Government : HELLO HOUSE DISTRICT 75 FROM THE STATE CAPITOL!

Week One was a very busy one filled with optimism. On Tuesday, Governor Kim Reynolds gave her Condition of the State Address in the House Chamber to both the House and Senate. Wednesday, we had a joint session for the Condition of the Judiciary by Justice Wiggins, and Thursday we had a joint session for the Condition of the National Guard by Major General Benjamin Corell.

On Tuesday, Governor Kim Reynolds revealed her plan for state spending in fiscal years 2021. The Governor's budget proposes to spend $8.0928 billion from the General Fund in FY 2021, which would be an increase of 4.42 percent over her revised FY 2020 budget. Governor Reynolds's budget spends 98.10 percent of the on-going revenue in the General Fund ($8.2490 billion).

Most of the Governor's budget is predicated on the Invest in Iowa Act. The act raises the state sales tax from 6% to 7%. The first 3/8 of that increase goes into the Natural Resources and Outdoor Recreation Trust Fund. The remainder is deposited into the General Fund. To offset the large revenue increase in the General Fund, the Governor reduces personal income tax rates over four years beginning on Jan. 1, 2021. This second round of income tax cuts are in addition to the income tax cuts approved by the Legislature and signed by Governor Reynolds in 2018. The Governor also proposes to eliminate one of the two income tax cut triggers approved in 2018. The current requirement that the state experiences at least 4% revenue growth prior to additional tax cuts going into effect is eliminated. Furthermore, the state assumes additional funding responsibility for mental health services by lowering the county mental health property tax levy.

Among the major items in the Governor's budget are:

Medicaid - In Fiscal Year 2021, the state will spend $1.594 billion out of the General Fund on the regular Medicaid program and the Health and Wellness program. This amount would have been significantly higher, if not for continued improvement in Iowa's federal Medicaid match rate. The Governor's budget makes several adjustments to the program, providing increased reimbursement rates for nursing homes, HCBS waiver homes, substance abuse treatment providers, adult and children's mental health services, and expansion of telehealth services. One key item that is not included is any adjustment in the per member/per month rates paid to the managed care companies. Rates for the next fiscal year have yet to be negotiated. Additional funds may be needed at some point if the adjustment calls for higher rates.

HAWK-I - State funding for the Healthy and Well Kids in Iowa (HAWK-i) insurance program has increases again. The additional funds are needed as Congress is returning the program to its normal matching of 75% federal/25% state. For the past few years, HAWK-I had a temporary matching rate adjustment to 95% federal/5% state due to a provision in Obamacare. Additionally, the program has seen enrollment growth over the past year.

Supplemental State Aid for Schools - Governor Reynolds is proposing that Iowa's education system would receive $102 million in additional money during FY 2021. The vast majority of this amount - $89.6 million - would be provided to school districts through a 2.5 percent increase in Supplemental State Aid for Schools. Under the Governor's budget, the state would provide districts with $24.475 million in 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 2021. Funding to the three state universities would be increased by $15.4 million, with Iowa receiving a $6.3 million increase, Iowa State receiving a 5.7 million increase, and UNI getting an additional $3 million. The community colleges are recommended to receive an increase of $5.2 million. Students at Iowa's independent colleges would benefit with 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 FY 21. Governor Reynolds's budget would provide $15.8 million to the College Student Aid Commission to fund the Last-Dollar Scholarship program. This is an increase of $2.8 million over this year's levels.

Mental Health -Marking a major change in the funding balance between the state General Fund and county property taxpayers, Governor Reynolds has proposed that the state assume a much larger share of mental health funding. Under the Governor's budget plan, the state would cover $80.6 million of mental health costs currently funded through the mental health property tax levy. Under her plan, counties will only be allowed to levy up to $12.50 per $1000 of valuation for mental health services.

Broadband - Governor Reynolds continued her efforts to expand access to broadband throughout Iowa. Her budget proposes $15 million of General Fund money in FY 2021 for grants to expand access to high speed internet service in underserved areas of Iowa.

