SHARE:
Policy Points from Iowa Fiscal Partners

Posts tagged Iowa Fiscal Partnership

IPP, CFPC form Common Good Iowa

Posted August 6th, 2020 to Blog

Today we have exciting news. The Iowa Policy Project has joined with our longtime partners at the Child and Family Policy Center to formally create a new organization, Common Good Iowa.

Look to Common Good Iowa for the solid research, rigorous policy analysis and focused advocacy that Iowans have come to expect from both organizations. Expect the same attention to critical issues that you have seen from IPP over two decades — and a new, invigorated approach to advancing a bold policy agenda. By joining to together we will have more capacity to coordinate our expertise on issues and communications, and wage successful campaigns to improve the lives of every person who calls Iowa home.

The creation of one organization out of two is the result of many months of discussions among board and staff members at both IPP and CFPC. We have always recognized that as each group has focused on some issues that the other has not, we share a common focus in other areas, including budget priorities and tax policy needed to fairly and adequately support those priorities. But we also have recognized that we need to connect the dots better between these many issues if we want our friends in the advocacy community to do so as well.

Common Good Iowa will, with one voice, draw attention to policy that connects these issues for the benefit of our entire community in Iowa — as we say, “the common good.”

Since the early discussions in 2000 that led to our founding in 2001, IPP has followed the vision of a “three-legged stool” for our work: economic opportunity (to include wages, jobs, education, wage theft, collective bargaining, economic development, pensions, and work supports including child care and Food Stamps); tax and budget issues, particularly tax fairness and revenue adequacy; and energy and the environment, including policy opportunities toward clean, sustainable energy choices and better water quality.

As you may know, IPP’s work on tax fairness and tax credits, as well as some of our research and advocacy on work support and safety-net programs, has been in cooperation and coordination with CFPC as the “Iowa Fiscal Partnership.” That brand on our work will go away as we are now formally one organization.

Common Good Iowa will carry on CFPC’s example as a leading advocate in Iowa on early childhood; children’s health, development and well-being; and family economic opportunity. As CFPC has done for many years, our new organization will continue to share data, link research to policy and promote best practices for improving child well-being as part of the nationwide Kids Count initiative.

Every staff member for both IPP and CFPC has a place in the new organization. Anne Discher, who has served as executive director of CFPC, will be the executive director of Common Good Iowa, headquartered in Des Moines. We will retain an Iowa City office, with IPP executive director Mike Owen becoming deputy director of Common Good Iowa. I invite you to reach out to Anne or Mike if you have questions about this new arrangement.

The name “Common Good Iowa” was chosen after great deliberation among staff and board of both organizations. It reflects our vision of public policy in Iowa. Philosophers, economists and political scientists have long debated and defined the common good, and there’s a powerful theme that links those conversations: public systems and structures for the benefit of all people, achieved through collective action in policymaking and public service. It feels utterly right for our new endeavor.

This is a great opportunity to reimagine our work. We’re at a moment when the devastating impact of racism, intolerance in our civic discussions, and years of neglect of our public systems have been laid bare for all to see. No Iowa community can thrive when some community members are systemically deprived of opportunity by our health, educational, human service and justice systems. We must do better.

As a largely white organization, we pledge to listen to and learn from our partners of color around our state, and to be not be just not racist, but, to borrow from scholar Dr. Ibram X. Kendi, to be anti-racist: to actively advance concrete policies and practices to dismantle the persistent inequities experienced by Black, Latinx, Asian, Native and other marginalized communities. We also commit to the internal work to become an organization that itself is attractive to a diverse, talented staff.

The merger is official now, although we will be putting finishing touches on our new brand over the next months. You’ll be hearing more about how you can celebrate virtually with us when we unveil our new logo, website, social channels and policy roadmap later in the year.

Until then you can reach Common Good Iowa staff at their existing CFPC and IPP email addresses, websites and social media accounts.

Sincerely,

 

Janet Carl

Vice President, Common Good Iowa Board of Directors
Former President, Iowa Policy Project Board of Directors

Back to business at Statehouse

Posted May 27th, 2020 to

Finding best uses of Iowa relief funds as legislators prepare to resume the 2020 session June 3

Over 18,000 Iowans have been sickened with the coronavirus. Over 313,000 Iowans — nearly 1 in 5 workers — have applied for unemployment since the middle of March. Many small businesses have closed or are operating at only limited capacity and suffering drastic losses.

