~a column by Mary Weaver
I am struggling to understand what is happening fiscally to Iowa government at all levels from the township, cities, counties, and at the state level. I vowed to understand this so I could share it with you readers, but this is very complex with a steep learning curve that I must admit I did not fully attain.
I turned to Senate Legislative educational leaders, the former Budget Director for Governor Vilsack, and devoured reams of Legislative Fiscal Bureau notes and actual legislation dating back to 1978.
We will start out simply but beware, this does eventually get into the weeds.
You know about paying your property taxes in September and March, but a little primer on the flow of how the taxes are generated……
Property taxes are based on the assessed value of your home or owned properties. Iowa is 42nd in the nation of the 50 states with Iowa at 1.59 percent compared to New Jersey, the highest, at 2.46 percent, and xHawaii being the lowest at 0.29 percent.
Property taxes are generated to support cities, counties, school districts, and townships.
In Iowa, the county assessor establishes the valuation and classification of the property, while the county auditor determines levy rates based on budgets provided from local levying authorities from the applicable tax base formula. The county auditor then bills individuals and businesses, and then allocates the collected tax dollars to each authority.
The property tax cycle in Iowa takes a total of 18 months from start to finish. It begins with the assessor determining the assessed values and classification for individual parcels of property on January 1 of the assessment year. The first half payment for property taxes related to this assessment is due in the fall of the following year and the second payment is due in the spring of the next year. For example, the assessment completed in January of 2023 would have been billed in the fall of 2024, and the spring of 2025.
Homeowners pay almost 43 percent of the property tax collected each year in Iowa. Farmers pay more than 22 percent, and businesses and industry more than 31 percent. Utility companies, including railroads, pay slightly more than 3 percent.
So having learned that information, I continued to struggle with comprehending how the State of Iowa has a $2 billion surplus, but the Kossuth County board of supervisors is cutting funds to their local libraries, school districts are closing buildings, increasing class sizes, cutting art and music, and laying off teachers.
Governor Reynolds is quoted as saying, “Some see surplus government dollars as not spending enough, but I view it as an over collection from the hard-working men and women of Iowa.”
Coming out of the income tax spring appointment, my father, a local farmer, always stated, “Having to pay taxes meant it was a successful year.”
Now into the weeds section:
The Iowa Legislature has been cutting property taxes as far back as 1978. Cutting taxes results in diminished services.
A 1978 State of Iowa legislation placed a 6 percent cap on allowable assessment, but in 1980 it was reduced to 4 percent and has now been dropped to 3 percent. If a property class grows statewide by more than 3 percent, its taxable value is reduced (called “rollback”) to comply with the assessment limitation law.
Senate File 295 was adopted in 2013 and signed by Governor Branstad. It was hailed as “the largest property tax cut in Iowa’s history.” The stated purpose of the bill was to provide property tax relief to commercial and industrial property taxpayers. It was recognized by the legislature that such a large revenue cut would have detrimental impacts to local government finances resulting in service cuts. To address this concern, a compromise was made during the legislative session for the State of Iowa to backfill the direct loss. This amount has been decreasing annually and will end in Fiscal Year 2026.
The rollback has clearly had an adverse impact on budgets, particularly those entities with significant residential property bases, as the taxable values of residential properties have substantially declined. A reduced residential tax base combined with a cap on the levy puts many government entities in a difficult financial position. This can be especially true for communities that are losing population, thus diminishing their tax base.
Meanwhile, expenses continue to rise, and counties and cities have seen dramatic increases in retirement, pension, and health insurance costs in recent years. In addition, many public entities have seen the cost of roadwork, facility construction, and items such as fire trucks far exceed national inflation figures.
The combined factors of tightening revenues with escalating costs to core functions of governments has caused significant reduction in services for many public entities around Iowa.
In an interview with WHO TV, Kossuth County board of supervisors chair Kyle Stecker stated, “Some of the ways they had taxed in the past were no longer allowed due to a new law called House File 718, which meant less allowable taxation”.
Common Good Iowa web site, and Randy Bauer, the budget director for Governor Vilsack, and a resource to me for this VIEW both anticipate that the State and counties will need to raise sales taxes to compensate for the legislatively mandated flat income tax adopted this past legislative session. In 2025, the rate will drop to 4.82 percent, and in 2026 down to 3.9 percent. That flattened income tax, elimination of the inheritance tax, and diminishing the allowable property taxes, is fiscally very frightening.
Though the legislative session has ended, our representatives Senator Jesse Green and Representative Carter Nordman will be walking in parades and visible within our communities this summer. Ask them why we have a $2 billion surplus but local entities are feeling a financial squeeze.
VIEW FROM MY WINDOW is written by Mary Weaver from her rural home near Rippey.
