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Posts tagged Mike Owen

Careful backpedaling on estate tax, Senator

Posted December 5th, 2017 to Blog

One of the problems with backpedaling is if you don’t do it well, you trip. Somebody catch Senator Chuck Grassley.

As has been widely noted across social media — a good example is this post in Bleeding Heartland — The Des Moines Register quoted Iowa’s senior senator that estate tax repeal would reward “people that are investing, as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.

Ironically, while promoted as a pullout quote in the packaging of the story, the “booze or women or movies” comment came quite low in the piece. More substantive problems with the Senator’s rationale for opposing the estate tax were presented higher: specifically his continued insistence that this has something to do with the survival of family farms.

It. Does. Not.

10-30-17tax-factsheet-f1Senator Grassley has promoted this unsupportable justification for his position for many years. This New York Times piece from 2001 includes it.

And he renewed it again Monday in claiming his “booze or women or movies” comment was out of context, taking the opportunity to promote his spin again — and again getting wrong the facts behind his fundamental objection: the impact on farms.

There, he claimed in the story that he wants a tax code as fair for “family farmers who have to break up their operations to pay the IRS following the death of a loved one as it is for parents saving for their children’s college education or working families investing and saving for their retirement.”

While only a handful might actually have to pay any tax at all because of the generous exemptions in the estate tax — shielding $11 million per couple’s estate from any tax — no one in the many years the Senator has pretended this is an issue has been able to cite a single farm that had to break up because of the tax.

Contrast his current statements with the one he made in the wake of Hurricane Katrina in 2005, when there was a move afoot to slash the estate tax. And — as shown by the graphs below — even fewer estates in Iowa and the nation are affected by the estate tax now than at that time, when he said “it’s a little unseemly to be talking about doing away with or enhancing the estate tax at a time when people are suffering.”

The tax legislation in Congress will cause millions to suffer, directly through a loss of health insurance, some with actual tax increases even at middle incomes, and over time with a loss of critical services that help low- and moderate-income families just to get by.

Furthermore, any middle-income tax cuts expire in 2026 while high-income benefits and corporate breaks remain in effect. And then, even more will suffer.

Questions we have been asking for years remain relevant today, and each time pandering politicians take a whack at the estate tax:

  • Is it a greater priority to absolve those beneficiaries of the need to contribute to public services — and make everyone else in the United States borrow billions more from overseas to pay for it — or to establish reasonable rules once and for all to assure the very wealthiest in the nation pay taxes?
  • Do we pass on millions tax-free to the heirs of American aristocracy, or do we pass on billions or trillions of debt to America’s teen-agers?

We all shall inherit the public policy now in Congress. As long as the estate tax exists, it remains the last bastion assuring that at least a small share of otherwise untaxed wealth for the rich contributes to the common good, or at least toward paying the debt they leave us. Fear not for their survivors; they still will prosper handsomely.

2017-owen5464Mike Owen is executive director of the Iowa Policy Project, a nonpartisan public policy research organization in Iowa City. Contact: mikeowen@iowapolicyproject.org

Editor’s Note: This post was updated Dec. 6 with the graphs showing the decline in Iowa estates affected by the estate tax.


The Case of the Missing Middle-Class Tax Cut

Posted November 22nd, 2017 to Blog

If Sherlock Holmes were a United States Senator, he’d be on it: “The Case of the Missing Middle-Class Tax Cut.”

We’ve all heard about the suspicious tax cut. It’s been in all the papers, all the social media posts, anywhere the spin merchants can find a way to promote the idea that the proposed massive and permanent tax-cut giveaway to millionaires, billionaires and corporations is somehow a “middle-class tax cut.”

Puh-leeze.

No reliable information can justify the billing. Middle-class and lower-income taxpayers ultimately will — on average — pay more as a result of this legislation if it becomes law.

In Iowa, the Institute on Taxation and Economic Policy (ITEP) has shown that despite some minor benefits upon enactment, the bill when fully phased in will actually result in a tax increase, on average, for the bottom 60 percent of Iowa taxpayers. Higher up the income scale, tax cuts will remain. (In the graph below, average tax changes for the bottom three quintiles of Iowa taxpayers are shown as increases, above the line.)

