Mount Pleasant's state senator warns payments to cities and counties are likely to be eliminated.

KEOKUK — State Sen. Rich Taylor warned local governments Friday to prepare for the elimination of commercial property tax payments from the state.

"That is going to happen," Taylor, D-Mount Pleasant, said Friday during a legislative forum at The Hawkeye Restaurant in Keokuk. "Senate Republicans are insistent on removing this backfill completely.

Senate File 2081 scales back the state's payments to cities and counties by one-third beginning in July with the start of fiscal year 2019. By July 1 of next year, two-thirds of the funds paid to local governments would be rescinded.

General fund payments to local government began with the 2013 passage of a commercial property tax cut for businesses in Iowa. Because of the reduced revenue that would then be pumped into city and county governments, the state agreed to allocate a portion of its general fund dollars to "backfill" the lost tax income.

For fiscal year 2018, ending June 30, state agencies have estimated backfill payments cost the state about $150 million out of its roughly $7.2 billion budget.

The Senate bill has not moved any further than its passage out of a subcommittee, but could still be brought up for consideration this year because it involves state appropriations.

House Study Bill 678 also rolls back state backfill payments, but unlike the Senate proposal, it keeps a portion of the backfill in place.

The bill states beginning in July, backfill payments should not exceed $100 million. In fiscal year 2020 the payments would be capped at $75 million; $50 million in 2021; and $25 million in 2022.

"It's going to happen," Taylor said, "I just don't know which plan they're going to go with."

Taylor and Rep. Jerry Kearns, D-Keokuk, said they did not support bills eliminating state backfill payments.

Iowa Department of Management data show Lee County would lose about $287,000 in revenue this year if the backfill was eliminated. For Des Moines County, the loss would be about $351,000.

Keokuk's final legislative forum of the 2018 session will be noon April 27 at The Hawkeye Restaurant.