A proposal by Iowa Gov. Kim Reynolds for a 1-cent increase in the state’s sales tax will be a major item for consideration during the current session of the Iowa General Assembly.
That was the assessment by State Sen. Mark Costello and State Rep. Cecil Dolecheck at a briefing Saturday, Jan. 25, at the Glenn Miller Birthplace Museum in Clarinda. The event was sponsored by the Clarinda Chamber of Commerce.
The two legislators agreed debate on the issue would likely focus on the specifics of how revenue from the tax hike would be disbursed, and also on what measures would be taken to reduce other taxes as a consequence.
As revealed, the plan by Reynolds would generate an estimated $540 million beginning in 2021.
A portion of that revenue, about $100 million annually, would be directed toward water quality programs, and $52 million a year would be used for conservation and outdoor recreation programs.
To offset the sales tax increase, Reynolds is proposing an income tax cut of an additional 10 percent beyond the rates set in a previous reduction. The top tax rate of 9 percent would drop to 5.5 percent by 2023 under her proposal.
Reynolds’s plan also includes a property tax reduction to be accomplished by the state paying about 70 percent of mental health costs and counties 30 percent -- compared to the current system whereby the counties pay all of the costs through a property tax levy.
The proposal, Dolecheck said, is “meant to reduce property taxes [since] the mental health levy goes away. That’s why it becomes extremely complicated and why there will be a lot of discussion to make sure if we do something like that, it doesn’t just become a boon to the revenue of the state to be used as general fund dollars.”
Costello said that whatever may eventually be adopted, he was “looking for it to be at least tax neutral, or even a reduction in taxes.”
If the state provides a majority of the funding for mental health services, he said, “there still are significant resources that are shared with the counties, so the counties would keep building space,” as well as employees who would work directly with local clients.
Regarding other uses for revenue from the proposed sales tax boost, projects designed to improve water quality in the state would have high priority, and money would be directed to a Natural Resources Trust Fund.
A portion of the tax increase, 3/8 of a cent, would create a “dedicated funding stream” for various types of projects that Iowa landowners could pursue through “incentives, rather than being forced,” Dolecheck said.
All of the 3/8-cent total has to be spent on applicable projects, Costello said, “but there’s a formula” on how it can be divided and “where exactly it goes. That formula can be changed.”
Money would also be available for the Resources Enhancement and Protection Program (REAP) that has provided grants to localities throughout the state. The program is currently set to expire in 2021, but if funding from the planned sales tax hike can be guaranteed, recurring action will not be needed to ensure REAP’s existence, Dolecheck said.
Although the tax proposal is expected to receive intense scrutiny in the coming weeks by members of the legislature, Costello said he believes that “with the governor behind it, it has a good chance of passage. We’ll make sure it gets done right.”
Due to the time that debate on the issue will probably consume, Dolecheck said he hoped that school funding measures could be taken up first, and that the amount of supplemental state aid could be determined and approved as soon as possible so districts can know what will be available for budgetary purposes.
Reynolds has proposed an increase in state aid of 2.5 percent, a figure Dolecheck said would likely receive a favorable response in the House of Representatives.
At the briefing, another topic of discussion was the continuing impact of the privatization of the Medicaid program in Iowa.
Since the change in 2016, Managed Care Organizations (MCOs) have contracted with the state to handle cases for individuals and families, but there has been a turnover among the companies delivering services.
Delays have also occurred in payments to providers, and reports have circulated of clients being removed from eligibility for the program.
Earlier this month, Iowa State Auditor Rob Sand said an attempt by his office to examine and evaluate home health care services offered by MCOs was unsuccessful because of what he called “bad data” from the Iowa Department of Human Services.
Costello said that “a lot of providers have struggled during this transition. But progress has been made in the administrative process. They’ve streamlined some of the reporting requirements, and made pre-authorization forms more standardized. There have been a lot of efforts to get things smoothed out.”
He noted that when the privatization occurred, about $100 million was cut from the program the first year. “We should have kept that,” he said, “because the data was wrong” regarding how much money could initially be saved from the change.
Currently, two MCOs are operating in the state, one of them new -- Iowa Total Care. Both firms, Costello said, are “meeting the standards we set. They are trying to be responsive.”
Commenting on the issue, Dolecheck said that according to figures he has seen, “the state is saving quite a bit of money overall. Has the system worked perfectly? No. But it’s an improvement that allow us to have a better handle on it. We still want to make sure providers are paid. We want to reimburse them at their rate so they can attract the people they need.”
He said that based on his personal experience with the system, “part of the responsibility lies with individuals themselves” to sign and submit information required to receive needed services.
Other subjects of discussion at the briefing included the need for adequate staffing for the state’s ombudsman’s office; prospects for increased wages for direct care workers; increased financial support for members of volunteer fire departments; and possible partnerships between school districts and private day care centers to provide expanded early childhood education opportunities.