On Tuesday night, Governor Kim Reynolds revealed her plan for state spending in fiscal years 2022 and 2023. The Governor’s plan proposes to spend $8.1141 billion from the General Fund in FY 2022, which would be an increase of 3.70 percent over her revised FY 2021 budget. Governor Reynolds’s budget spends 98.31 percent of the on-going revenue in the General Fund ($8.2533 billion).
For Fiscal Year 2023, the Governor is proposing a General Fund budget of $8.2998 billion. This would be an increase of $185.7 million or 2.29 percent. The Governor’s FY 2023 budget would spend 98.66 percent on what her office is forecasting for ongoing revenue in Fiscal Year 2023. There is no current projection for this year by the Revenue Estimating Conference.
Among the major items in the Governor’s budget are:
Broadband – The major announcement in Governor Reynolds Condition of the State speech was a proposal to commit $450 million over the next three years (FY 2022, 2023, & 2024) to expand access to broadband throughout Iowa. The annual amount of $150 million would be ten times her budget request for this last year and thirty times the amount that was budgeted in Fiscal Year 2021.
Mental Health – Another major piece of Governor Reynolds budget proposal is addressing mental health funding. Under her budget plan, the state would provide the mental health regions would receive $15 million from the state in Fiscal Year 2022 and $30 million in Fiscal Year 2023 to expand access and implement the mental health reforms and service expansions that have been enacted over the past three years.
Medicaid – In Fiscal Year 2022, the state will spend $1.4815 billion from the General Fund on the regular Medicaid program and the Health and Wellness program. This amount would have been significantly higher, if not for the enhanced federal Medicaid match rate states are receiving in response to the coronavirus pandemic. The Governor’s budget provides increases reimbursement rates for nursing homes ($10 million), home and community-based services’ providers ($8 million) and psychiatric medical institutes for children ($3.9 million).
In Fiscal Year 2023, the Medicaid budget is increased to $1.4915 billion with the $10 million increase going to nursing home reimbursement rates.
Supplemental State Aid for Schools – Governor Reynolds is proposing that Iowa’s education system would receive $26.3 million in additional money during FY 2022. The majority of this amount – $20.8 million – would be provided to school districts through a 2.5 percent increase in Supplemental State Aid for Schools and school transportation funding. The Governor also is proposing an additional $2.5 million to implement provisions of last year’s classroom behavior bill. Also included in her budget is $3 million to provide educational savings accounts for students who are currently attending failing schools.
For Fiscal Year 2023, the Governor is providing $140.3 million to Iowa schools through Supplemental State Aid for Schools and school transportation funding.
Higher Education – State funding for state universities under the Board of Regents, Community Colleges, and the Iowa Tuition Grant program would also receive an increase in FY 2022. Funding to the three state universities would be increased by $15 million, with $8 million replacing the FY 21 reduction and another $7 million increasing state funding levels for each school. The Board of Regents would determine the distribution of the funds. Iowa’s community colleges are recommended to receive an increase of $5.2 million. Students at the state’s independent colleges would benefit from a $1.2 million increase to the Iowa Tuition Grant program.
Future Ready Iowa – Continuing momentum for one of the more successful efforts in recent years, the Future Ready Iowa program will receive additional funds in Fiscal Year 2022. Governor Reynolds’s budget would provide an additional $10 million to the College Student Aid Commission to fund the Last-Dollar Scholarship program. This would mean that the state would be providing $23 million in financial to Iowans who are studying for degrees and certifications at Iowa’s community colleges.
Rebuild Iowa Infrastructure Fund – As part of her budget proposal, Governor Reynolds also released her recommendations for the Rebuild Iowa Infrastructure Fund (RIIF) for FY 2022. The Governor restores many recurring funding streams to their FY 2020 level, as gaming tax collections recover for their 2020 decline due to the pandemic. Among the new projects proposed to be funded are:
- $2 million increase for Renewable Fuels Infrastructure Fund
- $5.2 million for Dept. of Corrections projects including a new kitchen at Clarinda Treatment Complex
- $6.5 million for infrastructure projects at DHS facilities, including changes to the Stata Training School at Eldora
- $2.5 million to the Judicial Branch for equipping new and renovated county courthouses
One significant change in the Governor’s budget is the proposal to move the funding of the Technology Reinvestment Fund to the General Fund. This would receive $35 million in FY 2022 and $25 million in FY 2023.
