Southeast Iowa mental health officials worry about state legislation

A bill passed by the Iowa Legislature in June — titled Senate File 619 — contains a wealth of bipartisan clauses in areas like the state housing trust fund, energy infrastructure, disaster recovery, food banks, and biggest of all, tax reform.

"Implementing this bill, we are delivering Iowans over a $1 billion tax cut,“ said Sen. Dan Dawson, (R-Council Bluffs) who wrote much of the bill and fought for its passage as chair of the Ways and Means committee. ”This is big, it’s bold, and while other states limp out of this pandemic, Iowa is setting the example of accelerating.“

Despite the bill’s popular components, Southeast Iowa officials say a section that overhauled much of the state’s Mental Health and Disability Services (MHDS) system puts essential programs in danger as budget season approaches for the next fiscal year, when many of those changes take effect.

“They included a bunch of stuff in there that I think is pretty good, and I generally don’t have a problem with rolling back property taxes,” said Jack Seward Jr., a Washington County Supervisor and Vice Chair of Southeast Iowa Link (SEIL), the MHDS region for eight counties including Washington, Jefferson and Henry. “But what they did when they rolled it back is they didn’t check with what was going to happen on the ground in the field of mental health and disability services … it seemed like nobody at the state level asked those questions.”

The state’s MHDS system allows counties to band together in “service regions,” each managing its own administrative costs, employees, and affairs under a model agreed upon by member counties. No two of these regions are alike: the County Social Services region covers 19 counties in northeast and central Iowa, not all of them contiguous, whereas Polk County maintains a region of its own. Some choose to employ dedicated regional staff, while others delegate county resources and personnel to the regional cause.

Directors of the SEIL region, however, say SF 619’s changes threaten their service model, and have spent the last several months in meetings, calls and email exchanges with state officials as they scramble to prepare for July 1, the start of the next fiscal year. Their points of contention have met with varying degrees of resistance.

Funding reform leaves some regions short on cash

Perhaps the loudest complaint SEIL officials have voiced regards the bill’s overhaul of the funding system for service regions.

Before SF 619, counties dedicated a cut of their property tax revenue to their own, county-controlled accounts, referred to by finance officials as “Fund 10.” In the SEIL region, money from Fund 10 accounts was then spent at the discretion of the regional board, but often kept in the county-controlled accounts to minimize administrative issues when paying county employees for regional work.

Under the new system, county taxes are no longer allowed to support mental health regions, and Fund 10 accounts must be emptied and retired by the start of the next fiscal year. From then on, MHDS regions will be funded exclusively by state allocations from the general fund based on regional population and demand, along with supplemental incentive funds allocated by the DHS.

Sen. Dawson said centralized funding would solve gaps in service that he blamed on property tax differences.

“[Depending] upon your ZIP code, you have a chance of having a higher property tax rate and higher mental health funding, or a region with a lower property tax rate and lower mental health funding,” he said at a subcommittee meeting in March for the legislation that would become SF 619. “One of the things we’re primarily trying to address … is to make sure that all Iowans, no matter where you’re at, you actually have the same per capita distribution for mental health funding.”

Other advocates at that meeting said removing property taxes as a mental health funding mechanism would help depoliticize the issue.

“In the past, the conversation that we’ve had about the sustainability of the mental health system has devolved into one of property taxes, and we get into arguments with the farm bureau,” said Shelly Chandler, CEO for the Iowa Association of Community Providers, a group that advocates mental health issues on behalf of all 99 counties. “This bill, we think, allows us to move away from that conversation.”

But SEIL leaders like Seward say their largely self-funded setup was only jeopardized by the state-funded alternative.

“The system was being operated by the counties, and it was working really well until the state came along and decided to do property tax relief,” Seward said. “Fund 10 was a property tax funding level that every county had, and it was a mechanism for providing (MHDS) payments. We’ve figured out a way to make it equitable, we’ve figured out a way to make it reasonably equal throughout on a per capita basis, and we’ve been able to provide the needed services.”

Dawson did not respond to repeated requests for comment on the reasoning behind Fund 10’s removal.

SEIL leaders stressed that they don’t plan to change SF 619 itself, but hope to expose flaws in need of a fix, pushing for legislators to reinstate elements of Fund 10 without a property tax component.

