Iowa Gov. Kim Reynolds signs $8.5B state budget. What got funded and what didn’t

DES MOINES — Iowa in the coming fiscal year will spend more to help Iowa families pay for private school expenses, increase Medicaid reimbursement rates for Iowa nursing homes and raise the pay of private attorneys who represent indigent defendants.

At the same time, Iowa agencies that provide special-education services to students in public and private schools will see less state funding, as will a center that supports a statewide system of water quality sensors.

Iowa Gov. Kim Reynolds on Thursday signed into law a more than $8.5 billion state budget Iowa lawmakers passed last month to fund the state's operations for the fiscal year starting July 1.

Recommended Reading

Here's what's in Iowa's $8.5 billion budget for the coming year

That’s a 3.7 percent, or $302.5 million, increase over the current fiscal year budget. More than $1 billion will be appropriated from other funds.

The budget represents 88 percent of the state’s ongoing revenue. By law, the state can spend up to 99 percent of ongoing revenues.

Unspent revenue will go to state reserve funds.

By the end of the new fiscal year on June 30, 2024, Iowa is projected to have a $2 billion general fund budget surplus, nearly $962 million in cash reserves and more than $3.5 billion in its taxpayer relief fund.

Republicans, who have expanded majorities in the Iowa Legislature and control the governor’s office, have said the bills reflect conservative budgeting principles that continue to put the state in a strong fiscal position, while prioritizing tax relief for hardworking Iowans and investing in education, mental health care and workforce initiatives.

Democrats argue Republicans are intentionally underfunding public education in Iowa and “hoarding” money to pay for recently enacted state income tax cuts they say disproportionately benefit wealthy Iowans.

  Buy Photo

“We have the money. We don’t have the will,” Rep. Beth Wessel-Kroeschell, D-Ames, said during floor debate on the budget. “This is a hoarding problem. We are stockpiling taxpayer dollars” instead of using them to invest in public education, clean water infrastructure, higher education, mental health and substance abuse services.

  Buy Photo

House Appropriations Chairman Gary Mohr, R-Bettendorf, said statehouse Republicans “have proven time and time again that we can lower the tax burden while adequately funding Iowans' priorities.”

Here’s a look a key parts of the budget:

Education funding

The budget includes $3.7 billion in state aid for K-12 public education and $107.4 million for a new state-funded private school financial assistance program, which began accepting applications Wednesday.

Public schools will see a 3 percent increase in per-pupil funding, while Iowa’s nine AEAs will face a larger-than-usual budget cut.

Budget cuts for area education agencies: The budget includes a $7.5 million annual cut required by law as well as an additional $22 million reduction agreed on by Republican lawmakers.

That is $5 million more than lawmakers cut to the AEAs last year, according to a fiscal analysis by the nonpartisan Legislative Services Agency.

However, Republicans have said all but one Iowa AEA will receive more money than last year, thanks to the state’s 3 percent increase in state supplemental aid to public schools.

The reduction continues years of budget decreases to the agencies. It also comes amid anticipated growth in special education needs among private schools that the agencies will need to address due to the new law that eventually will allow all Iowa parents to use taxpayer-funded Education Savings Accounts to send their children to private schools.

Freeze on DEI funding at universities: Senate File 560, which funds the Department of Education and the state Board of Regents, bars Iowa’s regents universities from new spending on diversity, equity and inclusion programs and training, including new hires. It also requires the state Board of Regents to review of its campuses’ DEI programming and submit a report to the Legislature by December.

Iowa’s public universities already have paused the implementation of any new DEI initiatives after the board announced this spring it would be conducting a review.

Democrats questioned the intent behind the study, and said DEI programs are imperative for recruitment and ensuring a welcoming campus for students.

Justice system

Senate File 562 provides funds to the Department of Corrections, Department of Justice, Department of Public Safety and similar state agencies.

More money for indigent defense: It includes pay raises for private attorneys who agree to represent indigent defendants by $5 an hour and provides $35 an hour for travel time, plus mileage, as some attorneys spend hours driving to court hearings.

Iowa Supreme Court Chief Justice Susan Christensen, in her annual Condition of the Judiciary address in January, told lawmakers the indigent defense systems was “on the verge of snapping.”

  Buy Photo

Reynolds vetoed a section of the bill requiring an attorney’s consent before being appointed to represent indigent defendants.

“All attorneys owe a duty to the legal profession to accept such an appointment if needed,” Reynolds wrote in her veto letter. “And of course, this change creates the possibility that if no attorneys consent, indigent individuals will be left without legal representation.”

Pause on hiring new judges: Democrats criticized Republicans for removing more than $1 million in funding to hire four new district associate judges to address the state’s backlog of cases.

Rep. Brian Lohse, R-Bondurant and chairman of the justice system appropriations subcommittee, said lawmakers “will continue to work and fight for the resources that the judicial branch needs in order to provide justice to Iowans.”

Health and Human Services

Senate File 561 funds the Department of Health and Human Services, which includes the Department of Veterans Affairs.

More money for nursing homes: The new budget includes a $13 million increase in Medicaid reimbursement for mental health services and $15 million to nursing homes.

More than 20 nursing home facilities in Iowa have closed since January 2022. The closures stem from workforce shortages compounded by stagnant Medicaid reimbursement rates, which have failed to keep pace with rising costs. Lawmakers have said they hope the new money will begin to alleviate the problem.

More money for pregnancy resources: The budget includes a new family medicine obstetrics fellowship program, directing $560,000 to fund fellowships in rural or underserved areas.

It also directs an additional $500,000 to the More Options for Maternal Support program, for a total of $1 million in state funding. The program funds crisis pregnancy centers that provide pregnancy support and discourage abortion.

Agriculture and natural resources

Senate File 558 funds the Department of Natural Resources and the Department of Agriculture and Land Stewardship.

Less money for water quality monitoring: The bill transfers $500,000 from Iowa State University’s Nutrient Research Fund into the Ag Department’s Water Quality Initiative Fund. The transfer could put at risk the network of sensors that measure nitrogen and phosphorus levels in Iowa waterways.

ISU said in late May it will direct some of the transferred money to the University of Iowa to keep the sensor network in place.

While some Democrats protested, Sen. Dan Zumbach, R-Ryan, said the focus on improving land practices would make a bigger impact on water quality.

No open spaces goal: The budget also strikes a provision from Iowa law that requires at least 10 percent of Iowa land area be protected, public open space by 2000. Despite the requirement, only about 3 percent of Iowa’s land is publicly owned, according to Summit Post, an outdoors website.

Supporters of the change said the DNR should focus on maintaining the land it already owns, and that it would decrease costs for Iowans to purchase land.

But Rep. Sami Scheetz, D-Cedar Rapids, said public spaces are “critically important” to attracting people to the state and improving quality of life.

Other items

More money for the governor’s office: Senate File 557 increases the governor’s budget by $494,000 while maintaining the number of employees in her office.

A spokesperson for Reynolds said the funds would be used to recruit and retain staff to the office, noting that the governor’s office budget has not changed in a decade.

Democrats protested the increase, arguing there was not enough explanation of what the money will be spent on.

Rent subsidies for Iowans with disabilities: The budget allocates an additional $215,000 to the stopgap rent subsidy program administered by the Iowa Finance Authority, bringing its total funding to $873,000.

The program provides rent assistance to Iowans who have Medicaid waivers. It is intended to help Iowans with disabilities live at home, providing rent subsidies while individuals wait for local or federal rent assistance.

The Gazette-Lee Des Moines Bureau’s Caleb McCullough contributed reporting.

Comments: (319) 398-8499; tom.barton@thegazette.com