Iowa Gov. Kim Reynold’s delivers her 2020 Condition of the State Address in front of the Iowa legislature on Jan. 14. (Photo by Linh Ta/Iowa Capital Dispatch)
Republican Gov. Kim Reynolds’ plan to clean Iowa’s waterways and boost outdoor recreation would provide far less money for the work than voters envisioned, the Iowa Fiscal Partnership reported Friday.
Iowa voters in 2010 approved a constitutional amendment that would funnel a portion of any future sales tax increase into water quality and outdoor recreation programs. The amendment created the Natural Resources and Outdoor Recreation Trust Fund, and an accompanying state law governed how that money would be spent.
Reynolds’ plan would fund that program for the first time in a decade by raising the sales tax. A 1-cent sales tax increase would include $100 million a year for water quality projects on farms and elsewhere, and $55 million a year for water trails and other outdoor recreation projects, said Reynolds spokesman Pat Garrett.
The fiscal partnership is taking issue with Reynolds’ work to offset the sales tax increase with reductions in other taxes. She wants to lower income taxes and local property taxes that pay for mental health services. “I have no interest in raising taxes” overall, the governor has said.
Her plan means that Iowans will miss out on a chance to use $200 million a year to pay for projects envisioned when voters approved the referendum, the fiscal partnership maintains. Instead, environmental programs will get a net increase of $82 million, said Peter Fisher, research director for Iowa Policy Project, part of the fiscal partnership.
The researchers used updated sales tax projections and the current state law’s plan for how the trust fund would be used to come up with the figures.
The Iowa Farm Bureau Federation and other groups have lobbied to change the law so the trust fund spends more on farm conservation and less on trails and land purchases.
There there’s this: Fisher said state law clearly says the increased sales tax revenue earmarked for the trust fund is supposed to add to state spending on conservation and outdoor recreation, not to replace funds that are already in the budget. But, Fisher said, Reynolds’ budget would shift some programs already in the budget to the trust fund, too. One example is the Resource Enhancement and Protection program, known as REAP.
The governor has said that is a plus, protecting the money for those purposes in an account approved in a constitutional amendment that drew 63% approval from voters.
Former Democratic lawmaker David Osterberg, who founded the Iowa Policy Project, rejected Reynolds’ argument.
“This is just awful when it comes to tax policy,” Osterberg said in a phone news conference. “You use a regressive tax, sales tax, to cut the only progressive tax we have, the personal income tax.”
The effect, Osterberg said, is to shift more of the financial burden to low-income Iowans.
Fisher said Reynolds appears to have left out the consumer use tax from her calculations, too. That’s a variation of the sales tax paid on goods bought out of state, for example.
Reynolds also left out income from the state’s recently added sales tax on digital goods and services, Fisher said.
“So what this bill is really doing is taking money from seniors and workers and giving a big tax cut to high-income taxpayers,” Fisher said. “And what’s left for voters is the fraction of what they voted for in recreation and improved water.”
Garrett defended the plan Friday afternoon.
“The Invest in Iowa Act funds the Natural Resources and Outdoor Recreation Trust Fund based on Iowa’s current needs. The governor’s plan is a tax cut, with significant income tax cuts steered toward lower-income Iowans. Our current sales tax system includes several exemptions for essential goods and services and this plan adds additional exemptions to help lower-income Iowans,” Garrett said.
The governor’s proposal exempts diapers and feminine hygiene products from the sales tax.
Reynolds said in interviews before the legislative session that much has changed since 2010. The changes in the spending formula are needed to address a new landscape that includes the voluntary Iowa Nutrient Reduction Strategy. The state is relying on voluntary conservation efforts to clean waterways, but environmentalists say the approach isn’t working.
The governor added that her plan would improve Iowa’s tax climate, which is often cited as a drawback to luring businesses to the state and needs to be overhauled.
Democratic lawmakers have criticized Reynolds’ plan, too.
For example, Sen. Joe Bolkcom, D-Iowa City, criticized Reynolds’ plan Thursday on the Senate floor. Bolkcom said the tax cuts Reynolds is insisting on would benefit the wealthy most.
Bolkcom noted that the Iowa Farm Bureau Federation has lobbied heavily to shift the trust fund money away from land purchases and trails and provide more in payment to farmers.
“The state is not in financial crisis,” Bolkcom told his Senate colleagues. “So why are we raising taxes on working poor people and senior citizens, the people least able to afford it? Well, it’s simple: It’s to give another major tax cut to wealthy Iowans.”
In an interview earlier in the session, Bolkcom said he wouldn’t support Reynolds’ plan because of the shift of tax burden to less-wealthy Iowans, even if it meant giving up the long-awaited additional money for conservation and outdoor recreation.
The criticism comes as Reynolds is going on the road to drum up public support for her overall plan, called the Invest in Iowa Act. Republican legislative leaders have not predicted the plan would pass.
“I’m going to go out there and drive this,” Reynolds said during her weekly news conference on Wednesday.
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