DHS seeks $70M increase to pay for shifting mental health services to state in fiscal 2023

DES MOINES — A state general fund installment of nearly $70.2 million was proposed Thursday to cover the cost of shifting mental health services away from property taxes to the state.

The proposed shift in funding, for the 2022-23 fiscal year, was unanimously approved by the Iowa Council on Human Services.

The phased-in state takeover of regional mental health costs was part of a nearly $2.1 billion budget package for next year that primarily covers medical assistance to 1,051,720 needy Iowans, who are primarily children, elderly, disabled or poor.

Budget officials within the Iowa Department of Human Services characterized the fiscal 2023 spending plan as a “status quo” budget but said an additional $70.2 million will be needed to cover the mental-health piece and another $9.35 million increase for the children’s health insurance program.

Monika Jindal, an Iowa City physician who was one of two new members to join the state board, said she was “struck” by the fact there wasn’t a lot of change in the DHS status-quo proposal “despite the very drastically changing landscape” caused by the COVID-19 pandemic and other agency issues.

Overall, state and federal funding was expected to total nearly $7.87 billion in the coming year.

DHS Director Kelly Garcia conceded there was “a bit of gray space” in the budget documents, given the heavy reliance on federal COVID-19 relief money; the yet-to-be finalized capitation rates with private MCO Medicaid providers; and the expected “disenrollment” later this year of Medicaid recipients who continued to receive benefits due to the ongoing public health pandemic.

The budget proposal approved Thursday will be forwarded to Gov. Kim Reynolds to be incorporated in the fiscal 2023 state budget plan she will submit to the Iowa General Assembly in January.

In the closing days of the overtime 2021 legislative session, Reynolds and majority GOP lawmakers passed a major tax-policy package that included a provision to shift funding of Iowa's regionally based mental health system from county property tax levies to the state's general fund over a two-year transition.

Reynolds hailed the change as "a huge win" and the final piece in efforts to improve Iowa's mental health system for adults and children by providing a stable, sustainable funding source while bringing more statewide equity and uniformity to the services being offered.

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