Counties face mental health budget challenges as lawmakers prepare to reconvene

Iowa county officials are awaiting action from the Legislature on funding mental health services after a sales tax proposal was sidelined by financial uncertainty during the coronavirus pandemic.

Gov. Kim Reynolds has vowed to shift funding for mental health services from county property taxes to state sources. That was part of her Invest in Iowa Act, which would use an increase in the sales tax to pay for mental health services and water quality work. 

But because the coronavirus pandemic has muddied the state budget picture, Reynolds in recent weeks set aside the sales tax proposal. The idea had struggled to gain traction among lawmakers. 

That has left county supervisors and mental health officials nervous about their budgets and the prospect of cutting services.

The Legislature, which suspended its session March 16, will reconvene June 3 to work on the budget. County officials are scheduled to meet with Reynolds’ staff this week to discuss mental health funding. 

At news conferences, Reynolds has repeatedly vowed to push for mental health funding this year, regularly mentioning the state’s healthy reserves and the possibility of shifting other resources. 

But Iowa State Association of Counties (ISAC) lobbyist Lucas Beenken said counties, which have traditionally financed the services, are still fearful the state won’t come through. 

The problem is not small. Polk County alone is looking at a $14 million shortfall, half its budget for the programs. Scott County had to cut $1.5 million out of its current $12.3 million budget. 

“It’s certainly an issue,” Beenken said.

“Those conversations are ongoing,” Beenken said. “We know Polk is in a world of hurt,” in part because demand for its services is growing. Also, county-owned Broadlawns Medical Center, which has pitched in $6.5 million a year to help cover Polk County’s deficit, won’t necessarily be able to continue to do that, Beenken added.

William Peterson, ISAC executive director, said the state has twice moved to help ease the load on counties, which have had to pay for the services with a property tax levy that is limited by state law. But the added money has come with what Peterson considers micromanagement through the Iowa Department of Human Services and the addition of services for which lawmakers provided no additional funding.

“I’m not exactly sure what is going to happen this session,” Peterson said. “We had challenges with funding even before COVID-19 really threw a monkey wrench into the plans for the year.”

Some counties have reserves to get through a year or two. But urban counties such as Polk and Scott have had to serve a growing number of rural residents moving to the city, with a property tax rate limit that lawmakers haven’t changed since 1996, Peterson said. “Polk has had funding challenges for a number years,” he added.

Matt McCoy, chairman of the Polk County Board of Supervisors, said Polk County serves 15% of the residents seeking county mental health services in the state.

“We’re not sharing the burden with the rest of the state now,” McCoy said. “We need the state to help. Since (Reynolds) pulled the plug on Invest in Iowa, we don’t know what their solution is.

“We don’t know where we will get the $14 million if the state doesn’t address the issue,” McCoy said. 

McCoy is hoping the federal CARES Act appropriations for Iowa can help fill at least part of the gap, temporarily. “That is one-time money,” he noted. “We need to fix this structural deficit. We are hoping we get some direction from this Legislature when they go back into session.”

 Broadlawns Medical Center has covered shortfalls in the past, but can’t be expected to continue, McCoy said.

Even if the sales tax has been raised, the county would have been $4 million short of its budget for mental health services in the next budget, he added. 

McCoy said the county needs the state to come through with funding, or allow counties to increase property taxes for mental health services. The GOP majority controlling the Legislature has vowed not to raise property taxes.

Davenport-based Lori Elam, CEO of the five-county Eastern Iowa Mental Health and Disabilities Service Region, said Scott County has a particularly low state limit on its property tax levy for mental health services. That’s because some of the county services weren’t in place in 2005, the base year cited in a state law, because the county wanted to build programming slowly to ensure it was provided properly. 

That led to the budget cuts and waiting lists for services, Elam said. 

Elam said the state has added mental health services, including some for children, but the Legislature provided no additional funding to pay for them. At the same time, stress related to the pandemic has increased demand for some services, especially telehealth, Elam added.

With the state-imposed limit on property taxes for mental health, regional mental health networks have suffered financially, she said. 

“Part of the problem could be resolved if there was more state trust in county officials instead of trying to micromanage all those regions,” Elam said.

Matt Highland, spokesman for the Iowa Department of Human Services, responded, “It’s our responsibility to ensure consistent access to critical mental health services throughout the state. This requires working closely with our partners in the regions and counties. We value these relationships and we will continue our collaborative efforts with all of our stakeholders to improve the mental health system in Iowa.”