Fiscal Year 2021 adjustments – In addition to proposing budgets for the next two years, the Governor also brought forward some adjustments to the current year’s budget. Governor Reynolds is asking for supplemental appropriations of $41 million. The funds would go to the following programs:
- Chief Information Officer (OCIO) – Funding the first year of a contract with Workday to replace the state’s budget, accounting, and human resources computer systems – $21 million
- Dept. of Education – Funding for a supplemental grant program to Iowa schools for costs related to providing 100% in person learning during the 2020-2021 school year – $20 million.
The additional school funding has also been discussed by some House Republicans who would like to provide schools with additional funding for the costs associated with 100% in-person learning during the fall.
As always, the release of the Governor’s budget proposal represents the firing of the starter’s pistol on the annual budget process that dominates each legislative session. Budget subcommittees will begin next week, starting with a close examination of the details of Governor Reynolds’ proposal.
December State Revenue Collections Continue to Grow
State revenue continued to grow in December, maintaining a pattern in Fiscal Year 2021 of tax collections exceeding expectations. According to the non-partisan Legislative Services Agency, the state took in $36.1 million more than what was collected in December, 2019. This is a 5.1 percent increase over the previous year’s figure. Through the first half of the fiscal year, state revenue has increased 3.4 percent over FY 2020. This puts revenue collected ahead of the Revenue Estimating Conferences projection from its December meeting of 0.6 percent growth for Fiscal Year 2021.
Personal Income Tax receipts were down slightly, declining 2.4 percent when compared to December 2019’s figures. For the first six months of the fiscal year, personal income tax payments are 11.3 percent higher than the previous year. The Revenue Estimating Conference is projecting personal income tax collections to increase by 9.6 percent. These numbers are somewhat inflated, as the figures include 2019 tax year payments which were received in July and August due to the filing deadline extension granted by the Governor in March.
Sales and Use Tax collections continued to grow above their FY 2020 levels. For December, collections saw an increase of 4.2 percent over last year. For the year, growth in sales and use tax is 3.9 percent which is ahead of the REC projection of 3.1 percent growth.
Corporate Income Tax collections were higher in December, with the state taking in 140.9 million. This was $27.2 million higher than what was collected in December 2019. For the year, corporate income tax is 37.3 percent higher than FY 2020. This continues to be ahead of the REC projection, which calls for a 25.2 percent increase in collections for Fiscal Year 2021.
Tax refund payments were down $18.8 million compared to December 2019. School infrastructure distributions to local districts for the month rose, with those payments rising by $10.4 million.
News from District 97
This week marked the beginning of the 89th General Assembly of the Iowa House. With a new GA comes a fresh start; there are new members, new seats and a whole lot of new ideas to be scrutinized through the legislative process. As many workplaces currently do, the Capitol looks a little different this year. For the time being clerks have been moved off of the House floor in order to social distance. Committee meetings have also been moved to larger meeting spaces and are also being streamed via the legislative website (legis.iowa.gov).
Also this week the Governor delivered her annual Condition of the State address to a joint session of congress where she laid out her legislative priorities for this session. She began her speech by laying out the financial condition of the state. She stated,
“When I stood here last year, our fiscal health was strong. We had one of the lowest unemployment rates in the country, incomes were going up and our economy was roaring. Then 2020 happened. We took a hit like everyone else, but we didn’t falter long. Because of our conservative budget practices, Iowa’s diverse economy, and the decision to keep 80% of our businesses open, and the tenacity of the Iowa people, Iowa isn’t facing a massive budget shortfall like many states.”
The Governor spoke on how the pandemic has made it apparent that we need to heavily invest in broadband in our state. She also called on the legislature to get all of Iowa’s children back to in-person learning as soon as possible.
If you have interest in any particular bill or would like to know where it is in the process please contact me and I will do my best to try and keep you up to date. You can also follow bills on the legislative website once you know the bill number www.legis.iowa.gov.