OTTUMWA — Marc Roe didn't really want to bring up the subject during last week's Ottumwa City Council meeting, but he believed it too important not too.
"I don't usually do this, but I feel like this is one of those times where it's probably necessary," he said in the final moments of the meeting. "Senate File 587 is on the docket in the state house, and it has the possibility long term of doing damage to cities and counties."
The bill, which passed the Iowa Senate along party lines April 6, takes aim at restructuring the state's mental health service funding, and eventually phases out the ability for counties to use property tax money to fund those services. The Iowa House has not yet taken up the bill in their chamber.
The current levy is $47.28 for mental health services, but it would be $0 by fiscal year 2023 if the bill becomes law, with reductions starting in the next fiscal year. Counties then will be awarded per capita "appropriations" as funding for those services.
"The state hasn't exactly done a good job of handling mental health in the past," Roe said Friday. "This will force counties like Wapello County and the city of Ottumwa to draw down resources, and it would put a lot of programs at risk."
One of the biggest factors in the bill is that appropriation increases will be tied to a growth factor in the state's sales tax in fiscal year 2026 and beyond.
"Basically every community south of the Interstate 80/Interstate 35 corridor will have some trouble," Roe said. "The growth is up there. The bill is basically robbing Peter to pay Paul. If the goal is to strengthen the system, how do you justify taking 80% to benefit the 20%?"
• In fiscal year 2022, reduce the county's mental health levy to $21.15, with the state kicking in $15.86 (bringing to the total to $37.01).
• Funding begins to increase in fiscal 2023, the state appropriation would be $65 million ($38 per capita) among the 14 mental health regions to offset the elimination of the mental health property tax levy.
• In fiscal 2024, the appropriation would be $40 per capita.
• In fiscal 2025, the state appropriation would be $42 per capita.
• Starting with fiscal 2026, the previous year's appropriation would then be tied to sales tax growth rate, but not exceeding 1.5 percent.
Regional mental health service boards would continue to have oversight of the funds.
However, with a reduction and elimination in the levy, it could jeopardize popular programs such as Jail Diversion, which is designed to prevent or minimize the number of mentally ill individuals in prisons by providing them services during incarceration and offering community-based treatment after they are released.
It could also cost jobs, as the mental health levy helps pay for staffing at facilities.
"It will certainly reduce the grant we get for jail diversion pretty expeditiously," Roe said. "That should be a big concern, because there is a lot at stake."
Republicans in the senate say the bill lowers property taxes and they argue that a per-capita distribution rids the current inequities among county property tax levies. However, lower property taxes also reduces the amount of backfill in the budget's general fund. In Ottumwa, the general fund covers salaries for public safety, parks and recreation, and administrative duties.
The city has a backfill of $157,000 for fiscal year 2022, and backfill, which was created to offset state tax cuts on commercial properties in 2013, will be phased out. It's estimated the bill would take $152 million in backfill money from cities and counties.
"The state is going to look at this as lowering taxes, yet it will force us to raise taxes," Roe said. "We can't do that in this county or city, especially when we finally have our budget in a good place. Our only option will be to cut services. It's damaging to local economies, and it's not sustainable."
The bill goes beyond the mental health services. It also eliminates a public education and recreation levy for school districts and ends tax credits for those who donate their land to conservation. The bill does offer a tax credit for low-income Iowans 70 and over.
Farm Bureau, Americans for Prosperity, Iowans for Tax Relief and Iowa Taxpayer's Association have all endorsed the bill.
"I know the League of Cities has come out against it," Roe said. "The senate really isn't listening to those people. I would urge anybody to write a letter to their state senator or their state representative in opposition of this bill because it will not end well for the city of Ottumwa or Wapello County if this goes through as it currently stands."
The bill passed the Republican-controlled senate 30-17 and heads to the Republican-controlled house for further consideration.