“I want to make it very, very clear that the SEIL region is not contesting the switch over from the property tax base over to state appropriation,” SEIL CEO Ryanne Wood said at a meeting with DHS officials and a state legislator in December. “That ship has sailed, we very much understand that, we are just shedding light on possibly some unintended consequences that come with the elimination.”

Adding to their frustration is the fact that one MHDS region, Polk County, is still allowed to use Fund 10 as others are cut off.

“The policy decision that the legislature made is that regions would go to one combined account,” DHS Bureau Chief Theresa Armstrong said at a meeting with SEIL officials in early December. “The counties do not have an MHDS fund anymore and that’s what Fund 10 was. We have regional funds. We don’t have county funds anymore, except in Polk County because they are a one-county region.”

SEIL officials were unsatisfied with that reasoning.

“You took Fund 10 away from us and gave us something else in its place, why can’t Fund 10 have just stayed the same?” Seward said.

Without the ability to add county dollars to regional accounts, Wood said the now state-controlled cash flow would lower the budget of the SEIL region by at least $860,000 for the next fiscal year, not expected to catch up to its prior budget for four more years.

SEIL isn’t alone in that regard. Wood said that of the 14 MHDS regions, seven would see a jump in MHDS cash while the rest, including SEIL, would see a decrease as the state equalized per capita funding.

“Our max per capita when we were drawing property tax dollars was $42.60 (but) the new state appropriation is actually $37 per capita,” she said. “There is a growth factor, so that will be going up, but it is going to take us approximately four years in order to get back what we had available to us this year.”

Their concerns are amplified by lingering questions on carry-over allowances for the region. With counties required to empty their Fund 10 accounts by FY 2023, SEIL leaders said they were still waiting on precise guidance for retention allowances under the new system.

“The new fund that the department has made for us, subfund 6, we’re questioning if we’re able to maintain any account balance or cash forward across fiscal years,” Wood said. “If we have to clear it out at the end of every fiscal year, there’s a lag time to get money in the accounts where it needs to be in order to continue to do business.”

Transition issues prompt administrative confusion

One outcome of SF 619’s financial centralization is a slew of administrative changes to the same effect, with authority on the issue delegated to the Iowa Department of Human Services.

Advocates say that newfound state oversight is key to providing equitable care.

“There’s been a big need for that oversight from the state level for quite some time, because what happens in the regions is not consistent,” said Leslie Carpenter, co-founder of the group Iowa Mental Health Advocacy. “There’s a big need for the director of the DHS to say, ‘No, the law really does require you to pay for these things, let’s get this funded.’”

However, regional officials say that transition brings with it an array of logistical issues for employee payroll and equipment ownership, many of them again linked to Fund 10.

While the new system technically allows counties to keep using county staff and county assets for regional services, MHDS administrators say it provides strong disincentives through red tape and bureaucratic hurdles.

“If we move to subfund 6, we will have seven additional 28E agreements to maintain on an annual basis with the specifics of budgeting,” Wood said. “(That’s) just to maintain the exact employees that we have right now.”

Another key hurdle: sorting out ownership and employer obligations without drawing from county resources.

“The equipment that we use from the county may not have been purchased by Fund 10, it could very well have been purchased by an IT department,” Wood said. “How do we de-link our county level employees from the equipment that they’ve always used when they’re now an employee of a fiscal agent? … plus, we do have the issue of union employees, assistants, and various other things that take a lot of lawyering and maneuvering to make those transitions.”

While Iowa DHS Bureau Chief Theresa Armstrong conceded that transitioning to the new system would be bureaucratically challenging, she said the department was willing to help relieve administrative headaches for regions seeking to uphold their structures.

“Those are all things that the region can continue to purchase from the county with the dollars,” she said. “I understand what you’re saying about it being kind of complicated to figure that out … but that is definitely something (we) can come down and walk you through the technical assistance of.”

Still, Wood said adding barriers to the county-based system sent a discouraging signal to regional administrators.

“When the account that pays your salary and benefits is eliminated by an outside entity, that creates a lot of anxiety for folks,” she said. “If Fund 10 goes away, there’s some subliminal messaging coming down from the state that we don’t want county employees, because it is going to increase administration to maintain county employees. If Fund 10 is maintained, there is some subliminal messaging that, ‘We’re OK with y’all being able to use county employees.’”