While the misery is widespread, low-wage workers and persons of color have disproportionately felt the health and the economic consequences of the crisis. Both groups are more likely to be exposed to the virus — because they are more likely to be “essential workers” — and more likely to experience health and social disadvantages associated with poverty and racism that increase the odds of serious effects when exposed.[1]

Congress on March 27 passed the Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act, which created the Coronavirus Relief Fund (CRF) to cover expenses of state and local governments related to the COVID-19 health and economic emergency. Of $139 billion for states, Iowa’s share is $1.25 billion. Because we have no cities with a population over 500,000, no funding went directly to local governments, but the state is free to allocate funds to localities.

Quick and effective use of these funds is important not just to help the thousands of Iowans suffering from the effects of this crisis, but also to boost the state economy. It has been shown that the most effective way of stimulating economic activity is to get more money in the hands of lower and middle income households, who can be counted on to spend in the local economy and support Iowa’s businesses. That in turn will boost state sales tax and income tax revenues, moderating the state’s fiscal problems.

How can the state use CRF funds, and what are the best uses?

CRF money must go for expenditures necessitated by the coronavirus emergency through December 30, 2020.[2] Congress made it explicit that these funds are for unforeseen and necessary additional expenditures, not to replace revenue lost because of the falloff in economic activity.[3] Still, the range of allowable uses is quite broad.[4] Eligible expenditures include not only direct expenses for public health needs but also expenses “incurred to respond to second order effects of the emergency, such as providing economic support to those suffering from employment or business interruptions due to COVID-19 related business closures.”[5]

As of this writing, Iowa plans to spend $100 million of the $1.25 billion, all to the Small Business Relief Program.[6] The Governor also will use $20 million to fund a new rental and mortgage assistance program. Lawmakers should use the remaining $1.13 billion to prioritize protecting state and local finances — key to long-term recovery — and meet the needs of low-wage workers and people of color who have borne the brunt of the virus.

Here are ways legislators should allocate CRF funds or adjust state priorities when they reconvene June 3:

  • Pay salaries and benefits of state government employees who have been diverted from their usual activities to respond to the current emergency. By using CRF for some state payroll costs, Iowa would face a smaller budget shortfall from the expected precipitous drop in state revenues.
  • Transfer funds to cities and counties to cover additional costs associated with the emergency, including payroll. Cities and counties face sizable costs for emergency management, purchase of personal protective equipment, sanitizing of facilities, technology needed for staff to work remotely, overtime for public safety workers, and elections costs with greater use of voting by mail.[7]
  • Transfer funds to school districts, which face added costs to divert education staff to online learning programs, facility cleaning, and ensuring that all students have access to educational programs while schools remain closed. Funds provided directly to schools by the CARES Act represent just 1 percent of school district budgets and are unlikely to cover all of these costs.
  • Bolster the federal Low-Income Home Energy Assistance Program (LIHEAP) with state funds and create a parallel program to prevent water shutoffs.
  • Strengthen the state’s Child Care Assistance program by increasing the maximum family income eligibility level and raising provider reimbursement rates. These boosts will support essential workers unable to afford the full cost of child care, help stabilize the child care industry by bringing new families into the system and improve its underlying financial structure.
  • Expand cash assistance under the Family Investment Program to help families meet basic needs and avert serious hardship.
  • Expand food assistance by increasing income eligibility for the Supplemental Nutrition Assistance Program (SNAP) to 200 percent of the federal poverty level, easing access with broad-based categorical eligibility and initiating a Disaster SNAP (D-SNAP) program to reach currently excluded Iowans. SNAP puts food on the table and is an important way to stimulate local economies.
  • Hire more staff at Iowa Workforce Development to facilitate applications for unemployment benefits, and create a network of navigators to help individuals apply for various forms of public assistance needed now by those affected by the crisis, particularly those with language barriers.
  • Provide additional funds to counties for general cash assistance to individuals in emergency situations and those left out of traditional assistance programs.
  • Expand internet access for remote work and education, access to TestIowa and online commerce.
  • Assess the need for financial support to hospitals beyond the $691 million in “provider relief funds” to Iowa health care providers already included in the CARES Act. Hospitals are seeing revenues drop as people avoid seeking care for fear of contracting the virus, a trend that could well continue even after hospitals reopen for elective procedures.

