Is the SILO Lost

By Deborah D. Thornton 

In 1999 an Iowa State University study stated that there were $3.8 billion in unmet school building and repair needs statewide.  The Legislature created the School Infrastructure Local Option (SILO) tax to meet those needs.  The tax is proposed at the local school district level and voted on by citizens of that district.  If approved the local school board makes the building decisions, ideally with input from their parents and voters.  There is some statewide income sharing, instituted to help the more rural districts which are generally perceived to have a lower retail sales base receive an “equal” share of the money.  Additionally, each local district has the ability to pass a Physical Plant and Equipment Levy (PPEL) to provide specifically for building repairs.

An early stated legislative goal was to have the SILO tax be statewide, but because the taxpayers – us and our families – were not supportive of a sales tax increase following the sales tax increase to 5 percent in 1992, legislators adopted the district by district approach.  To his credit and in contrast to Governor Culver, then Governor Tom Vilsack (D) did not support the statewide sales tax.  Among other things, he was concerned about the ability to control the spending so that all the money would go to school buildings.

Another issue of concern is the declining enrollment in Iowa public schools.  Though Iowa City Community Schools (ICCDS) are seeing significant increases, statewide total enrollment has been dropping for several years, dropping by 11,225 students in 2006.  As a result the small, rural districts are continuing to get smaller, and some school district mergers and administrative mergers are occurring.

The last two Iowa counties to pass the SILO were Johnson and Linn Counties, “induced” to do so by the guarantee of keeping 100 percent of their incoming SILO tax, 1 percent on each retail dollar, for the first 5 years of the 10 year tax.  As of November 2007, the ICCSD is receiving approximately $1.1 million dollars a month, or $1,200 per year per student for 11,000 students.  This amount is more than double that being received by the other counties.

Currently, there is a proposal to repeal the SILO tax and instead have a statewide sales tax for school buildings (HF854).  However, even before the legislature passes the tax and it is signed by Governor Culver, various interest groups are lobbying for the funds to be siphoned off to them.  The proposals for spending the money range from road construction, to economic development, to teacher salaries, to natural resources.  A part of the argument in favor of the increased sales tax is that a statewide system managed by legislators and bureaucrats will provide more input and control to school districts than voter-controlled, local, county management.

Iowa has a long history of local control of education and schools, with one of the best public school systems in the United States.  The idea that a statewide tax, controlled by the state legislature and state bureaucrats, is somehow better that a local tax, controlled by local citizens and local school boards, is laughable.  A uniform, statewide sales tax increase would remove the current flexibility of voters to either cancel, increase, or reduce the tax rate as their school districts needs change.  Additionally, it seems counterintuitive to suggest that a small school district will have more ability to influence tax actions and legislation decisions at the statewide level through one or two State Representatives or State Senators, than they do in their own county, with their own parents and voters.

Further, based on the actions of Governor Culver and the Democrat controlled legislature in 2007, the likelihood of the SILO money remaining dedicated to school buildings once it becomes just another permanent, statewide sales tax is low.  Where is Governor Vilsack when you need him?  Iowa taxpayers and school boards, in both rural and urban counties, would be advised to follow this effort closely.

Deborah D. Thornton is a Research Analyst at Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation.  They are brought to you in the interest of a better-informed citizenry.