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Budgets, Redistricting, and Taxes (Oh My!)

Monday, May 24, 2021

At the beginning of the year, we said the Legislature really only has two things it must do this year - pass a budget and complete the redistricting process.  Budgeting is usually a really hard process and the Health/Human Services Budget is usually the bill that holds up the end of session.  Not so this year.  In fact, budgeting was relatively easy this year, thanks to extra federal funds helping pay for COVID-19 expenses and picking up a greater share of Medicaid expenses.  Legislators had more flexibility in spending this year, but budgets were held up while House and Senate leaders were gridlocked on a tax cut bill.  Since tax cuts mean less money coming into state bank accounts, legislators could not agree to budgets until the tax plan was hammer out. 

The second "must do" of 2021 is redistricting, and that has been delayed as the state waits for the federal Census data to be delivered. The Federal government hopes to get the census data to states in August, but it may be later in September.  Iowa's redistricting process is very structured, with non-partisan staff drawing the new maps and legislators voting on them. We'll talk about this more, but legislators will have to come back into session in August to pass a redistricting map before September 1, the deadline set by the Iowa Constitution. You can read more about this process here

Taxes: As mentioned, the biggest delay forcing the session overtime was the "Omnibus Tax Bill" (SF 619).  The House and Senate started the month of May off having more than 30 areas of disagreement in the tax bill; when the final deal was sealed, there were 28 sections, each section making a significant change in Iowa's tax laws.  The bill is considered the crown jewel of the session for many legislators, including some changes that have been more than thirty years in the making. It contains more than $400 million in tax relief, including the elimination of the property tax that pays for regional mental health and disability service (replacing it instead with an automatic state appropriation). The tax bill:

  • Makes the income tax cuts made in 2018 effective in 2023 (the original law required Iowa's revenues to increase by 4% before "triggering" the tax cuts; this just eliminates the triggers and has them go into effect).
  • Eliminates the inheritance tax.
  • Creates a new fund to provide investments in manufacturing and adds more incentives for the redevelopement of environmentally contaminated sites (called "Brownfields" and "Grayfields").
  • Increasing the volunteer emergency responder income tax credit from $100 to $250.
  • Increases the number of people eligible for child care tax credits (those earning up to $90,000/year - up from $45,000).
  • Exempts any COVID-19 grants or funds received by businesses or individuals from state income tax.
  • Increases workforce housing tax credits (that incentivize developers to build housing in area where there are jobs but not enough houses to meed the demand).
  • More than doubles the Housing Trust Fund - sending out $7 million for local affordable housing and homeless programs (up from $3 million).
  • Phases out county MH/DS property tax levies over two years and instead funds with an automatic (standing) state appropriation. 
This last one is a  big deal  for Iowans with disabilities, who have been through a lot with the transition to managed care and the regional restructuring that began in 2015. The bill calls for county levies to be immediately reduced to $21.14 (beginning July 1, 2021).  The state will add in funds to bring the per capita spending level to $37 per capita.  That will increase to $38 in FY 2023, $40 in FY 2024, and $42 in FY 2025.  After that time, increases can be up to 1.5% per year, depending on the state's economy. Regions with over 40% ending fund balance in FY 2022, 20% in FY 2023, and 5% in FY 2024 and beyond will not be eligible for a special $3 million "incentive fund" that can help pay for services in regions with a per capita rate above what is provided to them.  Regions would have performance based contracts with DHS, which would ensure they are meeting expectations.  To make sure regions continue to operate as efficiently as possible, DHS will hire a consultant to review budgets and services provided in each region and report back to the Legislature before the 2022 legislative session. 
 
There is on other part of the tax bill that many groups were not happy to see included; the phaseout of the property tax backfill to cities and counties (about $150 million promised to local governments when the state cut commercial property taxes). The Legislature allowed local governments either 5 or 8 years to phase out, depending on whether they were growing.  This is important to Iowans with disabilities because your city and county depends on this money to pay for things like libraries, trails, public transportation, parks, and other services. The Iowa League of Cities sent a message to their members that you can download the Excel document here; the Excel table shows each city and the option under which they fall. 

Budgets:  Even after the $400 million price tag for tax cuts, budgets still had a lot of room for increases, and that translates to some really good news for Iowans with disabilities and their support networks.  The FY 2022 budget spends $8.1185 billion in the upcoming year (FY 2022). This represents 97.7% of the money available to spend, an increase of $291 million over the current year (FY 2021).  Even after these increases and paying for the tax cuts, the state's two main "rainy day" funds are expected to be full. These reserve funds are like savings accounts and help the state through rough times, so having them full just one year since the pandemic began is really good news.

To the left, you will see a chart produced by House Republicans that shows how the budget breaks out by Appropriations subcommittee within the Legislature.  As you can see, spending on health and human services, education and school aid, and other automatic required spending make up 85% of the state's budget.  Here are some highlights - you can click on the links provided for a more robust description.

HEALTH & HUMAN SERVICES BUDGET (HF 891) 

  • $11 million for HCBS waiver provider rate increases and an additional $7 million for habilitation services. 
  • $3.9 million to increase Psychiatric Medical Institution for Children (PMIC) rates. That is a 28% increase!
  • A little over $1 million to take more kids off the children’s mental health waiver waiting list.
  • Adds $200,000 to fund two more (six total) rural psychiatrist residencies to address rural access issues.
  • Increases funding for special foods for kids with metabolic disorders like PKU by $35,000 ($188,000 total)
  • Shifts funding from Glenwood ($1.9 million cut) to Woodward ($1.3 million increase) to reflect a move of a cottage.
  • Medicaid is increase by $44.2 million overall (no mention of how that translates into MCO contracts).

EDUCATION BUDGET (HF 868) 

  • Additional $1 million for AEA school-based mental health services ($3 million total).
  • Increases the Department for the Blind by $528,723, including funding to hire another Independent Living teacher).
  • Adds $300,000 to Vocational Rehabilitation to draw down more federal funds for independent living.
  • New appropriation for therapeutic classrooms authorized in 2021 to address classroom behavioral issues ($1.6 million).

ADMINISTRATION/REGULATION BUDGET (HF 867)

  • $100 million to improve access to broadband (high speed) Internet. The discussion has been entirely around access, not affordability.  Federal COVID-19 relief funds can also be used for this purpose, should the Governor decided to do so.

JUDICIAL BRANCH, aka "the courts" (HF864

  • Sets aside $700,000 to pay for increased ASL interpretation services, per HF 707.

We know this is all confusing, so if you have questions or want to know more, join us for our summer Capitol Chats - you can register for them here.


There are still a lot of people on the waiting lists for the Home and Community Based Services (HCBS) waivers, even after these increases.  You can see the current (as of May 5, 2021) list here.  This may be something advocates want to continue to address, as some people have been waiting for these services now since 2017.  

  • There are a total of 26,151 Iowans served by the seven HCBS waivers, and another 15,956 on one of the waiver waiting lists.
    • Health & Disability Waiver (5,966 waiting)
    • Intellectual Disability Waiver (4,802 waiting)
    • Brain Injury Waiver (2,201 waiting)
    • Physical Disabiity Waiver (1,858 waiting)
    • Children's Mental Health Waiver (1,129 waiting)
    • Elderly Waiver (no waiting list)
    • AIDS/HIV Waiver (no waiting list)  


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