[1] Harvard Center on the Developing Child, “Thinking About Racial Disparities in COVID-19 Impacts Through a Science-Informed, Early Childhood Lens.” https://developingchild.harvard.edu/thinking-about-racial-disparities-in-covid-19-impacts-through-a-science-informed-early-childhood-lens/

[2] Legislative Services Agency, Fiscal Update, March 31, 2020. “H.R. 748 Coronavirus Aid, Relief, And Economic Security Act Appropriations.”

[3] The CARES Act states: “Coronavirus Relief Fund payments may not be used to directly account for revenue shortfalls related to the COVID-19 outbreak.”

[4] U.S. Department of the Treasury: “Coronavirus Relief Fund: Frequently Asked Questions,” updated as of May 4, 2020. A summary of allowable expenses described in this document can be found in the IFP report: “Iowa will need more fiscal relief than Congress has given.” https://bit.ly/2WKMp4o

[5] Legislative Services Agency, Fiscal Update, May 15, 2020, “COVID-19 – Iowa Coronavirus Relief Fund.”

[6] Legislative Services Agency, Fiscal Update, May 15, 2020, “COVID-19 – Iowa Coronavirus Relief Fund” and Legislative Services Agency, Fiscal Update, May 12, 2020, “COVID-19 — Iowa Small Business Relief Program Update.”

[7] An Iowa State Association of Counties found $5.8 million in additional spending required in 11 counties, the majority for emergency management, public safety, public health, courthouse expenses and IT. https://www.iowacounties.org/wp-content/uploads/2020/05/ISAC-COVID-Financial-Impacts-on-Iowa-Counties-Report.pdf The League of Cities is in the process of surveying members, https://bit.ly/2yvMQ9m.

Faster infection pace, fewer limits

Posted May 14th, 2020 to Blog

A number of Iowa counties are seeing a surge in coronavirus cases, even as the Governor continues to reopen the Iowa economy and further relax social distancing requirements.

In Wapello County, cases soared from 10 on April 28 to 306 two weeks later. Over that same time period, Crawford County saw an increase from 21 to 207, and Sioux County from 8 to 103. Yet instead of reinstituting social distancing in those hot spots, the Governor has expanded her relaxation of requirements on businesses from 77 counties to all counties statewide.

Given the problems and delays with testing, and the lack of widespread testing, it is difficult to know just how many Iowans are actually infected with the coronavirus, and whether there are other emerging hotspots that remain unidentified. But we do know where there have been major increases in identified cases. For the most recent two-week period, the table below shows the 16 counties with the highest number of new cases per 100,000 population over the past two weeks (through May 12).

When adjusted for population, we see that many rural counties are experiencing more rapid growth than urban centers, many of which (Linn, Johnson, Scott) did not even make this list. Half the counties on the list (indicated by shading) are among the 77 counties where restrictions were first relaxed on May 1.

Most of those eight counties we identified last week as likely hot spots based on the growth in cases up to that point. New additions to the list are Monroe and Osceola, where the total number of cases is not large, but where we may be seeing the beginning of a surge. Six of the eight shaded counties saw their case count more than double in the past week.

It is easiest to see which counties have grown the fastest if we compare the cases per 100,000 population and how this number changed since the county first hit 50 cases. The counties are compared on the basis of when the surge began in their county. Wapello and Crawford have been growing at much the same rate as Woodbury, notably one of the top counties in the entire country in terms of the size and rate of the coronavirus surge.

 

 

 

 

 

 

 

Peter Fisher is research director for the nonpartisan Iowa Policy Project in Iowa City.

Sheltering the data in place

Posted April 8th, 2020 to Blog

Governor Kim Reynolds over the past few weeks has moved incrementally to close more kinds of businesses, to the point where Iowa’s restrictions now resemble those of states that have a blanket statewide “shelter in place” order. Significant distinctions remain: a proper and comprehensive shelter in place order closes all businesses except those specified as essential, leaving no ambiguities and loopholes, and comes with clear and enforceable restrictions on travel and social activities.

