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Policy Points from Iowa Fiscal Partners

Posts tagged Mike Owen

Reading, ’Rithmetic & Politics

Posted January 18th, 2016 to Blog

First, Governor Branstad challenged the bounds of basic math — miscounting jobs — and now it’s language arts.

The Governor reportedly got a little testy last week at a Des Moines Register editorial board meeting. Among his complaints: references to a “diversion” of revenue from a state sales tax for school infrastructure to support water-quality improvements. From the Register:

Branstad, in particular, took issue with the idea that his proposal diverts money away from schools.

“I can’t see how you can possibly call it a diversion when schools are going to get at least $10 million more guaranteed every year, plus a 20-year extension,” he said. “They’re sharing a small portion of the growth.”

Well, here’s how you call it a diversion:

diversion
[dih-vur-zhuh n, -shuh n, dahy-]
noun
1. the act of diverting or turning aside, as from a course or purpose: a diversion of industry into the war effort.
dictionary.com

Under the Governor’s plan, there is a “diverting or turning aside” a share of sales-tax revenues from their currently authorized “course or purpose,” school infrastructure, from FY2017 beginning July 1 this year, to FY2029. This is illustrated by Governor’s own handout on the plan. See the one-page document his office provided the media on Jan. 5.  The graph at the bottom of that page (reproduced below), shows the diversion shaded in blue, beginning with the black vertical line and running to the red dotted line.

160105-water-school-graph
Of course it’s a diversion. In fact, the diversion continues if the tax — which would not exist before or after FY2029 without voters’ intent for its use in funding school infrastructure — is extended to FY2049.

May future debate focus on whether the Governor’s proposed diversion is a good idea, not the fact that he has proposed it.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

 

 


Privatizing Medicaid: ‘Why?’ ‘What?’ ‘How?’ not yet answered

Posted November 3rd, 2015 to Blog

060426-capitol-swwWhy do we have Medicaid? It’s a simple question with a simple answer. We have Medicaid because if we don’t, there are millions of Americans, and nearly 600,000 Iowans, who will not be able to get health care. Private industry will not provide it.

Why, we must ask, would we turn over to private industry a critical part of our public safety net to business interests that operate with a principal purpose of making money?

How do we assure that services are provided, that our responsibilities are met, if the people running the operation are not answerable to us?

As the legislative Health Policy Oversight Committee meets today about the Governor’s privatization edict on Medicaid, we need to remind ourselves of these basic questions.

When the Governor cannot detail the purported savings and our common sense tells us otherwise, we need an assurance that data will be available — and publicly available — to monitor what is happening with a service that has been accountable and efficient in expanding health-care access to Iowans who need it. We need to know Iowa is not setting itself to repeat problems that have been demonstrated in other states.

What will pass for public oversight after we’ve turned over the keys to private industry?

Over three dozen people and organizations filed comments (available here) with the oversight committee for today’s meeting at the Statehouse. Many have a firsthand understanding of the purpose and practice of Medicaid as we know it, and serious questions of their own about the uncertain world where the Governor is taking us, on his own.

Clearly, many fundamental questions have not been fully vetted through the legislative process, nor given a hearing before the decision was made within the Governor’s Office.

How we assure health care access to low-income Iowans needs to be the central issue here, not an afterthought.

Owen-2013-57Posted by Mike Owen, Executive Director, Iowa Policy Project
mikeowen@iowapolicyproject.org

New rule! Governor wants to make laws himself

Posted October 14th, 2015 to Blog

We all know the drill: The Legislature passes bills and the Governor signs or vetoes them, whereupon they become either laws, or nothing.

Not anymore, apparently.

The move by the Branstad administration to implement a new sales tax break worth an estimated $40 million a year — possibly more — is taking place outside the legislative session. If it succeeds, we have entered a new world of executive authority in Iowa.

Business lobbyists wanted the change, it could not pass the Legislature, and the administration thinks it has found a short cut: Change the longstanding interpretation of the existing law. Presto, tens of millions of dollars will be available for manufacturers. And those same tens of millions of dollars will not be available for schools.*

Consider a Des Moines Register guest opinion by Mike Ralston of the Iowa Association of Business and Industry, a lobbying group representing manufacturers who would benefit from the change:

Part of the change affects Iowa’s existing sales and use tax exemption for machinery and equipment used in the manufacturing process.  The change is sound policy.

If that’s the case Mr. Ralston wants to make, let him make it during the legislative session. This rules change skirts the legislative process, and Iowans are noticing. Jon Muller writes in an insightful piece on the Bleeding Heartland blog:

It’s easy to look at political discourse today and conclude everything is a battle between Democrats and Republicans, the left and the right, liberals and conservatives. But far more is going on with this issue. … A Democrat will surely be Governor again someday, and it would be a mistake to set a precedent that allows the Executive Branch to so drastically change the tax climate. If Republicans in the Legislature do not stand up against this unprecedented over-reach of power, they will almost certainly live to regret it.

