Senate File 504 - Introduced SENATE FILE 504 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 1187) A BILL FOR An Act relating to the funding of mental health and disability 1 services, by modifying the mental health and disability 2 services property tax levy, providing for the transfer of 3 certain county hospital property taxes, providing for the 4 use of certain excess cash flow amounts, and including 5 effective date and applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 2312SV (2) 87 md/hb/rh/rj

S.F. 504 Section 1. Section 222.73, subsection 2, paragraph b, Code 1 2017, is amended to read as follows: 2 b. The per diem costs billed to each mental health and 3 disability services region shall not exceed the per diem costs 4 billed to the county region in the fiscal year beginning July 5 1, 1996 2016 . However, the per diem costs billed to a county 6 may be adjusted for a fiscal year to reflect increased costs 7 to the extent of the percentage increase in the statewide per 8 capita expenditure target amount, if any per capita growth 9 amount is authorized by the general assembly for that fiscal 10 year in accordance with section 331.424A . 11 Sec. 2. Section 230.20, subsection 2, paragraph b, Code 12 2017, is amended to read as follows: 13 b. The per diem costs billed to each mental health and 14 disability services region shall not exceed the per diem costs 15 billed to the county region in the fiscal year beginning July 16 1, 1996 2016 . However, the per diem costs billed to a mental 17 health and disability services region may be adjusted annually 18 to reflect increased costs, to the extent of the percentage 19 increase in the statewide per capita expenditure target amount, 20 if any per capita growth amount is authorized by the general 21 assembly for the fiscal year in accordance with section 426B.3 . 22 Sec. 3. Section 331.424A, subsection 1, Code 2017, is 23 amended by striking the subsection and inserting in lieu 24 thereof the following: 25 1. For the purposes of part 6 of division III of this 26 chapter, this section, and chapter 426B, unless the context 27 otherwise requires: 28 a. “Annual inflation factor” means the percentage 29 established as follows and used to adjust the regional per 30 capita expenditure target amount for each region: 31 (1) For the fiscal year beginning July 1, 2018, one hundred 32 one percent. 33 (2) For the fiscal year beginning July 1, 2019, one hundred 34 one percent. 35 -1- LSB 2312SV (2) 87 md/hb/rh/rj 1/ 11

S.F. 504 (3) For the fiscal year beginning July 1, 2020, one hundred 1 two percent. 2 (4) For the fiscal year beginning July 1, 2021, one hundred 3 two percent. 4 (5) For the fiscal year beginning July 1, 2022, and each 5 succeeding fiscal year, one hundred percent. 6 b. “Base expenditure amount” is an amount determined for 7 each county that is the lesser of the following amounts: 8 (1) The county’s base year expenditures for mental health 9 and disabilities services, as defined in section 331.424A, 10 subsection 1, paragraph “a” , Code 2017. 11 (2) The product of the statewide per capita expenditure 12 target amount multiplied by the county’s population for the 13 fiscal year beginning July 1, 2017. 14 c. “Cash flow reduction amount” means the amount calculated 15 under subsection 4 and used to reduce a county budgeted amount 16 under subsection 9. 17 d. “County budgeted amount” means the amount calculated 18 under subsection 9 and certified for levy under subsection 6. 19 e. “County services fund” means a county mental health and 20 disabilities services fund created pursuant to this section. 21 f. “Population” means the population shown by the latest 22 preceding certified federal census or the latest applicable 23 population estimate issued by the federal government, whichever 24 is most recent and available as of July 1 of the fiscal year 25 preceding the fiscal year to which the funding calculations 26 apply. 27 g. “Region” means a mental health and disability services 28 region formed in accordance with section 331.389. 29 h. “Regional per capita expenditure target amount” means the 30 amount determined in subsection 8 for each region. 31 i. “Statewide per capita expenditure target amount” means 32 forty-seven dollars and twenty-eight cents. 33 Sec. 4. Section 331.424A, subsection 4, Code 2017, is 34 amended by striking the subsection and inserting in lieu 35 -2- LSB 2312SV (2) 87 md/hb/rh/rj 2/ 11

