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Policy Points from Iowa Fiscal Partners

Posts tagged Mike Owen

Iowa’s decline in job-based health insurance

Posted April 11th, 2013 to Blog

The Cedar Rapids Gazette today offered an interesting look at the question of where Iowans get their insurance. It’s less and less something that comes through employment. And when the costs of insurance keep rising, that makes it tougher on the household budget — or results in people not having insurance.

This is a trend we’ve been watching and reporting on at the Iowa Policy Project for many years, as have several good research organizations such as the Economic Policy Institute.

The Affordable Care Act offers at least a partial remedy. As health insurance exchanges are developed, affordable insurance should be more readily available. Tax credits for employers providing insurance will provide a targeted incentive to offer employees a better option than what employees might find on the individual insurance market.

Colin Gordon

Colin Gordon

Our State of Working Iowa report for 2012 offers another good look at this issue. As author Colin Gordon observes, wage stagnation, erosion of good jobs and recession have combined to batter workers, at the same time non-wage forms of compensation, health and pension benefits, also have declined. This has eroded both job quality and family financial security, and increased the need for public insurance. In Chapter 3, “The Bigger Picture,” Gordon writes that Iowa is one of 15 states, including five in the Midwest, to lose more than 10 percent of job-based coverage in a decade. He continues:

These losses reflect two overlapping trends. The first of these is costs. Health spending has slowed in recent years, but still runs well ahead of general inflation. Both premium costs … and the employee’s share of premiums have risen sharply — especially for family coverage — while wages have stagnated.

In 1999, a full-time median-wage worker in Iowa needed to work for about 10 weeks in order to pay an annual family premium; by 2011, this had swollen to nearly 25 weeks. Steep cost increases have pressed employers to drop or cut back coverage, or employees to decline it when offered. High costs may also encourage more employees to elect single coverage — counting on spousal coverage from another source and kids’ coverage through public programs. The second factor here is the shift in sectoral employment outlined above: Job losses are heaviest in sectors that have historically offered group health coverage; and job gains (or projected job gains) are strongest in sectors that don’t offer coverage.

This graph looks at the rate of employer-sponsored coverage, by industry sector, from 2002 to 2012.

job-based coverage comparison, Iowa 2002-2012

An interactive version of that graph in the online report allows the reader to toggle between those two years; the colored balloons sink on the graph in moving from 2002 to 2012, as if they all are losing air — the result of declining rates of coverage.

Good public policy could help to fill them again.

2010-mo-blogthumbPosted by Mike Owen, Assistant Director

 


Owen: State approaches incentives in upside-down fashion

Mike OwenBy Mike Owen, Iowa Policy Project

The world is upside down when state subsidies of business are presumed to be essential, and when a leading newspaper criticizes those who dare to question it.

In that world, the Sioux City Journal’s March 24 editorial (“Iowa must be a player in the economic incentive game”) might not be surprising, but is no less misdirected.

The Journal’s editorial brushes off critics of the state’s Orascom scheme — a $200 million subsidy to an Egyptian company to build a fertilizer plant in Iowa. It reluctantly concedes that “legislators not only have the right, but in some cases the obligation to ask questions about economic development deals involving state money for incentives.”

Yet in that sentence the Journal lays bare the weakening of fundamental checks and balances in our state on the question of corporate subsidies.

Lawmakers should ask questions “in some cases,” the Journal believes? How very wrong. State legislators have the obligation in every single case to ask questions about economic development deals involving state money, or at least to hold state agencies accountable on all Iowans’ behalf. Among those questions just for starters: First, is it a good project? Second, is there a public benefit? And third, is a subsidy even necessary?

Iowans must be assured that tough questions are being asked and the answers evaluated before the checkbook is opened in surrender to the mindset of a “need to offer state incentives, sometimes big incentives, to attract large capital projects to Iowa within the intensely competitive arena of economic development.”

The proper default position when a corporation comes hat in hand for a subsidy is at best, “maybe.” And if the answer becomes “yes,” it must be defended and defensible, especially for big deals such as Orascom.

If we cannot always count on development officials to be so careful, we should be able to count on a newspaper, which has as great an obligation as legislators to ask questions about development deals.