The governor continues to assert that her recommendations are driven by the same four metrics that have guided her since the beginning and that only recently became partly public information due to efforts by the press. We provided a thorough analysis of that guidance several days ago. On Tuesday, we finally learned about one of those metrics: There are three long-term care facilities with a sufficient number of COVID-19 cases to be classified as a facility with an outbreak.

We now know enough to construct the point system in spite of stonewalling by the Governor’s Office.

The first of the four measures — percent of population age 65 or over — can be found from census data. The second — cases per 100,000 population — can be calculated because the number of cases has been released by IDPH by county. The third — outbreaks at care facilities — is now known, with locations, because of a question at a press conference.

That leaves the fourth — hospitalizations as a percent of cases — that is unknown by county or region because the governor still refuses to release the data. But we know the total score by region because it shows up on the maps that are intermittently released at press conferences (but remain unavailable on the IDPH website). Thus by subtraction we can determine that all four regions must be at the highest level, a 3, on the hospitalization rate score.

From here on out, the only thing that can change is the cases per 100,000 population and the number of care facility outbreaks. Region 5 is already at the maximum on the cases measure, and regions 1 and 6 will likely get there soon, leaving all three regions with a score of 9, 1 short of 10, the number that supposedly triggers shelter in place. So those regions, covering a large majority of the state’s population and COVID-19 cases, can get to 10 only with another outbreak at a care facility.

The governor on the one hand argues that we already have the equivalent of shelter in place, and at the same time the metric that she says still guides her decisions shows that shelter in place is not yet warranted anywhere in the state. Has that metric really been used thus far, and in what way? How do you get from the metrics to a list of particular additional businesses to close? What will happen when a region reaches 10? Will the governor order more stringent measures in just that region? Or will the whole thing be scrapped once a proper forecasting model is developed that meets with her approval?

One thing is clear: transparency has been sadly lacking, and for no apparent reason.

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

IFP Statement: Disclose data, plans

It is past time to provide all Iowans with COVID-19 data, plans

A new policy brief by Iowa Policy Project research director Peter Fisher examines the arbitrary and backward-facing approach of the metrics that the administration of Governor Kim Reynolds has disclosed that Iowa officials are using in their response to the spread of the novel coronavirus. See that brief on the Iowa Fiscal Partnership (IFP) website.

The Iowa Fiscal Partnership released the following statement from Mike Owen, executive director of the Iowa Policy Project, about the lack of transparency in Iowa’s COVID-19 response.

“In a public health crisis like living Iowans and Americans have never seen, our leaders should welcome the value public scrutiny and perspective can bring to decision-making.

“It should not have taken an enterprising news reporter to coax out the short list of metrics[1] that Governor Kim Reynolds and her administration are using to make decisions about public safety. Responding to the crisis is public business, as consequential as most of us have seen. Iowans not only need to know what data is being used, and its sources, but how choices are being made with that information.

“Are other measures being considered? What measures have been dismissed? Who are the analysts? What comparisons are being made to other data and other states’ actions? These are only a few of the questions that logically arise. Not enough testing is being done to make the Governor’s metric of an infection rate meaningful, for one thing.

“The Governor asserts her actions thus far are as strong as official ‘shelter-in-place’ orders in other states. Even if comparisons wind up backing that claim, we need more information.

“Do we have the resources to make sure front-line health workers and all public and private workers handling essential services are protected? From medical care to corrections to seniors’ housing to day-care centers, do workers have the personal protective equipment to do their jobs safely? Do they have sufficient resources to protect the people in their care? Any of us could be among those needing care in the coming weeks.

“It is fair for Iowans to ask how they can expect that the state will avoid an overwhelmed health care system when we are relying on looser rules for social interaction than they are seeing in other states. Should we not build into public policy the findings of analysis that illustrate the benefit of reducing travel in preventing the spread of the virus?[2]

“It is not possible for Iowa to have all hands on deck to respond without knowing what resources we have, what we can reasonably expect to need, and to know how our leaders plan to bridge any gap.

“Yes, we are owed the information. It affects us all, and without it we cannot contribute with ideas to make solutions better or bring them along faster.

“It is time — past time — that all Iowans are brought to the table.”

