Iowa passes major government overhaul

Iowa lawmakers approved what may be the largest government overhaul in any state this year, setting Gov. Kim Reynolds (R) up for another big win in what has already been a busy session.

Reynolds characterizes the bill as a mammoth reorganization of state bureaucracy aimed at streamlining a state government that has ballooned to 37 Cabinet-level agencies. The 1,600-page bill would cut the number of those top-level agencies to 16, eliminating 200 jobs — most of which are already unfilled — in the process.

The package passed the House Wednesday  after the Senate approved the measure last week. Both votes were split along party lines. The measure now goes to Reynolds for her signature.

“We are making government smaller, more efficient, and more effective,” Reynolds said in a release. “This transformational legislation will put Iowa in the best position to help our state thrive.”

Reynolds has said the bill would save taxpayers $215 million over four years. 

Some highlights buried within the 1,600 pages of legislative text:

• The bill merges the Department of Human Services, the Department of Public Health, the Department on Aging, the Department of Human Rights, Early Childhood Iowa and the Iowa Commission on Volunteer Service into a consolidated Department of Health and Human Services.

• The measure transfers the library-services duties and responsibilities of the Department of Education to the Department of Administrative Services. The state librarian would be appointed by the director of the Department of Administrative Services.

• The package removes the Department of Cultural Affairs as a member of the State Records Commission. 

• The Department of Inspections and Appeals will become the Department of Inspections, Appeals, and Licensing. It modifies the organizational structure of the newly rechristened agency to include duties related to licensing and laws related to employment safety, labor standards, and workers’ compensation. It provides that the labor commissioner and the workers’ compensation commissioner will serve at the pleasure of the governor.

• The measure eliminates the Department of Cultural Affairs and transfers its responsibilities to the Iowa Economic Development Authority (IEDA).

• The legislation requires the Department of Homeland Security and Emergency Management (HSEMD) to administer the Disaster Aid Individual Assistance Grant Fund and the Disaster Case Management Grant Fund. It also provides that the director of the HSEMD will be subject to confirmation by the Senate and is to serve at the pleasure of the governor.

• The bill consolidates the powers and duties of the executive director of the Department of Veterans Affairs with the powers and duties of the commandant of the Iowa Veterans Home into the Commandant of the Department of Veterans Affairs. 

• The legislation transfers the Iowa Lottery Authority and the duties of the Alcoholic Beverages Division (ABD) of the Department of Commerce to the Department of Revenue. The new lottery administrator, who will report directly to the director of the Iowa Department of Revenue and will serve at the pleasure of the governor, will be subject to confirmation by the Senate. 

• Under the bill. the governor will directly appoint the director of the Iowa Department for the Blind. 

According to the legislature’s fiscal analysis of the package, the bill would save a total of $12.6 million a year. Most of the savings in the bill come from consolidating four departments, including the Department of Public Health, into the Department of Health and Human Services. That eliminates 110 currently unfilled full-time jobs and saves $6.4 million in fiscal year 2024, including $4.4 million in federal funds the state gets for those positions.

Another $4.2 million in savings would come from eliminating 63 full-time positions related to the Department of Workforce Development and $1.6 million from axing 20 full-time jobs with the Department of Inspections, Appeals, and Licensing.

Reorganizing the state government has been a priority for Reynolds, which she highlighted in her condition of the state speech in January.

“It’s been nearly 40 years since we’ve undertaken a comprehensive review of government operations and structure.” Reynolds said in the speech. “And frankly, it shows.”  

Supporters of the bill, including Sen. Jason Schultz (R), the measure’s chief Senate sponsor, said Iowa has a relatively high per-capita cost to fund the government compared to neighboring states.

Iowa spends $8,200 per resident on state services, Schultz said. That contrasts with Missouri, which spends $4,400 per capita; and Illinois, which spends $6,100 per person. 

“As we modernize Iowa to continue our ascent up the list of ‘best place to live,’ ‘best governed,’ ‘best managed,’ this is an important piece,” Schultz said on the Senate floor.

Randall Bauer, a state budget director under former Gov. Tom Vilsack (D), was skeptical that the bill would necessarily make the state more efficient. He added that states typically go through periods of centralization and decentralization.

“Consolidation isn’t a panacea, and there isn’t much evidence that it is necessarily more efficient,” Bauer said. “I’ve seen examples in many states where the ‘consolidated’ agency continues to operate in a siloed fashion, and all that has been accomplished is to add another layer of bureaucracy on top.”

He pointed to a reorganization led by former Gov. Terry Branstad (R) in the mid-1980s that some reports said resulted in consolidating power in the governor’s office. 

“It created a department of commerce by pulling together a bunch of separate entities, but they all continued to act independently,” Bauer said. “Other than reducing the number of entities, it didn’t really change anything.”

Iowa Democrats were critical of the bill during the debate in the Senate. Sen. Zach Wahls (D) offered an amendment to keep the bill from eliminating the State Board of Health.

“This is an extreme but powerful example of how in this large bill, small pieces of text are fundamentally changing how our state is governed,” Wahls said. “And like so many other parts of the bill I believe that this change will ultimately have a negative impact for our state.”

Schultz argued that a merger between the Council on Human Services and the Board of Health was already underway and that the merged entity would take over the board of health’s responsibilities.

This story was updated on Wednesday, March 15, 2023, at 6:30 p.m. EST to reflect approval of the bill by the Iowa House.