Orascom offers one of those poster-child examples of poor practices, where the state very simply offered more than was necessary, even if you believe “big incentives” are sometimes necessary. Iowa had Illinois beat: The state offered more than Illinois could do because of a $1.2 billion low-interest loan available to Iowa and not Illinois through a federal flood-relief program. That was enough to bring the firm to our state. Then Iowa sweetened its offer and roped local property taxpayers into it, as well.

If you believe in a market-oriented economic system, as many claim to do, a subsidy is a last resort — not the starting place — for public-sector involvement in a private-sector project. All such deals demand questioning. Some deals will pass as sensible, and some may even be optimal approaches as targeted, careful investments that will produce a return on the public dollar.

Orascom already has failed the test.

 

Mike Owen is assistant director of the Iowa Policy Project, a nonprofit, nonpartisan organization founded in 2001 to produce research and analysis on state policy decisions. IPP focuses on tax and budget issues, economic opportunity and family prosperity, and energy and environmental policy.

This guest opinion ran in the April 3, 2013, edition of the Sioux City Journal.

Sound budgeting doesn’t include blanket tax credit

Posted January 28th, 2013 to Blog
Mike Owen

Mike Owen

This session of the Iowa Legislature offers a tremendous opportunity to move the state forward with a balanced approach — including responsible, fair tax reform and investments in critical needs that have gone unmet, in education at all levels, in environmental quality and public safety.

The proposal for a blanket $750 tax credit to couples, regardless of need and blind to the opportunity cost of even more lost investments, does not fit that approach. To compound a penchant to spend money on tax breaks is fiscally irresponsible to the needs of Iowa taxpayers, who will benefit from better services, and to the promise that we would return to proper investments when the economy turned up, as it has. Furthermore, to give away Iowa’s surplus when uncertainty remains about the impact of federal budget decisions on our state’s tax system and services is tremendously short-sighted.

As the Iowa Fiscal Partnership has established, cutbacks in higher education funding have caused costs and debt to rise for students and their families, not only at the Regents institutions but community colleges as well. While Iowa voters, through a statewide referendum, have expressly called for new revenues to go toward better environmental stewardship, lawmakers have not taken action. The surplus we now see should be used responsibly for the future of Iowans, who patiently endured budget austerity for the day when we could once again see support for critical services. This is no time to be forgetting our responsibilities.

Iowa can do better by returning to the basics of good budgeting, crafting budget and tax choices that keep a long-term focus on the needs of young and future generations, whose lives will be shaped by the foundations we leave them.

Posted by Mike Owen, Assistant Director


Accountability is good for tax breaks, too

Posted January 4th, 2013 to Blog
Mike Owen

Mike Owen

The Des Moines Register has an interesting editorial today about the state’s voluntary preschool program. The Register is asking for accountability:

“Before lawmakers consider any new education reforms, they should ensure that the changes they made a few years ago are helping.”

Hard for anyone to argue with that. Advocates of preschool surely would not fear a legitimate review. And what better time to review and adjust a program than its early years?

Now, wouldn’t it be interesting to see the same concept applied to Iowa’s many tax breaks for corporations? Do they do any good? There is no evidence that they do for the most part, a fact ignored routinely by the Iowa General Assembly and our Governors past and present, but they just keep on going. The idea of a review of tax breaks only gets lip service from most lawmakers; there are no serious reviews and no teeth in state law to require them.

The Research Activities Credit alone is a program crying out for this kind of scrutiny, a point clear from the few details that are available (See http://www.iowafiscal.org/2012research/120221-IFP-RAC.html). Unlike the preschool program, in which 9 out of 10 Iowa school districts participate, the RAC is used by a relative handful of companies in Iowa, well under 200, and is dominated by less than 10.

The money is not all that different: $58 million in 2011-12 for preschool through the state formula vs. almost $48 million for the RAC in 2011 — with $45 million of that paid in “refund checks.” These are not refunds of taxes paid, and they don’t even reduce taxes. Instead, millions go to big corporations such as Rockwell Collins, Deere and DuPont that owe so little in income tax that their tax credits are far above the amount of taxes they owe.

What’s good for the goose of preschool is certainly good for the gander of tax breaks.

