and look forward to working with the governor’s staff and the Legislature this session.”

— Iowa Capital Dispatch Reporter Linh Ta contributed to this report.