Someone in Iowa making $1.5 million in 2027 would get about a $4,800 benefit under the ITEP analysis — not a lot to people at that income, maybe a good payment on luxury box rent at the ballgame.

But that break for the top 1 percent would total about $68 million — a hit to services on which the money could be spent on behalf of all.

Millions of Americans — an estimated 13 million — would lose health insurance under this bill, a large share of those not giving up insurance voluntarily, but because they could no longer afford it.

Billion-dollar estates that already have $11 million exempt from tax under current law would see a doubling of that exemption, as if the first $11 million free and clear is not enough while the millions of working families struggle to get by, some at a $7.25 minimum wage that has not been raised in over eight years (in Iowa, 10 years).

A Child Tax Credit designed to help working families with the costs of raising children would be extended to families earning $500,000 a year — as if those families need the extra help, when families making $30,000 get little from the deal. By the way, that is one of the changes billed as a middle-income break, and even it would expire in 2025.

There is no expiration, meanwhile, on the estate-tax break or on new giveaways to corporations.

If you’re looking for a real middle-class tax cut in this legislation, you’d better put Sherlock Holmes on the job. Even then, anything you find has an expiration date, plus tax increases. And the millionaires’ cuts that remain will clamp down on resources for the essential things that government does to protect and assure opportunity for us all, and our nation’s future.

You cannot afford to do both — provide critical services and also cut resources to pay for them.

It’s elementary.

Mike Owen, executive director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

Another reason to support IPERS

Posted November 2nd, 2017 to Blog

An estimated 103 beneficiaries of the Iowa Public Employees’ Retirement System (IPERS) were recent victims of identity theft — about 0.09 of 1 percent of all retirees receiving IPERS benefits. The system reacted quickly and transparently to support its retirees.

IPERS is cautioning all beneficiaries to make sure their October payments were made properly, and has issued new payments to those affected by this theft, in which criminals used personal information to redirect payments for a group of retirees.

All of this leaves a burning question for 2018: How bad might this have been without the IPERS system looking out for these retirees?

Put another way, what if all 115,000 of IPERS retiree beneficiaries and 350,000 IPERS members overall had been forced to private retirement plans, instead of the traditional pensions they have, as some lawmakers and hard-right activists would do with the future of IPERS?

By early news coverage, IPERS appears to have reacted very quickly to handle this security breach. IPERS had the backs of its beneficiaries, funds recovered and benefits on track to those counting on them, according to these early accounts.

It is unfortunate that this is not the emphasis of such stories. It should be. Identity attacks and threats are commonplace, and how the retiree’s account is protected is a critical issue.

Could you count on the manager of your private retirement account, such as a 401k, to respond so quickly, and with such accountability? Maybe. 

The new story about this identity theft assault on IPERS beneficiaries is one more reason — along with the positive performance of IPERS investments and retirement security offered by the program — to be putting the brakes on any attempt to rush through major changes to IPERS.

Privatization advocates make ideological arguments. In practical terms proposed changes would allow private outfits to profit unnecessarily from comparatively unaccountable management of public workers’ retirement investments, causing extra costs to employees and perhaps to the state.

So-called “reforms” have never been about making retirements more secure for those whom we as taxpayers employ to provide essential public services. This security, not private profit, is fundamental to the purpose and commitment of IPERS.

Mike Owen, executive director of the nonpartisan Iowa Policy Project

mikeowen@iowapolicyproject.org


Why Governor Reynolds is wrong

Posted July 21st, 2017 to Blog

As it has become clear that Iowa state leaders need to be more engaged publicly on the national health care debate, it was surprising to see Governor Kim Reynolds’ take on it.

“I’m focused on the things I can control.”

Well, if that is the standard for where the Governor should speak up, lock the office door and throw away the key. That’s not the way government works — or is supposed to work — in our American and Iowa tradition.

The Governor in our system has an important and powerful role, but rarely a controlling one.

