Taxes and the Budget
Issue Overview: Gov. Chet Culver made his first major address to legislators on Tuesday, Jan. 30. As is the tradition, Gov. Culver presented his budget to the members of the General Assembly his first budget since his election in November of 2006. The budget provided an insight as to his priorities and overall spending.
Gov. Culver's FY08 budget increases state spending by over $500 million over FY07 or an 8.3 percent increase in spending. However, that figure does not include the cost of the state employee salary bill. The governor is currently in negotiations with the state labor unions over the size of their pay increase. So expect another $70 to $90 million added to the overall state spending figure.
The governor's priorities are very clear to see while reviewing his budget. He requests a 4 percent allowable growth for K-12 education but, places another $70 million in the budget for teacher salaries. As a former teacher, the governor is taking care of his educators. Also, his budget places $20 million for universal preschool. This would be above the $5 million currently in place for preschool programs. Community colleges also will receive an additional $12.5 million for FY08 under the governor's budget.
The other crowning jewel of the governor's first budget is $25 million for his much discussed "power fund." It's interesting to note that he funds the program from the current fiscal year by asking for a supplemental appropriation rather than requesting the money for FY08. To date there is little detail as to how the power fund would be administered, it's a brand new government program dedicated to "renewable energy."
Education and renewable energy will take an early lead in getting the most attention from the new governor but as always the legislature will pass their budget and send it to the governor. However, Culver faces a much friendlier legislature, controlled by members of his own party, than Gov. Vilsack ever did.
Tobacco Tax
Issue Overview: Gov. Culver receives a large portion of this $500 million increase in state spending by raising taxes $1 on every pack of cigarettes. Legislative leadership was cool to raising the taxes this much but have become more receptive in recent weeks. The increase will occur as both House and Senate leaders have discussed an increase however the increase was more in the 40 to 60 cent range.
NFIB Position: NFIB has no official position on a tobacco tax increase. However, we oppose tax increases in general and believe state government should live within its means just like small business owners.
Issue Status: Very much alive and will probably become law, the final tax increase should be somewhere between 60 cents to one dollar.
Federal Deductibility
Issue Overview: Prominent Democrat leaders discussed eliminating federal deductibility prior to the legislative session. NFIB mailed all members urging them to contact their legislators and the program worked. Along with other like minded organizations enough pressure was put on legislators that Senate Majority Leader Mike Gronstal stated that eliminating federal deductibility would not move this year.
NFIB Position: According to the 2007 Survey over 91% of NFIB members oppose eliminating federal deductibility, we believe this is tax increase on businesses.
Issue Status: Dead for the remainder of 2007 Legislative Session. We will be watching again in 2008.