Again, SEIL officials said the bulk of their problems could be avoided by keeping Fund 10.

“Whether we have a Fund 10 or a subfund, we’re going to have a fund,” Keokuk County Disability Services Coordinator Tami Gilliland said. “So why are we creating additional work not only for us, but for our county auditor systems that have to recreate these account codes, that have to work with the county and work with DHS … Let’s, if we could, keep the fund we have. We’re already utilizing (Fund 10) in the manner in which we will use the subfund.”

While it’s hard to separate the idea of Fund 10 from its foundational tax function, Wood said its use as a county-operated administrative tool was still important.

“Every county that uses county employees for region work uses Fund 10,” she said. “It becomes very overwhelming when you look at terminating employment someplace to move employment someplace else. It opens up all kinds of opportunity for unintended consequences, it’s a land mine.”

A centralized system may trade off with local control

The third point of contention identified by SEIL officials is the balance between state oversight and local control.

On one hand, proponents say the centralized system ensures quality care to those in need, some of whom have been denied access to core services across the state.

“The biggest thing that I’m excited about is the oversight over the MHDS regions to ensure that the things that they’re mandated to be providing will get approved and paid for and actually be provided,” Iowa Mental Health Advocacy Co-founder Leslie Carpenter said. “Providing some better guidance and coordination from the top down, I’m open to that because it hasn’t been working from the bottom up.”

Carpenter said one big issue with the status quo’s local control was the potential for gridlock and indecision by disagreeing county officials in the same region.

“I’m in the East Central region, and what I can tell you is we have nine counties represented and in those nine counties, some of them are rural, some of them are urban, and the supervisors have very diverse interests,” she said. “They all have good hearts, they all have good intentions, but it hasn’t been functioning well.”

In contrast, opponents in Southeast Iowa say the system worked for them precisely because of that local control.

“We’ve got a pretty good system going right now, we are at the local level providing local service with local people, and that’s a hard thing to give up,” Seward said. “For the people that we’re supposed to look out for, with disabilities and mental health problems, issues should be dealt with by the people that are closest to them. And that’s what we’re trying to keep here, especially in a rural area.”

Seward said growing state oversight, while well-intended, came at the cost of much-needed flexibility, doubling down on core criteria that make sense for regions with population-dense communities, but are sometimes out of reach in rural areas like Southeast Iowa.

“The need is generally answered in bigger areas because they have the population that would support a psychiatrist. Not so down here in Southeast Iowa,” he said. “We would have to pay exorbitant amounts to get somebody to come down here. Unfortunately, when the state says you have to provide this, that, and one thing or another … we can’t provide it, so we can’t meet the minimum core standards.”

Instead, Southeast Iowa’s region has adapted to provide what services it can, diverting funds from comparatively infeasible core projects into more attainable ones, making the most of their resources despite geographic circumstances.

“What they need in Sioux City, Cedar Rapids, Des Moines, we don’t need down here,” Seward said. “What we need down here is the jail diversion and the drop-in centers. That’s what our local, rural population really needs, and if we can’t pay for them, I don’t know what we’re going to do.”

In a world where the state controls all of the region’s finances, Seward worries those core-plus services could be cut off.

“If we get any amount of money cut from our budget or what we need, we are not allowed to put it in those because it has to go into core services,” he said. “And when they remove Fund 10 from the county tax base, we don’t have spending authority to even tax for any money to pay for those things.”

While SF 619 explicitly creates a supplemental incentive fund to “support regional efforts to fund non-core services,” it only allows access to those funds for regions that meet “the standards outlined in the region’s performance based contract,” which includes “a requirement for the mental health and disability service region to provide access to all core services.”

The budget impacts may go even further than that. If the DHS determines a region to be in violation of their performance based contract with the state, SF 619 directs them to follow a series of steps to create compliance, the second of which is to “reduce the amount of the annual state funding provided for the regional service system,” by up to 15%.

Seward said that put SEIL in a no-win situation.

“The state says, ‘Oh, we’re going to provide you the money, but … you’re not going to get all the money you’re supposed to get because you’re not meeting our core standards,’” he said. “We’re never going to be able to meet all of the core standards that the state mandates.”