What the Governor is not acknowledging, though she surely knows to be the case, is that her position is perhaps the best pulpit in the state of Iowa for speaking up on behalf of Iowans, to our elected representatives in the House and Senate in Washington, and to the President of the United States.

If she cannot speak for the people of Iowa, who will do so?

What is clear from the debate thus far in Washington is that more than 200,000 Iowans will lose health insurance if the current Affordable Care Act is repealed without a meaningful replacement.

In fact, the latest estimate from the Urban Institute finds 229,000 fewer Iowans would be insured in 2022 than if the ACA were kept in place — but the state would spend $29 million more as federal spending dropped by 28 percent.

The Governor’s comments to reporters repeated inaccurate talking points about ACA, avoiding both the state’s own role in undermining the individual insurance marketplace, and the principal way Iowans would lose insurance: the loss of the Medicaid expansion. That one piece of the ACA covers 150,000 Iowans now and is projected to grow to 177,000 in two years, but goes away under the Senate and House plans.

So, whether Governor Reynolds likes it or not, what is now a federal issue will become a state issue.

Right now, the things she has more direct influence upon are state budget choices, many of which already are difficult.

Imagine how much more difficult those choices become with 200,000 more people uninsured. What will the state do to make up for it? What budget control — or families’ control over their health care options — would be lost? Some members of the Legislature already are calling for a state-run program to step into the void.

If Governor Reynolds is uncomfortable with any of these possibilities she could call her friends Senator Grassley and Senator Ernst, or gather the microphones and cameras and raise awareness about the stakes for all Iowans.

Again, there are members of the Legislature weighing in on that score as well. Perhaps they recognize that persuasion, and pushing for a critical mass of support behind an idea, is where “control” emerges.

 

owen-2013-57Mike Owen, executive director of the Iowa Policy Project

mikeowen@iowapolicyproject.org

 


Why not a special session?

Posted July 11th, 2017 to Blog
Long-term impacts could be decided in short order;
Might not our state lawmakers want to weigh in?

If anything has been clear about the current health-care debate in Washington, it is that little is clear — except the likelihood that (1) people will lose insurance coverage and thus access to health care, and (2) this will pose new challenges for state government.

That being the case, it seems a good time for the Legislature to return to Des Moines and sort it out, sooner rather than later. It will be easier for legislators to talk to their federal counterparts about all this before legislation passes than afterward.

Because of the Affordable Care Act (Obamacare), the Medicaid expansion serves about 150,000 Iowans, and would serve an estimated 177,000 Iowans in 2019 if preserved. But those Iowans — and some 55,000 more — would be in jeopardy of losing insurance under legislation pending in the Senate. If the enhanced federal share of funding for Medicaid expansion is reduced or eliminated under any legislation to come — and both the House and Senate bills currently would do this — states would have a choice: Fill in the gap or let people go uninsured.

Oh, and if you’re going to choose to fill in the gap, go ahead and plan now on what will have to be cut to compensate for it. K-12 education, perhaps? Even more cuts to the regents institutions? Child care? Water protection? Law enforcement and corrections?

Already, legislators and Governor Kim Reynolds are facing those kinds of questions amid a looming fiscal shortfall and speculation about a possible special session.

In The Des Moines Register this week, columnist Kathie Obradovich suggested Governor Reynolds “is prudent to wait until fall to make a decision on a special session but that doesn’t mean she should avoid talking about it. Now is the time to be speaking frankly with Iowans and individual legislators, identifying the causes and consulting on potential solutions.”

Now is also the time to be speaking frankly about the longer-term impacts of health care policy — and for that reason, waiting until fall might be too late. Legislative leaders and the Governor right now could be bringing in experts for a special session to discuss the potential impacts, and reach out to the congressional delegation, before decisions are made that restrict state budget choices for many years to come.
Unless, of course, they want to see budget crunches and special sessions more frequently.
Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

KanOwaSin: Low-road neighbors, together?

