County funds and property tax levies explained
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[The following article by Black Hawk County Auditor Grant Veeder was originally written in 2006 for the Iowa County magazine, a monthly publication of the Iowa State Association of Counties. It was primarily intended as a quick primer on county budgets for new or inexperienced county supervisors and other officers. It was updated and run in the magazine again in 2016. It has once more been updated in February for publication in the Record-News.
The article is reprinted with written permission by its author.]
By Grant Veeder, Black Hawk County Auditor
Iowa law establishes a significant degree of uniformity in funding and paying for county services. At first glance, county finance is complex and daunting. At second glance, it’s downright terrifying. If we tried to cover it all here, before you finished you would lose interest, patience, and quite possibly your will to live. This article, therefore, will stick with county funds and property tax levies.
Definitions are in order. “Fund” is the easy one. A fund is a sum of money set aside for some particular purpose. Iowa counties have a variety of funds in order to segregate what may be legally spent for different public purposes.
The term “levy,” on the other hand, is frequently misunderstood. A levy is an amount of tax. Lots of people think it’s a tax RATE, but it is not. According to Webster’s Dictionary, it is “an imposing and collecting of a tax or other payment,” or “the amount collected.” As used in the Code of Iowa, it is the amount that results from applying a tax rate to every thousand dollars of eligible property valuation, or rate x valuation x .001 = levy.
So when someone asks, “What’s your rural levy?” DON’T say “It’s $3.57445.” Heck, you couldn’t knock down a mailbox for that, much less pave a road. What you should say is, “You mean my rural fund tax rate? It’s $3.57445.” Because that’s the number they want to know, but you should try to answer them and educate them at the same time.
There are three broad fund types for counties: (1) Governmental, for most county basic services. (2) Fiduciary, for assets held solely in a custodial capacity, like those of the County Assessor or Emergency Management, which look like county departments but technically aren’t. (3) Proprietary, which are divided into two subtypes: (a) Enterprise, for operations in cases that look like private business enterprises, and are seldom used in Iowa (unless you have, say, a county-run water or sewer system) and (b) Internal Services, for the financing of goods and services provided internally by one department for others, such as health insurance, or self-funded insurance plans. In an act of mercy, we will here confine ourselves to Governmental Funds, which are budgetary funds. The others are (you guessed it) nonbudgetary funds.
Some county funds have taxes levied into them, and all funds that directly receive property taxes have some sort of limitation. Funds receiving property taxes may also receive dollars from other sources. Overall, property taxes accounted for 51 percent of county revenues in fiscal year 2019. Most of the rest of the money (31 percent of the total) came from state and federal programs – mostly state. Yes, the legislature saddles counties with unfunded mandates that cause us to justifiably gnash our teeth, but there are also FUNDED (at least partially so) mandates, and even though their portion has declined from 40 percent in FY07 to 31 percent in FY19, we should show our appreciation to our legislators for this consideration. (I just did – now it’s your turn.)
[In a future article, Veeder explains the different funds into which property tax dollars are split.]