James Larew, an Iowa City attorney who was general counsel to former Governor Chet Culver, served for four years as Culver’s appointee on the Administrative Rules Review Committee, a panel of legislators who have the authority to delay the rule change from taking effect. He advised the panel: “This is new territory. What is sauce for the goose eventually becomes sauce for the gander, too.” Larew went on:

The balance of political power changes from one election to the next.

The balance of constitutional power — the relationship between the Iowa General Assembly and executive departments of government — is more serious and more lasting.

Broad interpretive powers given up by the Legislature, in one moment of time, concerning one issue, are not easily, later recovered.

As the Cedar Rapids Gazette opined in an editorial, the change “breaks the rules of good government.” The Gazette wrote:

The Branstad administration should drop its rule change bid and make its case to the General Assembly, which is elected to craft a budget and write tax policy. If it’s truly a great idea that will create jobs, as the department contends, surely the sales job won’t be that difficult.

Many businesses, we often note at IPP and the Iowa Fiscal Partnership, already pay no income tax in Iowa, and they just had their property taxes slashed. The corporate appetite for tax cuts is insatiable. Guess who pays?

*  Note: The Department of Revenue estimate of the cost of this tax break to both the state and local governments is over $40 million for each of the first four full years of implementation, according to a document provided the Administrative Rules Review Committee. The Legislative Services Agency has told ARRC that it does not have enough information to determine the accuracy of that estimate. We have revised the initial version of this blog post to reflect this uncertainty, until state officials agree on an estimate.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

 


On big issues, Iowa leaders emerging locally

Posted July 23rd, 2015 to Blog

If state leaders won’t lead, local leaders in Iowa are showing they will take up the job.

On three big issues in the last several months, we have seen this:

I don’t know about you, but I’m beginning to see a trend.

Public policy matters in Iowans’ lives, in critical ways. We elect people who can take care of it in a way that works for all Iowans, but not enough who will. In the absence of state-level leadership, it’s inevitable, perhaps, that local officials who also are hired to work for their constituents will find a way to help them.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

Big ‘Oops’ for tax-cutters in school vetoes

Posted July 15th, 2015 to Blog

Governor Branstad’s vetoes of “one-time” funding pose “ongoing” and “recurring” problems for a major and ill-advised proposal by his allies to restructure personal income taxes in Iowa.

And they should.

During the last session, while lawmakers and the Governor were telling schools the state could not afford more than a 1.25 percent increase in per-pupil school aid, a group in the House was pushing a plan to let individuals choose a “flat” income tax rate option. In other words, figure your taxes under the current rate structure, then compare it to the flat rate, and choose which one costs you less.

It benefits primarily the wealthy, and it costs big money. There is no upside.

We have seen such a proposal in the past, and we are virtually guaranteed to see it again in some form in 2016. Not only does it compound fairness issues in Iowa’s tax structure, but it loses hundreds of millions of dollars in revenue, year after year, that Iowa legislators and the Governor have been telling us we cannot afford to lose.

Its supporters cannot avoid that contradiction, given their obsession this year about not letting a surplus — and a sustained one at that — be used for “ongoing” or “recurring” expenses on grounds they were not “sustainable.” Those are the grounds for the Governor’s vetoes of one-time funds for local schools, community colleges and state universities.

For good analysis of the 2015 alternative flat-tax proposal, which was not presented on the House floor as some of these messaging contradictions quickly became clear, see this Iowa Fiscal Partnership backgrounder by Peter Fisher. As Fisher noted, the projected revenue loss was projected at nearly half a billion dollars — $482 million — for the new fiscal year and around $400 million for each of the next three.

In short, the flat-tax idea is not “sustainable.” No need to discuss in the 2016 session.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

Veto words ‘ring hollow’

‘Governor Branstad’s words ring hollow in his decisions to cut education funding and to prevent greater access to child care assistance.’

IOWA CITY, Iowa (July 2, 2015) — The Iowa Fiscal Partnership released this statement from Mike Owen, executive director of the nonpartisan Iowa Policy Project, about actions taken late today by Governor Branstad on school funding and legislation that would have expanded eligibility for child care assistance:

 
Governor Branstad’s words ring hollow in his decisions to cut education funding and to prevent greater access to child care assistance.
 