                                            #     #     #     #     #

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit, Iowa-based organizations — the Iowa Policy Project in Iowa City, and the Child and Family Policy Center in Des Moines. Find reports at www.iowafiscal.org, and the IPP and CFPC websites, www.iowapolicyproject.org and www.cfpciowa.org.

[1] Zachary Oren Smith, Barbara Rodriguez, Jason Clayworth, Des Moines Register, April 2, 2020. https://www.desmoinesregister.com/story/news/health/2020/04/02/shelter-in-place-iowa-covid-19-benchmark-guidance-tool-waits-for-hospitalization-outbreaks/5111747002/

[2] The New York Times, “Where America Didn’t Stay Home Even as the Virus Spread.” April 2, 2020. https://www.nytimes.com/interactive/2020/04/02/us/coronavirus-social-distancing.html?algo=top_conversion&fellback=false&imp_id=603400842&imp_id=967213594&action=click&module=trending&pgtype=Article&region=Footer

IFP News: Giveaway costs grow

  • Research Activities Credit cost leaps in 2019 to record $78 million
  • Non-taxpaying companies receive record $53 million in ‘refund’ checks

IOWA CITY, Iowa (March 12, 2020) — Iowa businesses large and small made record use of the state’s generous research tax credit in 2019, a $78.4 million cost to taxpayers with most —$53.5 million — going out as checks to companies that paid no income tax.

The cost of the credit has risen 62 percent in 10 years, with very large businesses taking 78 percent of the benefit in 2019, or $60.8 million.

“Over the last 10 years, this unaccountable program has given away nearly $600 million — 73 percent of it in checks to companies that pay no state income tax,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project (IPP).

“This troubling trend comes as Governor Kim Reynolds continues to push legislators to give new tax breaks to the wealthiest Iowans at the expense of poor- and moderate-income taxpayers, and of public services including education and health care,” Owen said.

The Iowa Department of Revenue on Thursday issued its 2019 annual report on the Research Activities Credit (RAC), the 10th full-year report since lawmakers required the disclosure in 2009.

The report showed:

  • Both tax credit claims and so-called “refunds” — checks for the value of tax credits not needed to meet tax obligations — hit record levels for corporations in 2019: $55.8 million in claims and $46.6 million in refund checks.
  • The number of individual claims — by businesses filing as individuals — expanded dramatically in 2019, from 5,305 claims in 2018 to 7,083 in 2019. The cost also has grown sharply, from $11.3 million in 2017, to $15 million in 2018, to $22.5 million last year.
  • Rockwell Collins and Deere, and associated businesses, are the largest claimants as usual, accounting in 2019 for $23.4 million, or 30 percent of all claims.
  • Very large companies, with more than $500,000 in claims, accounted for 78 percent of the cost of the credit, and 81 percent of the “refunds.”

The RAC and a supplemental credit are refundable, which means companies receive a payment from the state for the amount of their credits above what they need to reduce or eliminate taxes.

“The dominance of large operations is important,” Owen said, “because this tax credit was designed to help small start-up operations. Deere, Rockwell Collins and many others do not need state help to do research, and certainly do not need refunds for taxes they didn’t have to pay.”

A special tax-credit review panel urged an end to RAC refunds for large companies in 2010. Lawmakers in recent years have acknowledged the concern about those uncontrolled subsidies but have not acted to restrain them, and the most powerful business lobbying interests have fought to keep them in place.

“How can Iowa defend giving so many millions to giant companies for research they would do anyway?” said Anne Discher, executive director of the Child and Family Policy Center (CFPC) in Des Moines. IPP and CFPC form the Iowa Fiscal Partnership, which has tracked fiscal accountability issues with the research credit since before the official annual reports were provided.

“Iowa families need access to child care, pre-K-12 and higher education, and mental health services,” Discher added. “Somehow, lawmakers can never find enough money for those public priorities. But big companies never have to worry — their entitlement keeps coming, even when they don’t owe any taxes.”

Other noteworthy elements of the report, in the context of reports for recent years, are that ethanol operations have become big users of the credit, and in 2019, there was another big jump in the number of claims by businesses filing as individuals rather than as corporations.

The amount of individual claims nearly doubled in two years, to $22.5 million in 2019, and nearly quadrupled in five years, from $5.9 million in 2014.

The Iowa Fiscal Partnership reports are available at www.iowafiscal.org.

