See what’s in Iowa’s $9.4B budget for the coming year

DES MOINES — State officials plan to dip into reserve funds to fund a $9.4 billion budget as state revenues are expected to decline due to previously passed income tax cuts.

Iowa lawmakers this week passed a $9.425 billion budget to fund the state for the next fiscal year that starts July 1. That’s a $478.1 million — or 5.34 percent — increase over the current fiscal year’s budget of $8.947 billion.

According to the latest projection from the state's nonpartisan Revenue Estimating Conference, the state will collect an estimated $8.5 billion in the next budget year. That means lawmakers will have to use the state’s various surpluses and reserve funds to cover an estimated $917 million budget shortfall — something majority Republicans foresaw when they passed state income tax cuts.

There is a $2 billion surplus in the general fund and $4 billion in the Taxpayer Relief Fund, which was created to cover revenue shortfalls caused by the income tax cuts.

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Rep. Gary Mohr, a Republican from Bettendorf who chairs the House’s budget committee, said dipping into savings was always part of the plan and that’s why the Legislature saved up billions.

Republicans, who control agenda-setting supermajorities in the Iowa Legislature, have argued that eventually state revenues will grow faster than state spending levels as tax cuts increase Iowans’ disposable income — leading to more consumer spending and economic growth.

Democrats, though, warn the state is headed into a “financial crisis” from declining revenue, increased spending and an overreliance on one-time federal funds.

They also point to the growing cost of Educational Savings Accounts for families of private school students. In approving the program, lawmakers made an unlimited appropriation — meaning all students approved are eligible for nearly $8,000 in state funding, the same amount the state will spend per student at K-12 public schools.

Beginning next school year, all Iowa K-12 students attending accredited non-public schools are eligible to participate, regardless of household income.

This coming school year, Iowa is poised to spend roughly $314 million on education savings for more than 39,000 students, a roughly $96 million increase. Iowa's private school tuition program cost the state $127.3 million in its first year.

State spending on K-12 public schools will total about $3.9 billion. When including money for ESAs, the legislation brings Iowa's K-12 education funding to about $4.2 billion, Republicans said.

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Sen. Janet Petersen of Des Moines, the ranking Democrat on the Senate Budget Committee, said Gov. Kim Reynolds is “breaking her own budgeting policies” by planning recurring withdrawals from the state taxpayer relief fund to pay for recurring expenses, despite saying one-time funds should only be used for one-time expenses.

Democrats said the GOP-backed budget fails to address critical needs for K-12 schools and fails to provide sufficient funding to address health care and workforce training needs.

“Failed economic policies have left us with not enough to cover our deficit budget, let alone give Iowans what they truly need,” Sen. Sarah Trone Garriott, a West Des Moines Democrat, said during debate.

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Sen. Tim Kraayenbrink, a Republican from Fort Dodge, said over the past nine years, the state has gone from a $400 million budget shortfall to a $6 billion surplus.

Republicans contend they delivered a conservative, responsible budget that appropriately funds the priorities Iowans count on.

Among the new initiatives in next year’s budget are $1 million to fund a team of epidemiologists at the University of Iowa to conduct research into Iowa’s growing cancer rate; an increase that would support nursing homes and address concerns about closures; $14 million for the second consecutive year to boost the pay of paraeducators; and an additional $7.5 million for community colleges.

Reynolds, a Republican, must sign the bills before they become law. She has the authority to veto specific budget lines.

The governor, in a statement, said the budget maintains fiscal discipline and looks out for Iowa taxpayers.

“To keep taxes low and ensure Iowans keep more of what they earn, we passed a responsible, balanced budget that puts taxpayers first and keeps Iowa on a strong, fiscally sustainable path,” Reynolds said. “Some have claimed Iowa is facing a deficit. Let’s be clear: this isn’t a deficit — it’s the result of the state collecting more from taxpayers than it needed.

“Now we’re giving it back. That’s what the Taxpayer Relief Fund is for. With $3.75 billion set aside specifically to offset income tax reductions, the fund ensures that we can cut taxes today while maintaining essential services and long-term stability.”

Education: $1 billion

The education budget, Senate File 647, spends just over $1 billion from the general fund on the Department of Education, Board of Regents and Department of the Blind, a $14 million increase.

Funding for K-12 education, which is expected to be around $4.2 billion, is contained in a separate budget.

The budget includes a $7.5 million bump in funding for the state’s community colleges — part of the agreement reached with House Republicans, who originally had asked for $8 million — but provides no increase to general education aid for Iowa’s three public universities.

The budget provides $578.5 million for the state Board of Regents with a $5.5 million increase for specific projects. That includes the $1 million for the cancer rate research, $1 million for a new Center for Intellectual Freedom at the UI and $1.5 million for the University of Northern Iowa to support a program offering in-state tuition to students from bordering states — among other appropriations.

The budget also includes an increase of $1.1 million for the Tuition Grant Program and $8 million for a “health care professional incentive program” that will consolidate several existing state loan repayment programs for attracting health care professionals to underserved areas of the state into one.

Rep. Adam Zabner, a Democrat from Iowa City, said the status quo budget for higher education will contribute to rising tuition in the future, impacting Iowa’s students and families.