S.F. 504 thereof the following: 1 4. a. An amount shall be reserved in the county services 2 fund to address cash flow obligations in the next fiscal year, 3 subject to the limitations of this subsection. The cash flow 4 amount for a county’s services fund shall be specified in the 5 regional governance agreement entered into by the county under 6 section 331.392. Amounts transferred from a county hospital 7 fund to the county services fund pursuant to section 347.7, 8 subsection 1, paragraph “c” , shall not be considered part of the 9 cash flow amount reserved under this subsection. 10 b. For each fiscal year beginning on or after July 1, 11 2017, of a county’s cash flow amount maintained in the county 12 services fund, an amount equal to the county’s cash flow 13 reduction amount shall be used for the payment of services 14 provided under the regional service system management plan 15 under section 331.393. 16 c. For each fiscal year beginning on or after July 1, 17 2017, each county’s cash flow reduction amount equals the 18 county’s cash flow amount minus twenty-five percent of the 19 gross expenditures budgeted from the county services fund 20 for the fiscal year in progress. However, the cash flow 21 reduction amount shall not be less than zero and shall not 22 exceed one-third of the county budgeted amount determined under 23 subsection 9 prior to any reduction resulting from the cash 24 flow reduction amount. 25 Sec. 5. Section 331.424A, subsections 6 and 7, Code 2017, 26 are amended to read as follows: 27 6. For each fiscal year, the county shall certify a levy 28 for payment of services. For each fiscal year, county revenues 29 from taxes imposed by the county credited to the county 30 services fund shall not exceed an amount equal to the county 31 budgeted amount of base year expenditures for mental health 32 and disability services for the fiscal year . A levy certified 33 under this section is not subject to the appeal provisions of 34 section 331.426 or to any other provision in law authorizing 35 -3- LSB 2312SV (2) 87 md/hb/rh/rj 3/ 11

S.F. 504 a county to exceed, increase, or appeal a property tax levy 1 limit. 2 7. Appropriations specifically authorized to be made from 3 the mental health and disabilities county services fund shall 4 not be made from any other fund of the county. 5 Sec. 6. Section 331.424A, subsection 8, Code 2017, is 6 amended by striking the subsection and inserting in lieu 7 thereof the following: 8 8. a. For the fiscal year beginning July 1, 2017, the 9 regional per capita expenditure target amount is the sum of the 10 base expenditure amount for all counties in the region divided 11 by the population of the region. 12 b. For the fiscal year beginning July 1, 2018, and each 13 subsequent fiscal year, the regional per capita expenditure 14 target amount shall be an amount equal to the regional 15 per capita expenditure target amount for the immediately 16 preceding fiscal year multiplied by the annual inflation factor 17 established in subsection 1 for the fiscal year. However, 18 application of the annual inflation factor in any fiscal year 19 shall not result in a regional per capita expenditure target 20 amount that exceeds the statewide per capita expenditure target 21 amount. 22 Sec. 7. Section 331.424A, Code 2017, is amended by adding 23 the following new subsection: 24 NEW SUBSECTION . 9. For the fiscal year beginning July 1, 25 2017, and each subsequent fiscal year, the county budgeted 26 amount determined for each county shall be the amount necessary 27 to meet the county’s financial obligations for the payment 28 of services provided under the regional service system 29 management plan approved pursuant to section 331.393, not to 30 exceed an amount equal to the product of the regional per 31 capita expenditure target amount multiplied by the county’s 32 population, and reduced by the amount of the county’s cash 33 flow reduction amount for the fiscal year calculated under 34 subsection 4, if applicable. 35 -4- LSB 2312SV (2) 87 md/hb/rh/rj 4/ 11

S.F. 504 Sec. 8. Section 331.432, subsection 3, Code 2017, is amended 1 to read as follows: 2 3. Except as authorized in section 331.477 , transfers 3 of moneys between the county mental health and disabilities 4 services fund created pursuant to section 331.424A and any 5 other fund are prohibited. This subsection does not apply 6 to transfers made pursuant to section 347.7, subsection 1, 7 paragraph “c” . 8 Sec. 9. Section 347.7, subsection 1, Code 2017, is amended 9 by adding the following new paragraph: 10 NEW PARAGRAPH . c. For the fiscal year beginning July 11 1, 2017, and subsequent fiscal years, if a county having a 12 population of two hundred twenty-five thousand or over has 13 a county budgeted amount under section 331.424A, subsection 14 9, that is equal to the product of the regional per capita 15 expenditure target amount multiplied by the county’s 16 population, as those terms are defined in section 331.424A, the 17 board of supervisors may transfer from a county public hospital 18 fund to the county services fund created pursuant to section 19 331.424A, an amount not to exceed the product of the county’s 20 population multiplied by the remainder of the statewide per 21 capita expenditure target amount minus the regional per capita 22 expenditure target amount for the county, as those terms are 23 defined in section 331.424A. 24 Sec. 10. Section 426B.1, subsection 2, Code 2017, is amended 25 to read as follows: 26 2. Moneys shall be distributed from the property tax 27 relief fund to counties for the mental health and disability 28 regional service system for providing county base property tax 29 equivalent equalization payments and the per capita growth 30 amount established pursuant to section 426B.3 mental health and 31 disabilities services , in accordance with the appropriations 32 made to the fund and other statutory requirements. 33 Sec. 11. Section 426B.2, Code 2017, is amended to read as 34 follows: 35 -5- LSB 2312SV (2) 87 md/hb/rh/rj 5/ 11