The official Department of Revenue report is available at this link: https://tax.iowa.gov/sites/default/files/2020-03/RACAnnualReport2019_rev03112020.pdf

Historically poor commitment to schools

Posted March 4th, 2020 to Blog, Budget, Economic Security, Education
To put the House-Senate agreement on school aid in perspective, take a step back for a better view.
The legislative agreement is for 2.3 percent Supplemental State Aid (SSA), or growth in the per-pupil spending figure that Iowa school districts use to build their budgets, which are based on enrollment.
As the graph below shows, for the decade of FY2002 through FY2011, that per-pupil figure fluctuated some but rose by an average of 3.1 percent per year (shaded area, left side of graph). For the next decade, from FY2012 to the FY2021 SSA agreed to this week, the plan will provide average growth of only 1.8 percent per year (shaded area, right side of graph).
Iowa’s commitment to public education in the 10 years from 2002 to 2011 stands in stark contrast to that of the most recent 10 years.
Notably, that earlier period provided more sustainable funding despite the deepest recession in the United States since the 1930s. Also notably, one reason for that was the state’s wise decision to use one-time funding from the federal Recovery Act — known to many as “stimulus” — to hold schools harmless as much as possible, bridging the recessionary gaps in revenues that would have forced slower growth or even cuts in per-pupil funding.
The contrast in SSA over time puts in perspective the political chatter around school funding from those who have held education lower than what is necessary for schools to keep up with costs, let alone to tap students’ potential to reach for greater achievement.
As for “historic” levels of funding — of course even a $1 increase provides a new record. You don’t have to see an actual cut to know you are being underfunded. If growth isn’t enough to keep up with costs, and it has not been for many years now, the only “historic” note is the defiance of Iowa’s tradition of commitment to education.
Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. He served on the West Branch Community School Board from 2006-2017.
mikeowen@iowapolicyproject.org

Cutting revenues, holding back schools

Posted February 11th, 2020 to Blog

It is worth noting that as the Iowa Senate passed an exceedingly meager 2.1 percent growth in per-pupil spending for Iowa’s K-12 public schools, Governor Reynolds’ tax bill offers a net reduction in revenue.

But even the governor has proposed more for FY2021 — 2.5 percent — than the Senate approved Monday. As shown below, the governor’s plan keeps Iowa on a long-term downward trendline (in red) for school funding growth. The Senate plan goes lower.

200115-SSA-shaded-roadmap6.jpg

The governor’s tax shift proposal trades a sales-tax increase for income-tax cuts: a bad deal both for tax fairness and adequate revenues. In doing so, she has chosen to pit education advocates against environmental advocates — who would see much less in funding for water quality and trails than voters directed in 2010 in a constitutional amendment. And, she would make our overall tax system tilted even more heavily to the wealthy than it is now.

191003-ITEP-WhoPays2.jpg

Poor and inequitable funding of public schools and other critical public services are directly related to an inequitable tax system that relieves those most able to pay — the wealthiest — of that responsibility.
The governor is demanding that the package of tax changes actually cause a net loss of revenue. This is not only a severe twisting of voters’ intent in 2010 in approving use of the next sales tax increase to raise funding for environmental and recreational enhancements, but a mathematical guarantee that other services will be held down or even cut.
If we are going to adequately fund programs to improve environmental quality and educational achievement, it starts with protecting all of those programs and promoting equity and fairness in how the revenues are raised.
M
Mike Owen is executive director of the nonpartisan Iowa Policy Project.
mikeowen@iowapolicyproject.org

Reining in business tax breaks

Posted February 5th, 2020 to Blog

It has become a familiar story: Tax breaks and tax expenditures growing at a pace that spending on traditional state priorities cannot match. This growth continues on autopilot, year after year, with little scrutiny and often with weak justification.

The cost of business tax credits under the income tax grew from $214 million in Fiscal Year 2015 to $244 million in FY19, and is projected to be $287 million for FY20.[1] The commercial and industrial property tax cuts enacted in 2013 have added significantly more to that estimate. The business property tax credit enacted in that legislation, which will remain at $125 million every year, will bring the overall state cost of business tax credits to more than $400 million by FY20. In other words, business tax credits in total will have about doubled in six years. (See graph.)

Related business breaks would drive total spending on subsidies to business much higher.