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 2021. Among the new projects proposed to funded are:

* $250,000 for security cameras on the Capitol Complex

* $2 million increase for Renewable Fuels Infrastructure Fund

* $4 million for new kitchen at Clarinda Treatment Complex

* $600,000 to address ADA issues at DHS facilities

* $830,000 to furnish new Law Enforcement Academy

* $400,000 for improvements to the Judicial Building

* $500,000 for DNR's Derelict Buildings program

* $3.4 million for 2 Iowa State Patrol aircraft

* $850,000 to replace DPS ballistic vests and bomb suits

* $50,000 to resurface road at the Iowa Veterans Cemetery

Fiscal Year 2020 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 $111.1 million. The funds would go to the following programs:

* Medicaid - $89.0 million * HAWK-I - $1.7 million

* Glenwood State Resource Center - $0.3 million

* Flood Relief assistance - $20.0 million

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 this Thursday, with the close examination of the details of Governor Reynolds' proposal starting next week.

Grain Warehouse Lien Legislation Introduced

On Tuesday, January 13, 2019, House Study Bill 500 was distributed to House Agriculture Committee members at the first schedule House Agriculture Committee meeting of the 2020 Iowa General Assembly. The study bill proposes legislation to fix a problem that has arisen with whether grain warehouses are able to get paid for grain storage, drying and conditioning that a farmer might incur as they deliver the grain that might be subject to other liens by landlords, or lending institutions who may have higher priority filed liens. The study bill proposes creating a new Code Chapter (571A). This new Code Chapter provides for a special lien on grain that is deposited with a licensed grain warehouse for purposes of storage, drying, and conditioning and attaches to any identifiable cash proceeds resulting from the sale of grain. The warehouse lien is perfected in two ways. First it is automatically perfected at the time the licensed grain warehouse takes provision of the grain and this lien enjoys super-priority over other competing creditor liens regardless of when those other liens were perfected. The automatic perfection terminates when the licensed grain d4ealer relinquishes passion of the grain, but the licensed grain warehouse may retain super-priority status by filing a financing statement (UCC-1) with the Iowa Secretary of State during the period that the possessory lien is perfected.

Governor Recommends Sales Tax Increase for Water Quality and Outdoor Recreation

On Tuesday, January 14, 2020, Iowa Governor Reynolds presented her "Condition of the State' speech to a joint session of the Iowa General Assembly in the House Chamber. One of the highlights of that speech was her recommendation that the state sales tax rate be raised by one-penny, with a portion of the proceeds (3/8ths) targeted to fund the Natural Resources and Outdoor trust fund.

This fund was established by a constitutional amendment approved by Iowa voters in the 2010 general election. Notably, the amendment provided no funding. Governor noted in her speech that her intent was not to increase overall state revenues and taxation. As a result, she said there should be a commensurate reduction of other taxes sufficient to offset the increase in sales tax collection.

Governor Reynolds indicated that times and needs have changed since the 2010 election and that the statutory distribution formula of the trust fund enacted in 2010 (Iowa Code 461.31) should be modified to increase the proportion of outlays from the fund to support water quality efforts. In preliminary supporting materials release after her speech, the Governor appears to reconfigure the trust fund allocation formula to provide more funds for water quality and soil conservation and a lower proportion of trust fund money for outdoor recreation operations. The Governor's Budget speech noted that implementation of the trust fund with a revised allocation formula would in futures whole years starting in Fiscal Year 2022 provide an estimated $100-million going towards water quality efforts that would be a net increase of 31% of current cumulative state funding for this purpose and the recreation aspect of her recommendation would allocate $52-million in FY 2022 that would be an increase of 14.6% above existing levels. The allocation for the upcoming year FY-2021 would be one-half because the Governor envision that the sales tax increase would occur mid-fiscal year for the State, or January 1, 2021. This transition year (FY-2021) would provide a mix of funding sources for ongoing water quality and outdoor recreation programs.