S.F. 504 426B.2 Property tax relief fund payments. 1 1. The director of human services shall draw warrants on the 2 property tax relief fund, payable to the county treasurer in 3 the amount due to a county in accordance with section 426B.3 4 statutory requirements , and mail the warrants to the county 5 auditors in July and January of each year. 6 2. As used in this chapter and in section 331.424A , for 7 purposes of population-based funding calculations, “population” 8 means the population shown by the latest preceding certified 9 federal census or the latest applicable population estimate 10 issued by the federal government, whichever is most recent and 11 available as of July 1 of the fiscal year preceding the fiscal 12 year to which the funding calculations apply. 13 Sec. 12. REPEAL. Section 426B.3, Code 2017, is repealed. 14 Sec. 13. COUNTY BUDGET RECERTIFICATION. If this Act takes 15 effect on or after March 15, 2017, notwithstanding section 16 24.17, for the fiscal year beginning July 1, 2017, a county may 17 recertify the county’s budget as necessary to implement the 18 provisions of this Act. A budget recertified pursuant to this 19 section must be recertified in duplicate to the county auditor 20 not later than thirty days after the effective date of this 21 Act, and protests to the budget shall be filed not later than 22 ten days after the county’s budget is recertified. 23 Sec. 14. MENTAL HEALTH AND DISABILITY SERVICES FUNDING —— 24 FISCAL VIABILITY REVIEW DURING 2020 LEGISLATIVE INTERIM. The 25 legislative council is requested to authorize a study 26 committee to analyze the viability of the mental health and 27 disability services funding provisions in this Act, including 28 the methodology used to calculate and determine the base 29 expenditure amount, the county budgeted amount, the regional 30 per capita expenditure target amount, the statewide per capita 31 expenditure target amount, the cash flow reduction amount, and 32 the annual inflation factor. The study committee shall consist 33 of five members of the senate, three of whom shall be appointed 34 by the majority leader of the senate and two of whom shall 35 -6- LSB 2312SV (2) 87 md/hb/rh/rj 6/ 11

S.F. 504 be appointed by the minority leader of the senate, and five 1 members of the house of representatives, three of whom shall 2 be appointed by the speaker of the house of representatives 3 and two of whom shall be appointed by the minority leader 4 of the house of representatives. The study committee shall 5 meet during the 2020 legislative interim to make appropriate 6 recommendations for consideration during the 2021 legislative 7 session in a report submitted to the general assembly by 8 January 15, 2021. 9 Sec. 15. SAVINGS PROVISION. This Act, pursuant to section 10 4.13, does not affect the operation of, or prohibit the 11 application of, prior provisions of law amended or repealed 12 by this Act, or rules adopted under chapter 17A to administer 13 prior provisions of law amended or repealed by this Act, for 14 fiscal years beginning before July 1, 2017. 15 Sec. 16. EFFECTIVE UPON ENACTMENT. This Act, being deemed 16 of immediate importance, takes effect upon enactment. 17 Sec. 17. APPLICABILITY. This Act applies to fiscal years 18 beginning on or after July 1, 2017. 19 EXPLANATION 20 The inclusion of this explanation does not constitute agreement with 21 the explanation’s substance by the members of the general assembly. 22 This bill relates to the funding of mental health and 23 disability services, by modifying the mental health and 24 disability services property tax levy, providing for the 25 transfer of certain county hospital property taxes, and 26 providing for the use of certain excess cash flow amounts. 27 Under current law, for the fiscal period beginning July 1, 28 2013, and ending June 30, 2018, county revenues from property 29 taxes levied by the county and credited to a county mental 30 health and disabilities services fund created pursuant to Code 31 section 331.424A (county services fund) shall not exceed the 32 lower of the amount of the county’s base year expenditures for 33 mental health and disability services or the amount equal to 34 the product of the statewide per capita expenditure target 35 -7- LSB 2312SV (2) 87 md/hb/rh/rj 7/ 11