Posted June 27th, 2017 to Blog

Here we sit in Iowa, nestled between two political petri dishes where experiments have gone wrong, and wondering if our elected leaders may let the mad scientists loose on us as well.

Some politicians would like to turn Iowa into another Kansas, another Wisconsin, where tax-cut zealotry already has driven down economic opportunity.

Welcome to KanOwaSin. In the anti-tax ideologues’ world, we’d all look the same. Why not ​share a name?


​Before someone squeezes another drop of anti-tax, anti-worker snake oil on us, let’s get out the microscope.Our friends in Wisconsin tell us: Don’t become Wisconsin. Our friends in Kansas tell us: Don’t become Kansas — and Kansans already are turning off the low road.A couple of researchers in Oklahoma are telling us: Listen to those folks. From the abstract of their working report:

“The recent fiscal austerity experiments undertaken in the states of Kansas and Wisconsin have generated considerable policy interest. … The overall conclusion from the paper is that the fiscal experiments did not spur growth, and if anything, harmed state economic performance.”

 

Their findings are among the latest exposing the folly of tax-cut magic, particularly with regard to Kansas, which IPP’s Peter Fisher has highlighted in his GradingStates.org analysis that ferrets out the faulty notions in ideological and politically oriented policies that tear down our public services and economic opportunity.

Iowa has long been ripe for tax reform, due to a long list of exemptions, credits and special-interest carve-outs in the income tax, sales tax and property tax. These stand in the way of having sufficient resources for our schools, public safety and environmental protection.

Each new break is used to sell Iowans on the idea that we can attract families and businesses by cutting  — something we’ve tried for years without success, as Iowa’s tortoise-like population growth has lagged the nation.

On balance, this arrangement favors the wealthy over the poor. The bottom 80 percent pay about 10 percent of their income in state and local taxes that are governed by state law. The top 1 percent pay only about 6 percent. Almost every tax proposal in the last two decades has compounded the inequities.

For the coming 2018 legislative session, and for the election campaigns later that year, we are being promised a focus on income tax. Keep in mind, anything that flattens the income tax — the only tax we have that expects a greater share of income from the rich than the poor — steepens the overall inequity of our regressive system.

Thus, as always, the devil is in the details of the notion of “reform.” If “reform” in 2017 and beyond means more breaks for the wealthy, and inadequate revenue for traditional, clearly recognized public responsibilities such as education and public health and safety, then it is not worthy of the name.

So, when you hear about the very real failures of the Kansas and Wisconsin experiments, stop and think about what you see on your own streets, and your own schools. Think about the snake oil pitches to follow their lead, and whether you want Iowa on a fast track to the bottom.

That is the promise of Kansas and Wisconsin for Iowa.

Or, if you prefer, KanOwaSin.

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Dan S. Rickman and Hongbo Wang, Oklahoma State University, “Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance.” March 19, 2017. https://mpra.ub.uni-muenchen.de/79615/1/MPRA_paper_79615.pdf
Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

IFP News: ACA repeal plans jeopardize health care gains in Iowa

As Senate builds legislation in secret, House approach hits Iowa hard 

Full report (or 10-page PDF)

IOWA CITY, Iowa (June 22, 2017) — Proposed legislation to repeal the Affordable Care Act (ACA) jeopardizes Iowa’s recent health coverage gains and puts the state’s most vulnerable residents at risk.

A new Iowa Fiscal Partnership report shows the stakes for Iowans — particularly seniors and rural Iowans — are significant. Losses of federal subsidies to obtain individual insurance are disproportionately greater in rural counties, and for seniors, under the legislation.

Besides those inequities, the report by Peter Fisher of the nonpartisan Iowa Policy Project (IPP) notes cuts in health coverage for vulnerable Iowans come in exchange for “billions in tax cuts to wealthy individuals, drug companies, and insurance companies.”

“Supporters’ promises of more state flexibility and individual choice ring hollow,” Fisher said, adding flexibility “means an enormous cost shift requiring the state to spend millions more and cut services. Meanwhile, ‘choice’ for thousands of Iowans would be stark: go without health insurance that had become unaffordable, or go without basic necessities such as food.”

