Iowa Budget Crisis: Cuts, Costs Hitting Cities, Counties
Iowa Fiscal Partnership
Report Shows State Policy Squeezing Local Government Services
DES MOINES, Iowa
(Dec. 15, 2004) — State budget shortfalls and higher costs that hit
Iowa cities and counties over the last four years have compromised
basic services while driving local taxes up and fund balances down, a
new study reports.
The
report, the fourth in a series from the Iowa Fiscal Partnership about
the impact of Iowa's budget crisis, illustrates a dilemma increasingly
faced by local government officials: how to meet residents' demand for
services with fewer or restricted means to pay for it.
“Short-sighted
state policy is putting local policy-makers in an impossible
situation,” said Peter Fisher, research director of the Iowa Policy
Project and co-author of the report for the Iowa Fiscal Partnership.
“As our report illustrates, when the economy contracts, people demand
more services – at the same time that the state is cutting back,
property values are stagnant and costs are rising. In this climate,
local officials are asked to do more with less.
“Like
the state, local officials are turning to one-time sources of money for
ongoing services, and they can't do that year after year.”
The report noted:
— State support for local governments has fallen by 42 percent, $119 million, since FY2001.
—
All but two of Iowa’s 99 counties have reached or exceeded their
general fund property tax levy limit, with 17 using their authority to
go higher due to unusual circumstances. Only one county did that in
FY2001.
— The percentage of cities at their general fund levy limit has gone from 71 percent in FY2001 to 78 percent in FY2005.
—
Health insurance costs have increased for local governments just as
they have for private employers. From FY2001 to FY04, the cost for
county health premiums rose by 78.4 percent. Local governments have
increasingly used special levies to finance the added costs. On
average, about three-fourths of the increase in overall city property
tax rates is due to employee benefit levies.
— Despite an increasing use of local-option sales taxes, this has not solved local governments' financial problems.
—
The property tax base has not grown to keep pace with either higher
costs or cuts in state support. This primarily is due to the state's
system of rollbacks, which has effectively reduced residential
valuation to less than half of its market value, and to the system of
valuing agricultural property based on productivity rather than market
value.
“Our
findings have critical implications for the coming debate on property
tax reform in the Legislature,” said Victor Elias, senior associate at
the Child & Family Policy Center and a co-author of the report. “We
have a combination of limits on tax rates and slow growth in valuation.
This has clearly constrained the ability of cities and counties to
finance services.”
The
Iowa Fiscal Partnership (IFP) is a joint initiative of two nonprofit
policy research organizations, the Iowa Policy Project in Mount Vernon
and the Child & Family Policy Center in Des Moines. Reports from
the IFP are available on the web at www.iowafiscal.org.
The
first three reports in the current IFP series on the state budget
crisis are available at that site. They include an overview comparing
Iowa's handling of its fiscal challenges to efforts of other states; an
analysis of the impact of the budget crisis on education; and an
analysis of the impact on human services.
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