S.F. 504 for the fiscal year beginning July 1, 2013, multiplied by the 1 county’s general population for the applicable fiscal year. 2 After June 30, 2017, current law provides that county revenues 3 from property taxes levied and credited to the county services 4 fund shall not exceed an amount equal to the county’s base year 5 expenditures for these services. 6 The bill amends Code section 331.424A relating to the amount 7 of county funding for mental health and disability services 8 and the amount of property taxes levied for payment of such 9 services. 10 The bill establishes a methodology for establishing a 11 regional per capita expenditure target amount. For the 12 fiscal year beginning July 1, 2017, the regional per capita 13 expenditure target amount is the sum of the base expenditure 14 amount for all counties in the region, divided by the 15 population of the region. The bill defines “base expenditure 16 amount” as the lesser of either the county’s base year 17 expenditures for mental health and disabilities services, as 18 defined in section 331.424A, Code 2017, or the product of 19 $47.28 multiplied by the county’s population for the fiscal 20 year beginning July 1, 2017. For the fiscal year beginning 21 July 1, 2018, and each subsequent fiscal year, the regional 22 per capita expenditure target amount is an amount equal to 23 the regional per capita expenditure target amount for the 24 immediately preceding fiscal year multiplied by the annual 25 inflation factor for the fiscal year, as specified in the 26 bill. However, the bill prohibits the application of the 27 annual inflation factor from resulting in a regional per capita 28 expenditure target amount that exceeds the statewide per capita 29 expenditure target amount. 30 Under the bill, a county is required to certify a property 31 tax levy for payment of services in an amount not to exceed the 32 county budgeted amount for the fiscal year. For the fiscal 33 year beginning July 1, 2017, and subsequent fiscal years, 34 each county’s budgeted amount shall be the amount necessary 35 -8- LSB 2312SV (2) 87 md/hb/rh/rj 8/ 11

S.F. 504 to meet the county’s financial obligations for the payment of 1 services under the regional service system management plan, not 2 to exceed an amount equal to the product of the regional per 3 capita expenditure target amount multiplied by the county’s 4 population, and reduced by the county’s cash flow reduction 5 amount, if applicable. 6 Under current law, counties are required to reserve an 7 amount to address cash flow obligations in the next fiscal 8 year that does not exceed 25 percent of the gross expenditures 9 budgeted from the county services fund for the fiscal year 10 in progress. The bill requires an amount to be reserved in 11 the county services fund to address cash flow obligations in 12 the next fiscal year as specified in the regional governance 13 agreement. For each fiscal year beginning on or after July 14 1, 2017, of a county’s cash flow amount maintained in the 15 county services fund, an amount equal to the county’s cash 16 flow reduction amount is required to be used for the payment 17 of services provided under the regional service system 18 management plan. Each county’s cash flow reduction amount 19 equals the county’s cash flow amount minus 25 percent of the 20 gross expenditures budgeted from the county services fund for 21 the fiscal year in progress. However, the bill prohibits the 22 cash flow reduction amount from being less than zero or more 23 than one-third of the county budgeted amount determined under 24 the bill prior to any reduction resulting from the cash flow 25 reduction amount. Amounts transferred from a county hospital 26 fund to the county services fund, as authorized in the bill, 27 shall not be considered part of the reserved cash flow amount. 28 The bill amends Code section 347.7, relating to county 29 hospital tax levies. The bill provides that for the fiscal 30 year beginning July 1, 2017, and subsequent fiscal years, 31 if a county with a population of 225,000 or more that has a 32 county budgeted amount equal to the product of the county’s 33 population multiplied by the regional per capita expenditure 34 target amount, the board of supervisors may transfer from the 35 -9- LSB 2312SV (2) 87 md/hb/rh/rj 9/ 11

S.F. 504 county hospital fund to the county services fund an amount 1 not to exceed the product of the county’s population for the 2 applicable fiscal year multiplied by the remainder of the 3 statewide per capita expenditure target amount minus the 4 regional per capita expenditure target amount for the county. 5 Amounts transferred by a county under this provision are 6 available to the county for the payment of mental health and 7 disability services. 8 The bill repeals Code section 426B.3 relating to per capita 9 funding and repayments of Medicaid offset amounts and makes 10 conforming Code changes to other provisions of law. 11 The bill provides that, notwithstanding the deadline for 12 certifying a county budget, for the fiscal year beginning 13 July 1, 2017, a county may recertify the county’s budget as 14 necessary to implement the bill if the bill takes effect after 15 the budget certification deadline. A budget recertified 16 pursuant to the bill must be recertified to the county auditor 17 no later than 30 days after the effective date of the bill, 18 and protests to the budget must be filed no later than 10 days 19 after the county’s budget is recertified. 20 The bill requests the legislative council to authorize 21 a study committee to analyze the viability of the mental 22 health and disability services funding provisions in the bill, 23 including the methodology used to calculate and determine 24 the base expenditure amount, the county budgeted amount, the 25 regional per capita expenditure target amount, the statewide 26 per capita expenditure target amount, and the annual inflation 27 factor. The study committee shall consist of 10 legislative 28 members appointed as specified in the bill. The study 29 committee shall meet during the 2020 legislative interim to 30 make appropriate recommendations for consideration during the 31 2021 legislative session in a report submitted to the general 32 assembly by January 15, 2021. 33 The bill takes effect upon enactment and applies to fiscal 34 years beginning on or after July 1, 2017. 35 -10- LSB 2312SV (2) 87 md/hb/rh/rj 10/ 11