First, the Governor is whacking $55.7 million in one-time funding for local schools and area education agencies from a budget compromise reached over many months by legislators. To defend this and other vetoes, the Governor speaks of concern about across-the-board cuts, when there is no threat of that possibility. These one-time funds for education were designated for one-time uses — in deference to the Governor’s previously stated concerns. The veto leaves schools with only 1.25 percent growth in the cost per pupil for the new fiscal year, well below schools’ actual costs — a legislative decision that will drive up property taxes for many districts. Neither the Governor nor the Legislature can claim accurately that they have provided sufficient funds for Iowa’s public schools, and the conclusion to this question comes 16 months past the legal deadline.
 
Second, low- and moderate-income Iowans face severe “cliff effects” — a sharp loss of resources — when their income rises enough to end their eligibility for child care assistance. A vetoed provision of SF505 would have lessened this effect for an estimated 200 families and nearly 600 children each month. These families, whose incomes are just below 150 percent of the federal poverty level (about $36,400 for a family of four), would have become eligible for child care assistance. This would have been a small but significant first step toward reducing the cliff effect. The Governor talks about increased incomes, but his veto means families will not be able to accept or seek small pay increases if it means they could no longer afford child care. The Governor’s claim that an improvement would “perpetuate” the cliff effect is to totally misunderstand the impact of this important benefit for low-income working families. Child care costs are not going down, and incomes are not rising fast enough for families to recover.
 
These issues are only two pieces of the package of decisions announced at the end of the day by the Governor’s Office. There will be more for Iowans to consider as the Governor’s decisions are reviewed more fully.

 

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 & Family Policy Center in Des Moines. For more on the issues raised in this statement, see the IFP website at www.iowafiscal.org.

Budgeting in the dark

Posted April 13th, 2015 to Blog

April 15 is more than Tax Day. It’s also Budget Day, the date by which Iowa school districts are required to certify and adopt their budget for the year starting July 1.

And that’s important, because Iowa schools consider themselves bound by law.

This stands in stark contrast to the General Assembly. The Legislature and Governor, you see, have not told the school districts yet how much money they will have for this budget that must be set by Wednesday. By law, they’re about 14 months late … and counting.

You read that right. Lawmakers were supposed to tell school districts in February 2014.

If schools were really getting the “first bite at the apple,” as some are so fond of saying, this number would have been set. Instead, schools are left wondering how much of the core of the apple will be left when legislators finally get their act together.

Those first bites are already gone — to backfill property-tax cuts, or to provide giant subsidies to multistate corporations that pay no income taxes to our state, or to let millions slip through corporate tax loopholes while our Legislature looks the other way.

The budget deadline is here, and schools don’t know how much they will be permitted to spend, how much of it will be state aid, or how much to levy in the property tax share of that budget.

How, then, do districts respond?

The safest approach for school districts is to assume the worst. This will differ around the state; for many, it means no increase in state aid or per-pupil budget growth.

Because budgets are a mix of state aid and property tax, and you’re assuming no state aid increase, you’ll be setting a levy at its highest amount. If state aid comes in higher, you will lower your levy to the authorized amount — but your overall budget may still be too low to meet the needs you have identified.

While these little tricks keep your district within the law, they do nothing for the spirit of transparency, to enable everyone to be part of the process.

  • District residents don’t really have a clear picture of what their levy will be, so what can they expect to learn, or say, at the required public hearing?
  • District teachers and board members trying to negotiate contracts in good faith through the winter and early spring have no firm numbers to discuss.
  • District administrators trying to plan for fall classes may not be sure whether they will be able to keep current staff levels, or be able to add staff to meet increases in enrollment, special needs, or demands for achievement in cutting-edge fields of study.

All we know as April 15 approaches is that districts, one way or another, will meet the letter of the law. No thanks to state legislators.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
Editor’s Note: Mike Owen has been a member of the West Branch Community School Board since 2006.

Basic RGB


Start with ‘zero’ on credits

Posted March 11th, 2015 to Blog

It was​ fascinating Tuesday to see Iowa lawmakers talking about zero-based budgeting — starting every budget from scratch — when they have refused to do the same with tax credits.

Spending on tax credits — including millions to companies that don’t pay any state income tax — just keeps going on and on.

And on.

And on.

Companies basically get to appropriate state money to themselves. Quite a deal if you can get it.

If the state were to sunset business tax credits, as recommended in 2010 by a special governor-appointed Tax Credit Review Panel, lawmakers could review each one and decide which are actually producing a public benefit, whether any of them are money well spent. If so, they could renew the credit. If not, we could put our resources where they make more sense for all Iowans.

Maybe a part-time legislature could start with a zero base on tax credits before we talk about it for an entire state budget.

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

No income taxes, big checks from state

IFP NEWS /
Lucrative program lets big companies erase taxes, and get extra in checks

IOWA CITY, Iowa (Feb. 11, 2015) — More companies are benefiting from a lucrative tax subsidy that permits large, profitable corporations to get checks from the state without paying any Iowa income tax.

