Statehouse News

January 6, 2012

Jobs, Economy Are Focus of 2012 Session
State Budget in a Strong Position to Start 2012 Legislative Session
World-Class Schools & Education Reform
Transportation Committee Chairs to Introduce Gas Tax Increase
Wellmark Rate Increase Approved
Mental Health and Disability Redesign Plan
Commercial Property Tax Relief Priority for Legislative Session
Sex Offenders Living in Care Facilities

Jobs, Economy Are Focus of 2012 Session

Jobs and growing Iowa’s economy will be the focus of the 2012 legislative session, which begins on Monday, January 9. Legislators also said cooperation and finding common ground will be the key to making progress this year.

In an effort to help create jobs, legislators have outlined plans to reduce property taxes on Iowa small businesses and expand Iowa’s skilled workforce with quality, affordable education. Legislators will also look to continue expanding Iowa’s renewable energy industry, which has already created thousands of good-paying jobs that can’t be moved to another state or country.

Other topics likely to be discussed during the 2012 session include helping middle class families, cutting commercial property taxes, education reform, overhauling Iowa’s mental health delivery system, and approving the 2013 state budget.

State Budget in a Strong Position to Start 2012 Legislative Session

State lawmakers will have $251 million in new revenue for fiscal year 2013 as they begin the 2012 Legislative Session. The revenue growth will help fund priority areas within the state’s budget. K-12 school funding is increasing $35 million and funding to help our low income working families with their health care costs is increasing by $95 million. The Legislature is also anticipated to consider mental health and disability services redesign, education reform, and commercial property tax relief, all of which will likely put additional demands on the state budget.

Iowa’s economy is growing. A recent report shows Iowa’s gross domestic product (GDP) growth is 5th among nine Midwestern states. Creighton University economist Ernie Goss estimated last year that Iowa jobs grew 0.7 percent and inflation-adjusted gross domestic product grew 2.3 percent. Goss projects that Iowa jobs will grow 0.9 percent this year and inflation-adjusted GDP will rise by 2.4 percent.

Iowa’s current general fund budget is $6 billion. The current fiscal year 2012 budget is estimated to have nearly $1 billion in surplus funds with $363 million in the projected ending balance and $596 million in the state’s reserve funds. The Revenue Estimating Conference (REC) is projecting revenue growth for fiscal year 2013 at 4.2%, an increase of $251 million over fiscal year 2012. The REC estimates $6.251 billion in state revenues will be collected in fiscal year 2013.

World-Class Schools & Education Reform

Improving Iowa schools and making sure every child graduates with the skills needed to land a good-paying job is a top priority for legislators this year. Governor Branstad also released his blueprint for education reform earlier this year.

Legislators and the Governor have hosted town meetings across the state this fall to receive input about Iowa’s education system and the Governor’s blueprint. After those meetings, the Governor has dropped his idea of changing Iowa’s teacher pay scale, will cap the number of times a 3rd grader can be retained, and emphasized end of course high school exams should be used more as an assessment tool. Iowans have suggested a longer school year, but the Governor has not yet included that measure in his plan. However, that issue may still be debated during the 2012 Legislative Session.

Here are items that appear to be left on the table for discussion this session:

• Students entering the teaching profession. This provision would only allow for 3.0 students to enter the teaching profession.
• 3rd grade retention based on the Florida model to end what is referred to as “social promotion.” What some states have done that has followed this, like Arizona, is not provide the proper resources to students that are falling behind in reading. There are concerns over providing enough intervention programs to catch these students back up, and would students be placed directly back in their class after passing the reading test? Finally, details need to be addressed on how much of a say parents would have in the retention. Studies have also shown that retention leads to self-esteem issues and thus higher dropout rates in later grades.
• End of Course High School Exams. This would involve a “cut score” and threats of not graduating. Details still need to be worked out on what the parents roll would be in not allowing a student to graduate. Like a lot of serious education reform issues, there will be some cost to implement and this would see some cost is developing a test and administering it.
• Requiring All Students to take ACT. Illinois and Minnesota, as well as many school districts in Iowa already require this. Besides concerns over requiring students to take the test that may be headed for high tech classes at a community college, there is a $1 million cost to this provision.
• “Innovation Acceleration Fund.” This would identify local educational problems and find evidence-based and innovative solutions. Critics at the town meetings said the plan cherry picks ideas without looking at evidence that reform actually works. It remains to be seen how the Governor is planning on supporting this initiative with funds and whether or not he has the support from his own party. The Governor may propose his plan, but either the House or the Senate may propose their own plan.

Wellmark Rate Increase Approved

Iowa’s Insurance Commissioner approved Wellmark Blue Cross Blue Shield’s request for a 9.35% increase for individual health insurance on policy holders under the age of 65 years. The increase is effective April 1, 2012. This increase does not affect persons who purchase their health insurance through their employers.

The Commissioner made her decision after holding a public hearing on December 10 and having two actuarial reviews done. Both reviews concluded that the proposed rate increase were reasonable and justified using the state and federal loss ratio standards. Wellmark cited the cost of medical services as the reason for the increase, and specifically says the increase will not be used for administrative costs.