      • Iowa in recent years has spent $152 million annually to backfill local public revenues lost when commercial and industrial property assessments were rolled back to 90 percent of actual value, a tax break to business.[2]
      • Revenue losses from the state’s failure to enact combined reporting to plug loopholes in the corporate income tax amount to an estimated $200 million.[3]
      • The state also spends nearly $60 million annually backfilling the loss of tax base to school districts as a result of city and county use of tax increment financing, much of which reduces the costs of business development.[4]

The total cost of business subsidies, in other words, approaches $800 million, even without other so-called tax expenditures, such as the state’s use of single-factor apportionment.

Tax credits have the same impact on the state’s bottom line as any other spending. Such spending comes outside the normal budget process where agencies, advocates and constituents make proposals that lawmakers vote up or down, on the record. Tax credits, with few exceptions, cause spending outside that competition.

State spending on business subsidies necessarily comes at the expense of other budgetary priorities, including education, health, and public safety. Investments in education and infrastructure, the building blocks of a strong economy, suffer when the annual budget debates start out with a billion dollars already committed to business incentives.

Real reform is needed now more than ever.

See our Roadmap for Opportunity two-pager on this topic.

[1] The following tax credits listed in the Iowa Department of Revenue Contingent Liabilities Reports are included in our analysis as business tax credits: Enterprise Zone Programs, High Quality Jobs Program, Historic Preservation, Industrial New Job Training Program (260E), Research Activities, Targeted Jobs, Venture Capital, Accelerated Career Education, Redevelopment, Renewable Chemical Production, Renewable Energy, Wind Energy Production, Biodiesel Blended Fuel, E15 Gasoline Promotion, E85 Gasoline Promotion, Ethanol Blended Gasoline, Ethanol Promotion. With the exception of Historic Preservation, this list is in line with credits classified as “business incentives” by the Iowa Department of Revenue in their most recent tax expenditure study. https://tax.iowa.gov/reports/2010-iowa-general-fund-tax-expenditures-excel.

[2] Legislative Services Agency, Summary of the Governor’s Budget Recommendations FY2021. Jan. 16, 2020, page 212.

[3] Iowa Department of Revenue, 2017.

[4] Legislative Services Agency, FY 2018 Annual Urban Renewal Report, February 15, 2019, p. 24. About 15 percent of TIF erxpenditure in FY18 went directly for business projects; it is not known how much of the 63 percent that went to property acquisition, roads, bridges, utilities, and water or wastewater treatment plants was associated with business development.

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

‘A bad idea all around’

Anne Discher

The Iowa Fiscal Partnership released the following statement today from Anne Discher, executive director of the Child and Family Policy Center, about federal guidance to states on Medicaid.

“Iowans served by Medicaid face enough challenges in our state without this additional level of uncertainty from the Trump administration.

“Already, changes in Iowa’s Medicaid program have caused a loss or reduction of health-care services to struggling families, and at a time of fresh proposals in the Legislature to further restrict access to care, the news from Washington is not good.

“The new administrative guidance for Medicaid issued by the Centers for Medicare and Medicaid Services rips away the guarantee of coverage for adults and parents. It takes away family security by letting states choose who gets coverage and what kind of coverage.

“We have seen in Iowa what happens when states change the rules of the game on a whim. All Americans need federal guidelines that assure an expectation of care, and a transparent process so residents understand what’s at risk. 

“No matter what you call it — and you’re likely to hear phrases like ‘block grants’ or ‘per capita caps’ — it equals less less federal funding for Iowa and fewer insured Iowans.

“It does nothing to address the real health crises we face, including inadequate mental health services and the decline of obstetric care in rural Iowa. And it could threaten the state’s ability to effectively respond in times of need like during an economic downturn, an epidemic like coronavirus, or a natural disaster. 

“It’s also worth noting that legal experts raise serious questions about this proposal. It will likely result in costly litigation while trying to make it harder for low-income Americans to have affordable health insurance.

“This plan is a bad idea all around for our state.”

#     #     #     #     #

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit, Iowa-based organizations — the Iowa Policy Project in Iowa City, and the Child and Family Policy Center in Des Moines. Find reports at www.iowafiscal.org, and the IPP and CFPC websites, www.iowapolicyproject.org and www.cfpciowa.org