Exceptional Persons, Inc. New Choices, Inc. Handicapped Development Center Life Works Community Services Candeo, Vocational Development Center, Inc., Healthy Connections, Inc. And Krysilis, Inc. v. Iowa Department of Human Services, 878 N.W.2d 247

In 2009 Governor Culver issued Executive Order 19 directing an across-the-board 10% reduction in state spending; IDHS adopted temporary rule 441—79.16(10) reducing HCBS provider payments by 2.5% (via a reduced inflation adjustment) for Dec 1, 2009–June 30, 2010.
Rule 441—79.16(10) included a sunset of June 30, 2010.
The legislature enacted H.F. 2526 (2010 Iowa Acts ch. 1192, § 33(1)(q)), directing IDHS to “continue the reduction in payments … in the percentage amount … as specified under Executive Order 19” for FY2011.
IDHS promulgated permanent rules in response to H.F. 2526 but inadvertently omitted a rule reducing the inflation adjustment by 2.5% for HCBS providers; nonetheless the agency paid providers using the reduced rates.
Exceptional Persons (several HCBS providers) challenged the FY2011 rate calculation, arguing the missing rule left the pre-2009 inflation adjustment in force and thus IDHS lacked rule-based authority to apply the 2.5% reduction. Administrative judge and agency upheld IDHS; district court and court of appeals sided with providers.
The Iowa Supreme Court reversed, holding the statute authorized continuation of the reductions and that the statute controls over any conflicting administrative rule or residual rule language.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether IDHS could apply the 2.5% reduction to the inflation adjustment for FY2011 despite failing to promulgate a specific rule doing so	Exceptional Persons: because IDHS failed to promulgate the specific rule reducing the inflation adjustment, the preexisting inflation-adjustment rule remained on the books and must be applied	IDHS: H.F. 2526 legislatively required continuation of the reductions; a statute supersedes any conflicting administrative rule, so the agency could lawfully apply the 2.5% reduction despite the rulemaking oversight	The statute (H.F. 2526) authorized continuation of the reductions and controlled over conflicting rule language; IDHS lawfully applied the reduced rates

Hiserote Homes, Inc. v. Riedemann, 277 N.W.2d 911 (Iowa 1979) (agency rulemaking power cannot exceed statutory authority)
Des Moines & Cent. Iowa Ry. v. Iowa State Tax Comm’n, 115 N.W.2d 178 (Iowa 1962) (administrative rules inconsistent with statute are invalid)
Rock v. Warhank, 757 N.W.2d 670 (Iowa 2008) (statutory language controls when plain and unambiguous)
Iowa Med. Soc’y v. Iowa Bd. of Nursing, 831 N.W.2d 826 (Iowa 2013) (administrative procedure act standards for judicial review)