This rate increase follows a 2010 increase of 18% and a 2011 increase of 8.5%, both on individual health policies.

Transportation Committee Chairs to Introduce Gas Tax Increase

The chairs of the House and Senate Transportation Committees announced they are introducing legislation to increase the gas tax. The bills will include recommendations by the Governor’s Transportation 2020 Citizen Advisory Committee.

Senator Tom Rielly (D-Oskaloosa) and Representative David Tjepkes (R-Gowrie) cited the fact that the gas tax is the only source of road and bridge fund revenue where people who live outside of Iowa contribute. According to information provided by the Citizen Advisory Committee, 35% of large trucks and 15% of the passenger cars and small trucks are from outside Iowa.

The bills will increase the gas tax a total of 8 cents; 4 cents in 2013 and an additional 4 cents in 2014. Each penny of increase in the gas tax is estimated to bring in approximately $23 million in revenue. The bills will also increase the fee for new registrations from 5 percent to 6 percent, and apply a fee to the annual registration fees for vehicles that run on something other than diesel or gasoline.

All monies collected through these proposals will be distributed to cities, counties, and the state through the TIME-21 (Transportation Investment Moves the Economy in the 21st Century) formula.

Mental Health and Disability Redesign Plan

As we begin the 2012 legislative session, one of the main issues on the table is mental health and disability services redesign.

A redesign of the system is needed and long overdue. The new system, if approved, will need to be phased in over time and done in a manner that does not make it harder, but easier for individuals and families to access the services they need. Legislators expect to work in a bi-partisan fashion this year in crafting the newly redesigned system.

Over the past six months, a Legislative interim committee met and heard from numerous providers, consumers, and stakeholders on issues regarding the current mental health and disability services system.

The interim committee agreed, as a starting point, to draft legislation based on the Department of Human Services’ recommendations to redesign the system. These recommendations include organizing services on a regional basis, requiring core services are provided in every region, standardizing eligibility across Iowa, creating meaningful consumer-centered quality of life outcome measures, incorporating multi-level and co-occurring disabilities in the redesigned system, and providing improved pre-committal screenings and jail diversion services.

The committee also looked at the financial aspect of funding the service delivery system. Currently, counties levy a total of $125 million in property taxes to pay for county administered services. This funding is combined with state and federal monies to cover the entire costs. For the next fiscal year, there is an expected short fall of $56 million to maintain services at the current level. In addition, legislation adopted last year eliminates the $125 million county levy starting July 1, 2013.

During the upcoming 2012 Session, the Legislature will have to look for ways to provide a more sustainable and equitable funding source for mental health and disability services.

Commercial Property Tax Relief Priority for Legislative Session

Democratic and Republican leaders in the House agree that commercial property tax relief will be a priority for the upcoming session.

The Senate Democrats are proposing a plan of tax credits for commercial property owners that will focus relief on small and medium-sized Iowa businesses. Under the Democratic plan, 83% of commercial property taxpayers will see more than a 40% reduction in their property tax burden when the plan is fully funded. The plan would provide property tax reductions on the first $340,000 of commercial property tax valuation. That means a Main Street small business with store front valued at $340,000 would receive the same property tax relief that a Walmart on the other side of town received.

Under the House Republican proposal introduced last year, commercial property taxes would be rolled back for all property tax payers, no matter the size of the business or connection to Iowa. The plan would reduce the valuation on all commercial property and limit the increases in tax rates that local governments, including school districts, can levy. However, the Republican plan would also have raised property taxes on homeowners and farmers to pay for the reduction in commercial property taxes.

Under Iowa’s current property tax system, commercial property is taxed at 100% of its assessed value. For 2012 property taxes, residential property will be taxed at a lower rate, or rolled back to 51%, while agricultural property will be taxed at 57% of its assessed value. This rollback was implemented in the 1970’s and 1980’s to shield agricultural and residential property owners from inflation.

Sex Offenders Living in Care Facilities

Iowa’s sex offender law was last updated in 2009. Over the past year, there have been reports of residents of nursing homes and residential care facilities sexual assaulting other residents.

According to recent news reports, there are 42 registered sex offenders living in nursing homes, residential care facilities, and intermediate care facilities across Iowa. Typically the facilities provide housing and services for the elderly and persons with a physical or mental disability, and the facilities are not completely secure.

Under current law, a judge can order a registered sex offender to a care facility as a mental health commitment or if a person is unfit to stand trial. Even though a sex offender can live in a facility for dependent adults, they cannot work in one.

The Legislature asked the Judicial Branch/Department of Human Services (DHS) workgroup of the Mental Health and Disability Redesign Interim Committee to look at this issue during their deliberations. The workgroup recommends that placement to a residential care facility should occur only after notification and acceptance by the facility. The Governor has also formed a workgroup to look at this issue.

During the upcoming session, the Legislature will review this issue as they consider all ways to improve the state’s mental health and disability services delivery system in Iowa.