September 25, 2015

Penny Education Tax Tried in Other States

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Several states have proposed or approved penny sales taxes to support education, similar to a proposal in the works in Oklahoma, and the results have varied.

In some cases, the sales tax hikes have remained in place for years, expanding or preserving education spending. In another case, a tax hike was repealed by voters, and a second tax ran into legal trouble.

Iowa, Georgia, Arizona, Idaho and Florida are among the states that implemented sales tax increases similar to the one proposed by University of Oklahoma President David Boren.

That plan, which would go to voters in 2016, would increase Oklahoma’s sales tax by one penny on the dollar in an effort to generate more than $600 million. Most of that would be used to give raises to teachers.

Sioux City Public Schools in Iowa became the first district in the state to push for a countywide, voter-approved penny sales tax in 1998. That money was used to pay for the construction of new schools.

Brad Hudson, a government relations specialist for the Iowa State Education Association, said all but three of Iowa’s 99 counties adopted the sales tax by 2005.

The Legislature then voted to implement the tax statewide.

More than $1 billion in funding has gone to rebuilding or upgrading Iowa’s schools, Hudson said.

“The need for a vote of the people was clear for something like this to occur,” Hudson said. “By 2005, most of the counties passed it, so the citizens clearly supported it.”

The tax will need to be renewed by the end of this decade, which Hudson expects to happen.

The main question is whether the state will expand how the money can be spent.

“It’s done a lot of good across the state of Iowa for improving schools,” Hudson said. “The discussion is changing to, ‘Does this entire amount need to go toward infrastructure, or should some of it go to operational costs or programs for low-income students?’”

Oklahoma House Minority Leader Scott Inman, D-Del City, said he supports the proposal even though there are concerns it would disproportionately burden low-to-moderate-income families.

Inman said the proposed tax is the only viable plan that has a chance to garner public support in the face of another budget shortfall.

The proposition would also need language to ensure the Legislature can’t undercut the tax, he said.

“It has to protect against opening the back door and funneling money out of public education as this new money comes in,” Inman said. “If these new monies were to pass, it would have to be above and beyond what we already give.”

That was a concern raised by critics in Arizona after voters approved a sales tax increase in 2010 that was used to protect core services like education during the recession. By the time the program expired at the end of 2013, Arizona had made some of the deepest education cuts in the nation.

A push to renew the tax failed by a wide margin, with 65 percent voting against the proposition.

Arizona also passed a 0.6 cent sales tax increase in 2000 to support education. That tax expires in 2021. About 20 percent of that revenue is used to fund base salaries, and another 40 percent is used for performance pay for teachers. The rest goes to the districts.

That tax also has not been without controversy.

In July 2014, a state judge ruled that Arizona violated a section of the voter-approved law, which stipulates lawmakers must adjust school funding for inflation. The judge found the state failed to do that between 2009 and 2014.

That decision has been appealed.

Other sales tax proposals have been less controversial.

In Idaho, the Legislature passed a 1-cent tax hike that was tied to a reduction in property taxes in 2006.

Paul Headlee, deputy manager of the budget and policy division for the state’s Legislative Services Office, said that revenue was not specifically earmarked for education, though that’s where most of the funds went.

Headlee said the sales tax raised $210 million in 2007, but still left education short $40 million due to the loss of property tax revenue. The state covered the $40 million loss and then added another $265 million for education.

“Our property taxes were skyrocketing at the time,” Hudson said. “It was a sales tax increase for property tax relief.”

Not all pushes have been successful.

The Georgia Association of Educators has pushed for a statewide half-cent tax increase, but the proposal has found little support in the Legislature.

That would be on top of a provision that already allows individual districts to ask voters to approve a 1-cent sales tax increase.