The report focuses on the impact of ending the expansion of Medicaid to low-income adults and placing a “per capita” cap on benefits in the regular Medicaid program.

In addition, the House bill would:

  • Permit states to undermine current protections for patients with pre-existing conditions;
  • Shift federal Medicaid funding to a per-capita formula that does not reflect actual costs, particularly in difficult economic times or epidemics, or for patients needing higher-cost care.
  • Ignore coming higher costs in aging states, like Iowa, for coverage of the senior population.

As Fisher notes in the report, the Medicaid expansion “greatly increased access to health coverage in Iowa’s rural areas, where the percent of non-elderly residents who were uninsured was cut nearly in half between 2013 and 2015.”

These are the kinds of gains threatened by the American Health Care Act (AHCA) and the similar legislation emerging in the Senate.

“President Trump was happy with his crowd of 6,000 last night in Cedar Rapids, but many times more Iowans could lose health care under the House-passed American Health Care Act,” said Mike Owen, executive director of IPP.

“Today, we are learning of the plan that was hatched behind closed doors in the Senate. That proposal needs to be judged not against the low bar set by the House plan for the health coverage in our national safety net, but against the expanded role for Medicaid that provides coverage for 150,000 Iowans under Obamacare.

“Any legislation that takes Iowa backwards — by shifting federal Medicaid costs to the states, ending the Medicaid expansion, placing kids, seniors, and people with disabilities who depend on Medicaid at risk, and increasing out-of-pocket costs for low-income Iowans — is unacceptable.”

Fisher’s report includes estimates by the Urban Institute that 191,100 Iowans could lose Medicaid coverage under the House plan — or 38 percent of non-adult enrollees now served. Only 11 states have a greater share of their Medicaid enrollees in jeopardy of losing coverage.

A principal reason many of the enrollees have gained coverage is the Medicaid expansion, in which expanded federal subsidies to states encouraged 31 states and Washington, D.C., to offer Medicaid eligibility to more residents. The AHCA — and the emerging Senate proposal — would dramatically phase down the amount of federal dollars that states receive to cover new enrollees, including people who come off Medicaid and need to go back.

To maintain the expansion, Iowa would have to spend an additional $192 million in 2021, nearly tripling what the state spends now on that population.

The higher state cost would come from the state making up the difference between the subsidy under current law — 90 percent federal share of the cost — and the regular Medicaid reimbursement of 58.5 percent for Iowa. Expansion states like Iowa would have to determine whether to pay the additional cost and cut other programs (and/or raise taxes), or reduce Medicaid services to keep their budgets in balance.

“By 2023, the state’s additional cost would be $335.8 million, a 288 percent increase over current spending on the expansion population. It is highly doubtful that the state would find that much more in its budget for Medicaid,” Fisher wrote.

Owen noted Census data have shown Iowa uninsurance dropped from 8.1 percent in 2013 to 5 percent in 2015, largely due to the Medicaid expansion.

“Not only would changes proposed in the AHCA reverse these gains, but they would end Medicaid as we know it,” Owen said. “These changes would virtually guarantee gaping holes in the nation’s safety net for vulnerable Americans in many states, and push enormous new costs onto state budgets already stretched thin.”

The Iowa Fiscal Partnership (IFP) is a joint initiative of the Iowa Policy Project and another nonpartisan organization, the Child & Family Policy Center in Des Moines. Iowa Fiscal Partnership reports are at www.iowafiscal.org.

 

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Closing the books — why real math matters

Posted June 20th, 2017 to Blog

Or: How Governor Branstad claimed to reach his jobs goal but did not come close

As it all turned out, the job-growth goal set by former Governor Terry Branstad was at best ambitious, and never realistic.

With four previous terms behind him, and 12 years out of office, Branstad came back in 2010 with a goal of 200,000 new jobs in five years.



Nothing wrong with setting lofty goals. The biggest problem with this one was the way the longtime Governor decided to measure progress toward it. If the goal was never realistic, the counting method was never math.