Proposed Revision Codified Allocation of Natural Resources & Outdoor Recreation Fund

U.S. - China Phase One Trade Agreement

On Wednesday, Jan. 15, 2020, the Iowa Department of Agriculture and Land Stewardship issued a press release in which Iowa Secretary of Agriculture Mike Naig issued the following statement in response to the signing of the U.S.-China phase one trade agreement in Washington D.C. earlier today. IDALS Secretary Naig noted--"The signing of the phase one U.S.-China trade agreement is great news for Iowa farmers. It signals that both sides recognize the value of the trading relationship and are willing to continue working to secure a long-term deal. This is the progress we need to regain U.S. agricultural exports to China. I want to thank the Trump Administration for continuing to fight for access to this important market." Under the agreement--

* China may purchase up to $40 billion in agricultural products under the phase one agreement.

* The U.S. exported 49 million metric tons of corn to China during the 2018-2019 marketing year, according to the USDA FAS.

o 47 million metric tons of soybeans

o 861,702 metric tons of beef

o 1.2 million metric tons of pork

o Iowa exports to China in 2018, according to WISERTrade. $415 million of soybeans

o $40 million of animal feed

o $480,000 of beef

o $30 million of pork

o $10 million of corn * Iowa exports to China in 2017, according to WISERTrade.

o $1.6 billion of soybeans

o $50 million of animal feed

o $322,000 of beef

o $42 million of pork

o $27 million of corn

Top Priority - Increasing Internet Access

In the past having a high-speed internet connection has been considered a luxury. However, in today's world is has become a necessity - much like electricity became a necessity close to 100 years ago. A few years ago, Iowa started to connect every Iowan to the internet by creating a broadband grant program. The governor has requested $15 million this year to fund broadband grants for broadband deployment in unserved areas of the state.

Governor Plans $102 Million School Funding Increase

As part of her Condition of the State speech on Tuesday, Governor Reynolds presented her recommendations for increasing state funding to schools for Fiscal Year 2021. The Governor called for giving Iowa schools an additional $102 million next year. The funding comes out of various sources. They are:

State Aid to Schools: The Governor is recommending an estimated General Fund appropriation of $3.381 billion for State aid to schools in FY 2021, an increase of $95.7 million compared to FY 2020. This amounts to a 2.50% increase in the supplemental State Aid (SSA). The amount also reflects an adjustment to the Property Tax Replacement Payment (PTRP) funding per student, which is estimated to increase from $110 to $131. Under the PTRP, the state picks up the portion of property taxes that could have increased with the 2.50% increase in SSA. The amount further reflects an increase of $1.0 million for the addition of work-based learning coordinators to the positions covered by operational sharing.

Transportation Equity Fund: The Governor is recommending a General Fund appropriation of $24.5 million to the Transportation Equity Fund, an increase of $5.5 million compared to FY 2020. The Transportation Equity Fund was created to provide additional funding to school districts for public school transportation costs that exceed the statewide adjusted average cost per student.

Work-based Learning Coordinators: The Governor is recommending an additional $1 million for operational sharing agreements between schools that share a work-based learning coordinator.

Children's Mental Health Training: The Governor is recommending an additional $900,000 to schools to help pay for training of school personnel in mental health issues. This funding was begun last year when the state provided schools with $2.1 million to address this growing need.

Work on the Governor's school funding proposals will begin quickly in the House Education Committee.

Mental Health Services Expand Across State

Recently, the County Rural Offices of Social Services (CROSS) Mental Health and Disability Services (MHDS) Region opened the first Access Center in the state in Osceola. This monumental step comes after the legislature unanimously passed a comprehensive mental health bill in 2018 to increase access to mental health services and create new services in urban and rural communities in Iowa.

Access Centers were developed with significant input from families and individuals who have experienced mental health crises, mental health providers, and law enforcement. The CROSS Access Center will be open 24-hours a day to provide assessments and screening for multi occurring conditions, care coordination, crisis stabilization, sub-acute mental health services, and substance abuse treatment for those that do not need inpatient psychiatric hospital treatment, but are still in need of supports and services. The legislation from 2018 specifically required the expansion of evidence-based practices including 6 Access Centers, 22 Assertive Community Treatment teams, and 120 Intensive Residential beds statewide through collaboration with Iowa's 14 MHDS Regions. It takes time to develop these services, and the opening of the first Access Center provides the framework for other Regions to begin expanding additional mental health services to fill the gaps currently in the state.