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Standings: $4.8 billion

The standings budget bill, Senate File 659, includes $4.837 billion for statutory commitments. The $4.2 billion K-12 school funding is covered under this bill.

The bill includes a decrease of $21.9 million to the state’s overall school foundation aid from the state’s general fund to lower property taxes, with that amount replaced using money from the Economic Emergency Fund. It also reduces funding for Iowa’s Area Education Agencies by $25 million.

Health and Human Services: $2.5 billion

House File 1049 provides $2.469 billion from the general fund to the Department of Health and Human Services and Department of Veterans Affairs — an increase of $255.9 million. Most of the increase includes an additional $230 million to make up for the expected shortfall in funding to Iowa Medicaid and Healthy and Well Kids in Iowa, called Hawki.

Zabner questioned whether the state budget proposal will provide enough funds to backfill potential federal cuts to Medicaid.

Republican Rep. Ann Meyer of Fort Dodge, the bill’s floor manager, said lawmakers were “fully funding” Iowa Medicaid.

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“When you talk about federal cuts to Medicaid, federal cuts to Medicaid are going to be fraud and abuse — those are not cuts to Medicaid health care,” Meyer said.

The bill also increases Medicaid reimbursement rates for nursing facility providers through $20 million in rate rebasing, and provides $420,000 to increase reimbursements for maternal health care providers. The bill also includes an increase in the personal needs allowance for people in care facilities on Medicaid from $50 to $55 per month through a $331,000 allocation, and creates a new allocation of $2.1 million to increase Medicaid reimbursement rates for dentists.

Sen. Molly Donahue, a Democrat from Marion, said the budget “fails to meet the scale of the maternal health crisis unfolding in our state.”

“What I find most egregious is the lack of any appropriation to reduce the Medicaid waiver waitlist for Iowans with disabilities,” Donahue said.

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Judicial Branch: $221 million

The justice system budget funds the Iowa Attorney General’s Office and state departments like corrections, the Iowa National Guard, Iowa State Patrol and State Public Defender. It includes a $374,000 increase for the Iowa Attorney General’s Office.

The budget, Sente File 644, adds $7.6 million for the Department of Corrections and an additional $862,000 for the Department of Public Safety.

Lawmakers also provided an additional $1 million for the State Public Defender’s Office, including money to raise the pay of private lawyers who agree to represent indigent defendants for a third straight year by $2 an hour.

The budget also provides an additional $150,000 to the victim assistance grant fund in the Attorney General’s Office to go toward providers of services for victims of human trafficking.

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Republican Rep. Brian Lohse of Bondurant called the additional funds a “big step forward” for victims of human trafficking, adding that he’d like to see more funding for the grant fund in the future.

The budget allocates roughly $5 million for victim assistance grants awarded by the Attorney General’s Office, similar to last year.

Organizations across Iowa that provide services to victims of domestic violence, sexual assault and rape expressed concern that the money going toward the grant fund for human trafficking victims would not be available to fund the services they provide while federal grants they rely on face uncertainty.

Trone Garriott said the additional funding for human trafficking wouldn’t contribute to an increase in resources for other services for victims of domestic violence and sexual assault.

“The worst part of this budget is that, once again, there is no increase for crime victim services,” she said. “This category has been stuck at $5 million for years, falling far short of what the people of our state truly need and crime victims suffer.”

Justice System: $703 million

Judges and magistrates in Iowa would see a 2.5 percent pay increase in the proposed judicial system budget, Senate File 648, which covers funding for the state courts.

Lohse said increasing judicial pay would draw a more competitive and qualified slate of applicants, especially from the private sector, to fill open judge positions across the state.

“We have to continue to fight to increase judge pay to a point where it is truly competitive so that we can get the best applicants available and from the positions in those areas of the law that where we need really good, qualified, well-rounded judges,” Lohse said.

Agriculture and Natural Resources: $47 million

Senate File 646 provides $46.6 million from the general fund and $99.4 million from other funds to state agriculture and natural resources departments, a $682,000 increase.

It includes funding to prevent the spread of foreign animal disease, supports state park maintenance and continues the Choose Iowa program to help food banks purchase locally produced foods.

The bill redirects money that’s sitting unused in the Iowa Brucellosis and Tuberculosis Eradication Fund to shift to combating other foreign animal diseases. Those funds would go toward animal disease equipment, vaccine research and updates to state technology to track an outbreak.

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Republican Rep. Norlin Mommsen of DeWitt, the bill’s floor manager, tied the need for funding to the ongoing impact of the highly pathogenic bird flu in Iowa and across the country.

The bill also appropriates $250,000 to cover moving into Iowa State University’s expanded Vet Diagnostic Lab and $200,000 to the Iowa Geological Survey to research and map the state’s aquifers.

Other budgets

Economic Development — $40 million: This budget, Senate File 645, funds workforce and business development projects in the Iowa Economic Development Authority. The budget includes $550,000 for the Housing Renewal Pilot Program.

Rebuild Iowa Infrastructure Fund — $263.5 million: This budget, House File 1039, is separate from the general fund, and funds infrastructure and other projects.

Transportation — $503 million: The transportation budget, Senate File 628, funds the Department of Transportation using the road use tax fund.

Administration and Regulations — $73 million: This budget, House File 1044, sets general and other state appropriations for statewide offices and agencies.

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