Mental health bill has bumps for regions, cities

BY CHUCK VANDENBERG
PCC EDITOR

LEE COUNTY – A new bill that is sitting on Iowa Gov. Kim Reynolds desk will put mental health services in the hands of the state starting in July 2023.

That bill, Senate File 619, will replace a county levy that has helped fund regional health care authorities, with a state funding mechanism starting in Fiscal Year 2023.

The funding mechanism will be based on a complex formula of regional population multiplied by the sum of the dollar amount used to calculate regional service payments for the immediately preceding fiscal year.

And it will take someone like Ryanne Wood, the CEO of Southeast Iowa Link, one of 14 regional mental health authorities across the state, to explain untangle that mess.

Wood said Wednesday the bill is chalked full of policy for the Mental Health Disability Services regions.

“The most striking is that there seems to be an effort to disengage counties from the region financially and as employers of record, via elimination of the property tax levy and counties Fund 10 (designated MHDS fund),” Wood wrote in an email to Pen City Current.

“At the end of FY22, all balances and revenues will be allocated exclusively to the Region Fiscal Agent pooled fund which for SEIL is the Des Moines County Auditor’s office.”

Wood said a supervisor from each member county of the region will remain on the region’s governing board, which has oversight of the system regionally, along with other members defined by legislation.

But she said the eventual move to fully state-funded Regional MHDS systems in 2023 without the ability to transfer funds to county-level service, will require a restructuring of regions if there is no change in the current bill’s language.

The bill would reduce the maximum funding of the SEIL Region from $42.60 to $37 per person, which will be a combination of a $21.14 levy and a $15.86 state contribution. In the next fiscal year that would bump up to a $38 per person contribution. From there the contribution would increase to $40 in Fiscal year 2024 and $42 in fiscal year 2025.

After 2025 the funding mechanism would kick in and regions with diminishing populations could see reduced state contributions.

“As one may guess, a reduction of secured revenue, while simultaneously making an effort to develop legislated core services from the previous two legislative sessions is anticipated to be a challenge,” Wood said.

Those core services include Adult Complex Needs and Children’s Behavioral Health.

The state will also be setting benchmarks on those services in performance-based contracts that regions will hold with DHS. Wood said factors such as insufficient workforce, low service reimbursement rates, declining population bases in rural Iowa, and limited access to services either in person or teleservice, will be additional complications to developing mandated services.

“SEIL has concern that the service system that has been developed with our partners that attend to the full spectrum of service, and continuity between services, may be disrupted because some of those services do not fall into the currently legislated core service array,” she said.

She said the legislation also includes an incentive fund that will be tied to the performance benchmarks.

“The Incentive fund developed in this bill is not fully understood in how access to those funds will be managed,” she said.

“It is recognized it will be tied to performance, however those specific indicators are not fully flushed out and there is the matter of prioritization for allocating funds based on outcomes, or needs, or first-come, first-served, etc. Sufficient and consistent data to be collected by all regions should be used to determine need for service and the development of service where need is indicated.”

The good news seems to be that access to services and income guidelines for assistance won’t change at the base level.

The bill would eliminate the levy county residents pay for mental health services, with the state picking up the tab. But Reynolds is also close to signing a bill that would phase out what is called a backfill of local government commercial property taxes.

In 2013 the state instituted a rollback on commercial property taxes statewide and committed to replacing that lost revenue. That phasing out would provide added revenue to help offset the added expenses of the mental health care.

Fort Madison City Manager David Varley said the city will have to just absorb the cuts since they are already maxed out at the $8.10 general levy limit.

“The state has been backfilling the 10% to cities for several years to make up for the loss of revenue caused by their actions,” Varley said.

Varley said in fiscal year 2022-23 which begins on July 1, 2022 the city will lose $128,710. The following year $102,968, then $77,226, $51,484, and $25,742 in fiscal year 2026-27, for a total of $386,130 just during the phase out. Then the 10% they were backfilling will be completely up to local governments to absorb.

Some local governments not at the state’s $8.10 general levy limit may have to then increase property taxes on their end to help recoup the lost revenues.

Fort Madison is already at that limit so they will have to absorb the phasing out and eventual loss of the rolled back taxes altogether.

“Unfortunately the state has limited cities’ general fund mil levy to the $8.10 level. Because we are already at that level we cannot raise a mil levy at all in order to make up for the loss of revenue caused by the loss of the state backfill.”

Some legislators are saying the stimulus money currently on it’s way from the federal government to local governments will make up the difference. Varley said that’s not the whole story.

“The stimulus money we will receive is a one-time deal so it won’t help in coming years. The backfill loss will be felt every year.,” Varley said.

“Also, the stimulus money is very limited in what it can be used for. We can’t just dump it into the general fund to make up for the backfill loss. It has to meet very specific guidelines. In fact, I just finished reviewing the 151 pages of guidelines the treasury department has already sent out which outlines the rules for spending the stimulus funds.”

Fort Madison also will start seeing payments on a 1% franchise tax in July. Varley said the loss of backfill money will eat into some of that franchise fee revenue.

“The easiest way to state it is that the state government cut taxes at the local level and we are left holding the bag.” he said. “They cut tax revenue without giving us a way to make up for it. That’s what the backfill was for, “to hold us harmless”.”

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