CONTACT: TOM SNEE
300 Plaza Centre One
Iowa City IA 52242
(319) 384-0010; fax (319) 384-0024
Release: Nov. 14, 2002
UI Law Student Finds Local Option Sales Tax Unconstitutional
An article in the most recent issue of the Iowa Law Review supports opponents
of the state's Local Option Sales Tax, who claim it violates Iowa's constitution
by discriminating against some students because it provides a higher or lesser
quality of education based on where they live.
In his article, "LOST and Found: The Unequal Distribution of Local
Option Sales Tax Revenue Among Iowa Schools," University of Iowa law
student Matthew Craft writes that a lawsuit pending in Warren County should
find such a school funding system is unconstitutional and the law authorizing
it struck down.
"There is an undeniable connection between educational funding and
the quality of education received," Craft writes. "Because a LOST
generates substantially different sums of money, similar school districts
will provide a different quality of education for children based on the child's
The Local Option Sales Tax is a funding mechanism that allows taxpayers
to implement a countywide sales tax of up to 1 percent to supplement what
the school districts in that county receive from property tax levies and state
aid. That money can be used only for improvements to school facilities, construction
of new facilities or property tax relief. While the law authorizing the LOST
was intended to give local taxpayers greater control over their school district's
funding, opponents say it creates gross funding inequities that provide large
sums of additional money to some districts while very little to others.
Craft points to school funding in the neighboring school districts of Norwalk
and Bondurant-Farrar in metropolitan Des Moines to demonstrate the inequality.
The Bondurant-Farrar school district encompasses two small towns in Polk County
with about 1,800 residents, a small retail sector and a stable school enrollment.
Norwalk, just over the county line in Warren County, was once similar to Bondurant-Farrar
but has become one of the state's fastest-growing cities and school districts
with more than 7,000 residents and a rapidly increasing school enrollment.
As a result, the school district faces an urgent need to improve existing
facilities and construct new ones.
However, the two districts' potential to generate Local Option Sales Tax
revenue is vastly different because Bondurant-Farrar receives its LOST money
from Polk County, which includes the city of Des Moines and its suburbs, the
largest commercial market in the state. Norwalk, meanwhile, is in Warren County,
a sleepy suburban and agricultural county with many fewer businesses from
which to generate sales tax revenue. As a result, a LOST can only generate
about $241 per pupil in Norwalk; Bondurant-Farrar receives more than four
times that much from Polk County's LOST.
"The school districts that benefit the least from the LOST collect
only approximately $100 per pupil," Craft writes. "This is almost
ten times less than Polk County school districts. Furthermore, lower property
tax rates contribute to attracting more residents to the area, which in turn
generates more sales tax revenue, and thus, the cycle continues."
As a result, Craft writes that such a disparity discriminates against children
living in poorer school districts or in counties with small retail sectors
because they receive a lower quality of education. Opponents of the current
LOST funding system have tried -- so far unsuccessfully -- to change the law
to create an equalization system that would be more equitable to more students
across the state. Those opponents have since filed suit in Warren County challenging
the constitutionality of the law, which is pending.
Comparing, once again, Norwalk to Bondurant-Farrar, Craft writes, "While
Norwalk has the power to enact a LOST, the district will not improve its schools
at the same rate of Bondurant-Farrar. So long as the retail base of a given
county is the major determinant of how much a city therein can spend on its
schools, only a county with a large retail base is able truly to decide how
much it cares about education
.Thus, local control is of little use to
the residents of Norwalk, since they cannot take advantage of this discriminatory
Craft concludes that "unless a modification is made to the statute,
the LOST will disable the system it was allegedly designed to aid."
Craft is a third-year law student at the UI College of Law from LaPorte
The Iowa Law Review is a student-edited law journal published five times
a year by the University of Iowa College of Law.