Reynolds signs property tax bill into law

Bill requires a 2/3 majority override on budgets that exceed previous year’s by 2%.


DES MOINES – Iowa governor Kim Reynolds signed a bill into law today that makes local government clear an additional hurdle in approving budgets with more than 2% revenue growth.

Senate File 634 was signed Thursday morning and Reynolds says the new law will add a layer of transparency to local budgeting processes.

“This bill creates an additional public hearing prior to the approval of a city or county’s budget, allowing more public input and helping increase awareness and transparency to the budgeting process and Iowa taxpayers.”

But Fort Madison City Manager David Varley said it’s just more of the state tying the hands of city staff across the state.

“It’s ridiculous. they tie our hands behind our back. You govern the state and we’ll run the cities and if the people don’t like how we’re doing they’ll elect different people,” Varley said.

The bill requires local governments to add an additional public hearing in the annual budgeting process of proposed budgets indicate a revenue growth of more than 2%. A two-thirds majority vote on a resolution by the elected officials of the governmental agency would permit the budget to be approved after the additional public hearings and posting took place.

State school districts have a different state funding formula and are not affected the bill.

Lee County Budget Director Cindy Renstrom said it’s extra work and could be impacted by the election cycle.

“I’m not looking forward to this. It’s going to limit us to 2% and what we can do,” she said.

She acknowledged the process has an out, but she said when supervisors are up for election, it could become an issue.

“When you have three supervisors that are up for election, do you think they’ll be quick to vote for increased spending. If they don’t approve it, now your looking at spending cuts.”

Varley said the state doesn’t seem to be considering that personnel costs alone increase more than 2% over year, that means cuts have to be made on the back of the rest of the budgets if the council doesn’t approve the relief.

“It’s going to be difficult for us to cap at 2%. Our personnel costs go up 3 to 5% every year including health care and benefits,” he said.

“That means if you want to stay within that you have to cut or layoff. When 70-80% of your budget is personnel, you have to balance that on the 20-30% of the rest of the budget like supplies and equipment.”

Varley agreed that you can get around the cap with an extra majority vote of the council, but he said they aren’t always willing to do that. And since the bill requires a 2/3 majority, that means Fort Madison would require 5 of 7 councilmembers to approve the resolution.

“You can get around it, but it’s an added hurdle. Council is sometimes hesitant to do things. I don’t understand the thinking when they know that with health care salaries going over 2% how that even makes sense,” he said.

“This is taking away from local control. Instead of cities running cities, they are trying to run cities for us. This is Des Moines trying to run all the cities of the state. That’s the bigger issue.

The bill also requires cities and counties to certify their budgets by March 31.

State employees have said the bill is backdoor attempt to manipulate the state’s Iowa Public Employees Retirement System, or IPERS.

State Rep. Jeff Kurtz (D-Fort Madison) said the bill throws IPERS funds and 411 funds, which are the police and fire department retirement funds, into the general fund that is now facing a 2% soft cap.

“That’s never happened before with a cap,” Kurtz said. “An amendment to take those two entities out of that bill was submitted by Monica Kurtz of Des Moines, and the Republicans defeated it. The bill was much worse in it’s original form, but that 2% softcap that can only violated with a super majority.”

Varley, who oversees the Fort Madison city budget, including all IPERS contributions, said he didn’t see the bill having an impact on the current IPERS structure.

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