Imposed deadlines leave little time for regions to adapt

The last issue stressed by mental health professionals in Southeast Iowa is the timeline laid out by SF 619. SEIL CEO Ryanne Wood said the legislation required an unrealistically fast transition.

“In the time frame that we were given, it was just not going to be feasible for us,” she said. “Based on our structure and all of the things that we would have to navigate around for the elimination of Fund 10 to do anything different with our organization, it just wasn’t going to be.”

The SEIL governing board is feeling that time pressure now more than ever, with county budgets for FY 2023 expected to wrap up by February.

“Though this legislation piece was passed last year, it just didn’t give a whole lot of time to get everything all worked out,” Wood said. “We’re in the midst of that right now, worksheets are going out to our auditors and we don’t even know what account codes (and) general ledger numbers that we can and can’t use.”

Wood said that pressure threatened to hinder good-faith coordination SF 619 strove for.

“Each of us have a little bit different perspectives because it’s the nature of our business to have different perspectives,” she said. “There’s not animosity there, it’s just a matter of (having) sufficient time to change things, and this doesn’t feel like the time was sufficient to get things changed in a smooth way, which increases the probability of errors.”

With the clock ticking, SEIL officials have stressed the urgency of their pleas for reform.

“We are in a pretty tight budgetary process, and that’s why we’d like to get this information out, get it considered,” Jack Seward said. “(We’d) respectfully ask that if something is going to change, it be done fairly early in the session.”

Solutions are promised, but none can say what or when

After countless meetings, calls, emails and conversations on mental health reform, possible fixes remain hazy.

State Rep. Joe Mitchell (R-Mt. Pleasant) said he was open to mental health changes that didn’t fundamentally alter SF 619.

“The main piece of legislation, we’re taking property taxes off the back of property taxpayers here in the county,” he said. “That’s not going away, and we’re trying to figure out now how we can use the system that has been put in place and the avenues that DHS has to be able to pick up some of the funding that we want to make sure is there.”

Mitchell and Sen. Kevin Kinney (D-Oxford) are hoping to pitch co-sponsored MHDS changes in the next legislative session, but the specifics are still in the works.

“I’ve taken some of the information that was given to me by the SEIL region and my staff is working on that,” Kinney said. “We were going to look at those items and try to come up with a solution and see if we could fix the issue for them.”

As for the fate of Fund 10, Kinney said his staff were shooting to recreate the administrative tool as best they could.

“You can call it what you want to, they need the funding,” he said. “It might not necessarily be called Fund 10, it might be called something else, I don’t care, but it’s just trying to come up with a funding source for them.”

Still, the senator from Oxford didn’t expect changes to be immediate.

“It’s going to have to go through the legislative process, and that’s going to take a while,” he said. “It’s not going to be as fast as they would like. It’s one of those things where I’m … trying to work on it not only with myself but with some of the other legislators.”

Mitchell warned that whatever fixes he and Kinney settled on, they were far from guaranteed.

“Regarding Fund 10, we’re going to try our hardest to have conversations with folks to talk about this,” he said. “It might not go anywhere, we don’t know until we get into a session. I would just encourage obviously collaborating with these other regions that have been able to implement this somewhat successfully.”

Some mental health advocates for SF 619, including Leslie Carpenter, said they hoped continue improving the system after changes were implemented.

“I’m optimistic that they are committed to continuing to work on it,” she said. “I don’t think this is something that is going to be solved in one to three to five years, we’re looking at something that’s going to take 10-15 years before we really see marked, tangible changes. I say that with a very heavy heart, but having been at this for a while, I’m happy for progress.”

Ryanne Wood stressed that as burdensome as the new system may be, the region was bracing for the possibility of biting that bullet.

“We can manage not having Fund 10 available to us and proceeding forward with the subfund 6,” she said. “That being said, it’s not the most efficient or cost-effective way to go about doing business ongoing, and at some point in the future the SEIL governing board will have to make the decision about whether to continue in that fashion or to move to a more streamlined, cost-effective way to organize ourselves.”

In any case, Seward promised the region would continue to provide the best care possible, whatever its circumstance.

“We’ve been given challenges before and we have figured it out,” he said. “We’re all doing a very good thing for the people in our region … It sure looks an awful lot like they’re trying to take that away from us, but we will do what we can do.”

Comments: Kalen.McCain@southeastiowaunion.com