The latest annual report from the Department of Revenue on the use of the Research Activities Credit (RAC) shows that 248 companies claimed $51 million from the program in 2014, one-third more than the highest number of companies in the last five years.

Most of the credit claims — $34.8 million, or 68 percent — were paid out as checks, not as tax reductions.

“Most notable is that Iowa continues to give a lot of money to companies that aren’t paying income tax. There were 181 companies that received RAC checks from the state because their tax credits exceeded their income tax liability,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project in Iowa City, part of the Iowa Fiscal Partnership.

“The $35 million that went to those 181 companies could have provided 1 percent supplemental state aid for public schools, or it could have gone to other public services, if it had been part of budget discussions. But the state does this kind of spending outside the budget process.”

The report, released Wednesday, also shows:
— Only 16 companies — or 6.5 percent — claimed 83 percent of the benefits and at least 75 percent of the checks.
— Those 16 companies each had at least $500,000 in claims, totaling over $42 million in 2014.
— The top five companies benefiting from the credit have been the largest beneficiaries over the last five years: Rockwell Collins, Deere & Co., Dupont, John Deere Construction and Monsanto.

“Those are highly profitable companies. We need to be asking whether it makes sense, when school budgets are tight and enforcement of environmental and workplace laws are weak, to be subsidizing these businesses to do research that they already would have to do, and can afford to do on their own,” Owen said.

Owen noted a special tax credit review panel appointed in 2009 came back in 2010 with many recommendations to curtail spending on business tax credits — including elimination of the so-called “refunds” of the research credit.

Rockwell Collins was the biggest corporate beneficiary in 2014, with $11.7 million in claims, followed by Deere at $9.4 million and Dupont at almost $6.9 million.

“Careful analysis of the report shows that at least two of the top three companies received at least some of their benefits without paying any income tax,” Owen said.

“Unfortunately, the good information in this report doesn’t go far enough to provide detail for Iowa taxpayers on how their money is being spent on this credit. If it did, we would know exactly how much was paid to these big companies as checks, and how much was used to erase taxes they owe.”

The report is available on the Iowa Department of Revenue website at https://tax.iowa.gov/report/Reports?combine=Research%20Activities.

The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonprofit, nonpartisan organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. Reports are at www.iowafiscal.org.

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Editor’s Note: This release was revised on Thursday, Feb. 12, to clarify that the top 16 claimants received 83 percent of the total benefits and at least 75 percent of the benefits that were paid as checks. The original Feb. 11 release stated that those firms had 75 percent of the benefits.

See ya later, Gator: Civics lesson from bowl game

Posted December 31st, 2014 to Blog

ipp-kinnick6Of course we’re all excited that the Iowa Hawkeyes will be playing Jan. 2 against Tennessee in the — uh, what’s the name of that bowl again?

It has something to do with tax preparation. (No royalties are being paid for publication of this message, so no need to repeat it.) So for now, let’s just call it the Pay Your Taxes Bowl.

Or, to recognize what we do by preparing and paying our taxes, we could make it the Feed the Hungry Bowl, the Educate the Children Bowl, the Fix the Highways Bowl, or the Clean the Air and Water Bowl.

In years past, most bowl games promoted a tradition, or an image, related to their locale. This game in Jacksonville, Florida, used to be called the Gator Bowl, and that was the name of the stadium. Now it’s played in a rebuilt stadium named for a bank.

The Gator Bowl has a storied past, including a good game in 1983 between the Iowa Hawkeyes and the Florida Gators, who won 14-6.

Even the Beatles played there once — though it was for a concert, not a gridiron battle with the Beach Boys — and that seems more interesting than the heavy-handed advertising that dominates these games now. Maybe the Fab Four Bowl? Strawberry Fields Bowl? Hold Your Hand Bowl?

There was a time when the Orange Bowl wasn’t connected to the name of a delivery service or a credit card company. There was a Citrus Bowl in Florida and a Peach Bowl in Georgia. I remember going to the Alamo Bowl once, happy to see the name bound to the enduring history of San Antonio, with no connection to rental cars.

Almost all bowls now feature a corporate sponsor’s name, so it may be in the nature of things that when many Iowa fans remember “The Catch” by Warren Holloway to beat LSU as the clock expired, they involuntarily associate it with the name of a credit card.

Still, we should acknowledge the irony that with the corporatization of all that is good, like football bowl games, at least one bowl game is associated with paying taxes instead of avoiding them.

Just understand: Some of us will still think of it as the Gator Bowl.

Go Hawks!

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

Editor’s Note: This piece was published as an Iowa View in the Dec. 28, 2014, Des Moines Register