The Cherokee School Board passed a resolution in support of a statewide one-cent sales tax for education to replace the School Infrastructure Local Option (SILO) tax that is in place in all 99 counties in Iowa.
Superintendent John Chalstrom told board members at the Jan. 21 meeting that there is agreement among school administrators who have communicated with state legislators that if the legislature doesn't pass the proposed statewide education one-cent sales tax this year, it will never get passed.
"It could be beating a dead horse," Chalstrom said.
The SILO revenue is used by school districts to pay for construction, purchase of equipment and to pay off bond debt for building construction. It cannot be used to pay for general operating costs.
In the Cherokee District, it is used to pay bond debt on the construction of the Cherokee Middle School. This results in property tax relief because the bond debt would otherwise be totally paid for through property tax revenue.
Chalstrom said that revenue from the statewide one-cent sales tax is expected to be similarly restricted although there are some legislators advocating that the state allow the revenue to be used in any way that the school district chooses.
One effect from the change to a statewide tax would be the elimination of the vote in each county required for the implementation of the levy in that county. Currently there is a sunset clause that requires another vote each 10 years to renew the levy.
Another effect would be the redistribution of the tax more equitably, providing the same per-pupil amount to school districts across the state rather than the current situation of this revenue being based on how much sales tax is collected in the county in which a pupil resides.
Changes in the law now require that a new passage of a SILO referendum in a county results in the revenue from that county being placed in a pool and that any revenue in excess of the state per-pupil average not remain in that county but rather be used toward bringing up the statewide average.
This pooling of revenue above the state average does not apply to counties in which the levy was already in place before the law was changed, until and unless the levy is renewed in that county. Woodbury County was the first county to approve the SILO in 1998. Woodbury County voters have approved a renewal of the SILO levy but after the 10th anniversary of the original passage, school districts that have students who reside in Woodbury County will receive significantly less per-pupil revenue from SILO than previously.
When SILO was originally started in 1998, many people, including many state legislators, were unaware of how lopsided the collection of sales tax would be. The largest cities in the state are retail centers, collecting much more sales tax per capita than rural counties. The ratio of sales tax revenue between Polk County, the county with the most concentrated taxable retail sales, and Louisa County, the county with the least amount of taxable retail sales, is about 10 to 1.
Before the change in law, school districts in rural counties took the initial steps toward a lawsuit to force more equitable distribution of the SILO revenue. The argument made for more equitable distribution was that the greater per-capita sales tax revenue in counties like Polk County results because people from other counties shop at retail centers so people from other counties are supporting Polk County schools.
The change to a statewide tax would speed up a process of equalization that would happen anyway under changes in the SILO law if counties would all renew the tax when the original vote sunsets.
However, counties might not continue to renew the tax. Chalstrom said that if the SILO tax was up for renewal right now in Polk County, it would likely not pass there.