Iowa’s economy produced 106,900 new jobs — the net job increase — through the Governor’s second round in office.

As late as April, the last jobs report released in Governor Branstad’s tenure, the official report from Iowa Workforce Development bore an extra line, ordered by someone, for “Gross Over-the-month Employment Gains,” from January 2011. And that line would, magically, put the state over the 200,000 mark — a year late, but more on that later.

There was no explanation with the report on how this special line was computed, but analysis showed the administration cherry-picked job gains to come up with the “gross” figure. Job categories that showed a loss in a given month were simply ignored.

It was as if a business reported its sales but not its expenses, or a football team counted its own touchdowns but not those it gave up. The number, then, was literally meaningless as an indicator of anything happening in the economy.
 

Last week, IWD released its first report on monthly job numbers since Governor Kim Reynolds took office, and the “gross” gains line was gone from the official spreadsheet.

So, for the sake at least of history, a little context:
— Through the five years of the Governor’s goal, Iowa produced 92,100 new jobs.

— Through the end of the Governor’s tenure, Iowa produced 106,900 new jobs.

In fact, we didn’t reach 200,000 under even the Governor’s counting gimmick until January of this year, a year late. Meeting the goal would have required 60 months averaging over 3,300 net new jobs a month. Instead, we have seen far less:



The slow pace of recovery should not have been a surprise to anyone. Iowa and the nation had just come out of a shorter and less severe recession in 2001. The pace of that recovery — up until the Great Recession hit — was quite similar to what we have seen over the past six years before even the latest pace slowed down.

The actual job numbers and what they may illustrate remain more important than Governor Branstad’s spin on them. It would be a mistake to devote undue further attention to the fake numbers.
Likewise, it would be a mistake to attribute any general job trends — positive or negative, even legitimately derived with actual math — principally to state efforts. Much larger forces are at work. Plus, overselling the state role feeds poor policy choices, namely to sell expensive and unaccountable tax breaks, supposedly to create jobs, at the expense of the public services that make a strong business environment possible and make our state one where people want to raise families.
Iowa needs more jobs and better jobs. To understand whether we’re getting them
requires responsible treatment of data, and honest debate with it.
owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

AHCA: Shifting Costs to States

FOR IMMEDIATE RELEASE TUESDAY, JUNE 6, 2017

Cutting Medicaid Expansion: Huge Cost Shift to Iowa, Other States

IOWA CITY, Iowa (June 6, 2017) — A new report shows Iowa would have to spend almost three times what it does now to cover low-income adults who would lose health coverage under the House-passed American Health Care Act (AHCA).

To keep up the benefit to those families, AHCA would force Iowa and the 30 other states that expanded Medicaid to absorb a greater share of the cost. The Center on Budget and Policy Priorities (CBPP), estimates the cost to Iowa to rise $192.5 million in 2021.

“This is an enormous cost-shift to Iowa, and we already have seen our state’s leaders cutting back revenues, and trying to cut more. Facing those fiscal constraints already, it is hard to see how the state could pick up those costs, which puts health coverage for many thousands of Iowans in jeopardy,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project (IPP).

The new analysis by the Center on Budget and Policy Priorities shows that Iowa’s costs would continue to soar. By 2023, the state would have to find an additional $335.8 million to maintain coverage for people benefiting from the Medicaid expansion. That would be a 288 percent increase from the cost under current rules.

“The real question is whether Iowa’s political leaders on both sides of the aisle are willing to speak up about this to assure Iowa’s senators, Charles Grassley and Joni Ernst, are aware of the decisions being put on state lawmakers’ plates,” Owen said.

Peter Fisher, IPP research director, noted that about 150,000 Iowans benefit from the Medicaid expansion, which was part of the Affordable Care Act (ACA).

“Many thousands of Iowans have health coverage now because of the ACA and the Medicaid expansion,” Fisher said. “As we have stated before, any plan to replace ACA can be judged on how well those gains are maintained.

“The House bill would at best jeopardize the gains, and with higher costs for insurance, almost guarantee far greater numbers of Iowans would be uninsured.”

