Senate Republicans are fast-tracking a bill that would change how the state finances mental health services, accelerate tax cuts, and reduce both payments to cities and tax breaks for preserved forests and other land.
After an hour-long hearing Wednesday that drew opposition to the legislation, Senate Study Bill 1253 is expected to be considered by the full Ways and Means Committee at 10 a.m. on Thursday.
The bill would shift $60 million from county property taxes to state appropriations in fiscal year 2022 and $125 million in fiscal year 2023, GOP spokesman Caleb Hunter said.
A string of speakers at a subcommittee meeting Wednesday morning split on the bill.
The Iowa Farm Bureau Federation supported the measure as a way to cut property taxes by shifting mental health expenses to state appropriations. Environmental groups objected to language that would resurrect a move to reduce tax breaks for forest land, an idea that had been shelved in another bill on March 15.
Cities, counties and school districts objected to a section in the legislation that would end a series of payments to local governments associated with 2013 tax cut legislation, a move that has been discussed for years.
The bill also includes a section that would clear the way for new state income tax cuts by removing language in current law setting revenue goals that would have to be hit before new reductions kicked in.
Bill manager Sen. Dan Dawson, R-Council Bluffs, chairman of the Senate Ways and Means Committee, said the bill was an effort to address Gov. Kim Reynolds’ now-shelved Invest in Iowa Act. That measure would have used a sales tax increase to fund mental health services while at the same time cutting local property taxes that now pay much of those expenses.
The current proposal is silent on the other large part of Invest in Iowa — funding projects to improve water quality, conservation and outdoor recreation by filling the voter-approved Iowa Natural Resources and Outdoor Recreation Trust Fund.
The meeting featured conflicting views from Dawson and subcommittee member Sen. Joe Bolkcom, D-Iowa City.
“The reason we are doing this bill today is because Senate Republicans want to get the attention of the House Republicans to address their tax policy issues, especially the issue of kicking into place the income tax cut that was passed in 2018,” Bolkcom said. “This bill then just adds kind of a hodgepodge of policy issues that have been a long interest of the Republicans in Iowa,” including a phaseout of $152 million in tax-cut related “backfill” payments to local governments related to the 2013 tax cuts, Bolkcom said.
Bolkcom suggested Republicans interested in tax reform look at abuses of tax-increment financing, a tool that uses growth in tax revenues in a certain district to fund improvements in the area. Some cities have tried to use the tool citywide, Bolkcom said.
He also questioned state aid to the likes of Facebook, Microsoft and Google.
Dawson said if Bolkcom objects to the Republicans’ mental health approach, months in the making, perhaps he wants to continue with the current property tax funding for those services. But Republicans, who control both legislative chambers and the governor’s office, have heard from mental health advocates for years that the state needs more funding for those services, while business groups have decried high property taxes, Dawson said.
Dawson noted a main goal was to find stable, adequate funding for mental health services while addressing what Republicans see as excessive property taxes in Iowa. Dawson said Iowa’s hot housing market has led to rising assessments, which could price some seniors out of the market.
“(If) Senate Democrats think that the current funding system is the most stable thing and we shouldn’t do anything else, then I guess …. we don’t need to be worried about mental health funding,” Dawson said. “That’s not the word I’m hearing from the (mental health) regions, and that’s not the word I’m hearing from constituents.”
Health providers, business groups support mental health tax shift
Shelly Chandler, CEO of the Iowa Association of Community Providers, a mental health industry group, said her organization largely supports the bill. Chandler said the legislation shifts funding from property taxes to state appropriations, which generally come from income and sales taxes. She added that some of that revenue can be disrupted after flooding or an event like the derecho in August.
Dustin Miller, executive director of the Iowa Chamber Alliance, said his organization supports shifting expenses from property taxes, increasing funding for mental health services, and making arrangements for larger counties to get a higher amount due to a larger population. “Generally, this is heading toward the right path for us,” Miller said of the bill.
Matt Steinfeldt, lobbyist for the Iowa Farm Bureau Federation, said the shift of mental health funding is important. “Our members believe the state should make mental health a priority in their budget and assume the cost of the system, removing this from the backs of property taxpayers,” Steinfeldt said.
Speakers object to elimination of tax break for land donations
Farmer Seth Watkins objected to the bill’s language repealing a tax break for charitable donations of land for conservation purposes. Those breaks have been used by farmers and organizations such as the Iowa Natural Heritage Foundation to protect land, increase habitat, and improve water quality.
“People don’t realize how important it is that we have lost over a million acres of pasture in southern Iowa over the last 10 years,” said Watkins, who owns Pinhook Farm in Clarinda. “That’s critical to the beef industry. It’s critical to water quality. It’s critical to wildlife habitat,” Watkins said.
The tax credit not only makes it cheaper for landowners to help with conservation, but also makes it more affordable for young farmers to get in the business, he added.
Joe McGovern, president of the Iowa Natural Heritage Foundation, said the debate isn’t just about reducing property taxes. “We need a parallel track that deals with our quality of life, that ties directly to good conservation,” which can mean millions in revenue related to outdoor recreation.
McGovern asked lawmakers to leave the conservation tax credit intact.