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Iowa Senate Bill Would Shift Mental Health Services To State Funding, Phase Out Backfill

John Pemble
IPR file
Republicans on a Senate panel advanced a bill that would fully shift mental health funding from local property taxes to the state and end backfill payments to local governments.

Republicans on a Senate panel advanced a bill Wednesday that would fully shift mental health funding from local property taxes to the state, phase out commercial property tax replacement payments known as the “backfill” to local governments, and make other changes to Iowa’s tax policies.

A news release from Senate Republicans said the bill would provide $100 million in property tax relief.

Sen. Dan Dawson, R-Council Bluffs, said the bill will help respond to the increased mental health needs brought on by the pandemic as well as increased property valuations that are expected as homes sell at record prices.

“We’re not saying this is a perfect bill, but we’re trying to get to something better and deliver a better system for people in the state of Iowa,” Dawson said.

Sen. Joe Bolkcom, D-Iowa City, said the bill was a “hodgepodge” of Republican policy interests that would replace all current mental health funding with a promise from the state.

“Just like when we promised we’d fund the backfill,” Bolkcom said. “Here we are eight years later saying it’s time to end the backfill.”

About 200 people joined the virtual subcommittee hearing Wednesday morning.

Mental health funding

Republican and Democratic lawmakers have been saying for the past few years that it’s a priority to find a sustainable source of funding for the mental health regions.

Under this bill, property taxes levied by counties would no longer fund mental health services, and the state would take on the full cost starting July 1, 2022. The bill sets out a formula the state would use to determine how much money each region would get, and that would be paid through the Department of Human Services.

Mental health advocates say they want state funding for these services, but counties should still pitch in.

“The reason for that concern is that when a state has a bad economic year, one of the first things that usually gets cut is mental health funding,” said Leslie Carpenter of Iowa Mental Health Advocacy.

The bill requires counties to spend down their mental health funding by July 1, 2022.

Russell Wood is CEO of Central Iowa Community Services, one of the mental health and disability services regions. He noted that that most region employees are county employees.

“So I would encourage you to consider that without that local fund, we don’t have a way to pay the payroll costs at the local level,” Wood said.

The Iowa Farm Bureau supports the bill and has advocated for ending property tax support of mental health regions.

“Our members believe the state should make mental health a priority in their budget and assume the cost of the system, removing this from the backs of property tax payers,” said Matthew Steinfeldt, a lobbyist for the Iowa Farm Bureau.

The bill would also create a risk pool to prevent regions from having to reduce or eliminate certain services for lack of funding, and creates a board that would approve or reject applications for additional funding.

Renee Schulte, representing the National Alliance on Mental Illness of Iowa, said the state used to have a risk pool for mental health funding, and it didn’t work well. She said if counties are adequately funded on a per capita basis, growing counties shouldn’t need to seek money from a risk pool like they did in the past.

Schulte also noted the risk pool board doesn’t specify any members representing the children’s mental health board or providers.

“There is not one thing in this entire bill about children or children’s services,” Schulte said. “And that is a huge concern for all of our providers that have trusted that we would not just absorb them.”

The Iowa Legislature created the framework for a children’s mental health system in 2019, but has not attached funding for the new services.

Backfill eliminated

Groups representing cities and counties oppose the bill because it would phase out the “backfill”—state dollars paid to communities to make up for commercial property tax cuts.

“The backfill is a reimbursement for the benefit that commercial and industrial properties are getting by reducing their taxable valuation,” said Lucas Beenken, a lobbyist for the Iowa State Association of Counties. “And so if that goes away, the shift goes to homeowners and farmers.”

Robert Palmer with the Iowa League of Cities said communities may have to make up the difference by raising property taxes or cutting services.

Other provisions

Several Iowans at the hearing Wednesday spoke in opposition to ending tax incentives for private land conservation.

Groups that focus on advocating for tax cuts praised the bill. It also includes the removal of revenue “triggers” to speed up income tax cuts, a proposal that the Senate has already passed in a separate bill.

Katarina Sostaric is IPR's State Government Reporter