The CBPP report estimates the bill would jeopardize coverage for 11 million newly eligible low-income adults who enrolled in Medicaid under the expansion.

The report is available at http://www.cbpp.org/research/health/house-republican-health-bill-would-effectively-end-aca-medicaid-expansion.

In states that adopted the Medicaid expansion, the federal government pays at least 90 percent of the expansion costs — an enhanced rate compared to the regular Medicaid program. This change cut uninsurance rates in half for non-elderly adults in Medicaid expansion states, from 18.4 percent in 2013 to 9.2 percent in 2016.

Under the AHCA, however, the federal government would pay only the regular Medicaid matching rate, 58.5 percent in Iowa, for new enrollees beginning in 2020. Anyone whose Medicaid coverage lapses for more than two months becomes a new enrollee. Because Medicaid recipients cycle on and off the program, in the space of just a few years most enrollees would be “new,” and would lose Medicaid coverage altogether unless the state came up with the millions required to keep them on.

With the loss of the Medicaid expansion, the percent of Iowans who are uninsured could rise to levels even higher than existed prior to Obamacare. That is because those individuals who received some coverage from IowaCare, and who since moved to the Medicaid expansion, would not have IowaCare to fall back on when the expansion ends.

The Iowa Policy Project is a nonpartisan public policy analysis organization based in Iowa City. IPP and the Child & Family Policy Center in Des Moines together analyze fiscal policy issues as the Iowa Fiscal Partnership, www.iowafiscal.org.

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Rosy forecasts bring thorny budgets

Capitol-DSC_0119-7inA memo from the Legislative Services Agency (LSA) indicates a higher-than-anticipated cost of a special-interest sales-tax break primarily for manufacturers.

We could not afford it when Governor Terry Branstad attempted to implement it by rule in 2015, or when a scaled-back version passed in 2016, and we cannot afford it now.

But it appears likely that the new break is at least part of the reason sales-and-use taxes are flattening out, putting fresh pressure on the budget even after FY2017 cuts and continued reliance of state policy makers to push tax breaks that divert millions from critical services such as education.

There is great irony in this report coming as Governor Branstad was turning over the keys to Kim Reynolds, especially given this comment in the LSA piece by senior fiscal legislative analyst Jeff Robinson:

One potential explanation for the recent sales/use tax downturn is an underestimated fiscal impact of the sales/use tax exemption for manufacturing supplies and replacement parts. For proposed legislation in previous years, estimates of the impact of exempting manufacturing supplies and replacement parts from the State sales/use tax had been much higher.

As Robinson suggests, there was ample reason to think the cost would be “much higher” and that should have been taken into account in revenue estimates and crafting the FY17 budget.

Likewise, the four of us were present in the Iowa House chamber in 1983 when new Governor Branstad proposed a sales-tax increase, just a few months after bludgeoning his election opponent, Roxanne Conlin, with a “tax and spend” refrain. The new Governor inherited a budget shortfall right out of the gate, a product of overly rosy revenue projections by the Ray administration.

To be fair to Governor Ray, the farm crisis was unfolding back then, and the landscape was not necessarily as clear.

This time, the continuing revenue problem is due principally to out-of-control tax giveaways, which have accelerated long since Governor Ray left office. Just this one perk for manufacturing was expected to cost $21.3 million from the state budget.* However, the latest LSA analysis suggests, the cost to the state may be two or three times what was expected.

Odd that Governor Branstad, burned so early in his tenure by optimistic revenue estimates, would let this happen to his very own successor as she took office. Maybe he just forgot.

We did not forget.

 

* That cost figure grows to $25.6 million when including the dedicated revenue for local school infrastructure, and $29.2 million when including lost local-option tax revenue.

Posted by IPP Executive Director Mike Owen, IPP Founder David Osterberg, IPP Board President Janet Carl, and IPP Board Member Lyle Krewson. Owen was the Statehouse correspondent for the Quad-City Times and Osterberg, Carl and Krewson were state representatives from Mount Vernon, Grinnell and Urbandale, respectively — in 1983.