Once all of these services are up and running, they will relieve the pressure placed on inpatient psychiatric beds, serve mental health patients in the proper setting, decrease the time law enforcement will spend transporting patients and waiting in Emergency Rooms, but most importantly, these services will treat Iowans with mental illness like any other health condition.

Glenwood Resource Center Update

The following article outlines the timeline and response to the Department of Justice investigation of the Glenwood Resource Center.

DOJ notified DHS of the investigation on November 22, 2019 and DHS began immediately gathering information, notifying family members, staff, and legislators of the DOJ investigation and working to determine what immediate actions were necessary to ensure safety of the patients at GRC.

Following the Thanksgiving holiday, DHS sent a team on-site to evaluate operations and determine what additional steps needed to be taken. This included partnering with The University of Iowa for 15 weeks to bring medical staff on-site to provide a peer-reviewed objective assessment of the care being provided to GRC residents. The UI providers have specific experience treating individuals with intellectual and physical disabilities.

Shortly after the investigation began, DHS placed superintendent Jerry Rea on administrative leave, and then on December 30, DHS terminated his employment. Marsha Edgington, superintendent of Woodward Resource Center, is filling in as interim superintendent at GRC. DHS has posted a position for a Division Administrator for all DHS facilities, and will shortly be posting a position for a full-time GRC superintendent. Admissions are currently suspended at GRC.

DOJ was onsite at GRC on December 6 and has since sent follow-up requests for information and documents. DOJ is expected to be onsite again in February.

DHS has also requested support from the Department of Public Safety to provide additional forensic investigative efforts into some of the allegations, and has contracted with a third party experienced with caring for individuals with intellectual and physical disabilities to evaluate GRC's services, and identify, develop and implement plans on areas of needed improvement.

Additionally, there are staff and family town halls being planned for the month of February.

Veterans Health Administration Central Office Redesign Will Improve Care for Veterans

From the VA:

On January 1, the U.S. Department of Veterans Affairs announced the redesign of the Veterans Health Administration Central Office as part of its modernization efforts.

The new structure reflects leading health care industry practices and addresses clinical integration through the joint leadership of a chief medical officer and expanded chief nursing officer role.

The new structure clarifies office roles and streamlines responsibilities to eliminate fragmentation, overlap and duplication. It also allows VHA to be more agile and respond to changes and make decisions more quickly. This positions VHA to better support Veterans Integrated Service Networks and facilities directly serving Veterans. VHACO staff includes approximately 20,000 staff located throughout the country that provides operational support to VA Medical Centers. The proposed change in structure will not result in a reduction or termination of staff.

The redesign addresses concerns raised in the Government Accountability Office (GAO) 2019 High Risk List and recent external assessments from GAO, Commission on Care and the Independent Assessment regarding the need for improved accountability, integration of the organizational structure, and a clearer definition of roles. The changes will emphasize and support VA's top priorities including, improving patient safety and quality, enrollment and delivery of Women's Health.

Section 179 Expensing - Iowa Fully Conformed to $1.0 Million Federal Limit

Remember how every year at this time the Legislature is asked to decide what level of section 179 expensing we can afford? Well, not this year. Tax year 2020 brings us to full conformity with the federal limit on section 179. Under section 179 of the Internal Revenue Code, taxpayers can deduct the cost of qualifying property used in a trade or business in the year the property was placed in service. This allows businesses to make that deduction in one year, rather than deducting the cost of the property over a number of years using depreciation.

Iowa taxpayers who elect the federal section 179 deduction must also take a section 179 deduction for the same assets for Iowa income tax purposes in that year. However, for the past several years, the Iowa limitations on this deduction have been different from the federal limitations for the same year. This means that adjustments were required to determine the correct Iowa section 179 expensing deduction.

For tax year 2019, the Iowa limitation was $100,000 for all taxpayers (less than the federal limitation of $1.0 million). For tax years 2020 and later, the Iowa section 179 deduction will be the same amount as the federal limitation for all Iowa taxpayers. Since 2018, the federal limit has been $1.0 million (adjusted annually for inflation.) For this current tax year and all those that follow-Iowa will be conformed to that federal limit. This predictability will allow Iowa businesses to make those investments in themselves with confidence.