//EDITOR’S NOTE: The next annual report on the use of the Research Activities Credit is due Feb. 15 from the Iowa Department of Revenue. Stay tuned!//

Posted by Mike Owen, Assistant Director


Accountability is good for tax breaks, too

Posted January 4th, 2013 to Blog
Mike Owen

Mike Owen

The Des Moines Register has an interesting editorial today about the state’s voluntary preschool program. The Register is asking for accountability:

“Before lawmakers consider any new education reforms, they should ensure that the changes they made a few years ago are helping.”

Hard for anyone to argue with that. Advocates of preschool surely would not fear a legitimate review. And what better time to review and adjust a program than its early years?

Now, wouldn’t it be interesting to see the same concept applied to Iowa’s many tax breaks for corporations? Do they do any good? There is no evidence that they do for the most part, a fact ignored routinely by the Iowa General Assembly and our Governors past and present, but they just keep on going. The idea of a review of tax breaks only gets lip service from most lawmakers; there are no serious reviews and no teeth in state law to require them.

The Research Activities Credit alone is a program crying out for this kind of scrutiny, a point clear from the few details that are available (See http://www.iowafiscal.org/2012research/120221-IFP-RAC.html). Unlike the preschool program, in which 9 out of 10 Iowa school districts participate, the RAC is used by a relative handful of companies in Iowa, well under 200, and is dominated by less than 10.

The money is not all that different: $58 million in 2011-12 for preschool through the state formula vs. almost $48 million for the RAC in 2011 — with $45 million of that paid in “refund checks.” These are not refunds of taxes paid, and they don’t even reduce taxes. Instead, millions go to big corporations such as Rockwell Collins, Deere and DuPont that owe so little in income tax that their tax credits are far above the amount of taxes they owe.

What’s good for the goose of preschool is certainly good for the gander of tax breaks.

//EDITOR’S NOTE: The next annual report on the use of the Research Activities Credit is due Feb. 15 from the Iowa Department of Revenue. Stay tuned!//

Posted by Mike Owen, Assistant Director


Does Iowa have the will to govern itself?

Posted November 13th, 2012 to Blog

Does Iowa have the will to govern itself?

How ironic that we have reason to ask that question, a week after a presidential election that capped three-plus years of courting of Iowa voters, and a few days before a potential 2016 candidate visits to start all of it brewing again.

Yet the question is unavoidable. Consider two pieces in today’s Des Moines Register.

First, the Register reports, the federal Environmental Protection Agency may take over water quality enforcement in Iowa due to weak efforts by Iowa’s state Department of Natural Resources (DNR).

As IPP’s David Osterberg recently told EPA officials to hold DNR more accountable because the state is underfunding water protection.

“EPA should help the agency in bargaining with a legislature that has shown itself to be less concerned with water quality protection than tax cuts. … There is no question that if EPA simply accepts the agency’s agreement to try to do better, water quality will not improve in this state.”

If the EPA admonishment of Iowa’s lax environmental enforcement were not enough, we also are waiting for the state to offer its long-overdue decision on how to proceed on health reform. The 2012 election affirms the Affordable Care Act will not be repealed, so the state’s dragging its heels on creating a health insurance exchange no longer makes sense — if it ever did.

Yet, we now have a real question of whether it’s a good idea for the state to move ahead on its own with an exchange, where Iowans can shop for affordable insurance and not be denied coverage, or having the federal government do it for us. As the Register opined in an editorial today, “It is too important for this state to mess up.” Citing problems implementing temporary high-risk pools, and political dealings in previous legislative attempts to create an exchange, the Register noted:

“Iowans need the coming insurance marketplace to work for them in years to come. But state leaders have shown they are not the ones to design it.”

Can we govern ourselves? Apparently national candidates will come calling in Iowa without worrying about that. So maybe we should answer if for ourselves.

Posted by Mike Owen, Assistant Director


How about that timing of worker pay report?

Posted October 31st, 2012 to Blog
Mike Owen

Mike Owen

Timing is everything.

Consider the announcement Tuesday by the Branstad administration of a new report produced by an outside company to examine whether Iowa state workers are paid too much.

Paid too much?

As the Department of Administrative Services was releasing the report, emergency rescue workers across the Eastern seaboard were putting themselves in harm’s way to help their neighbors in the path of the deadly Hurricane Sandy. And right here in Iowa, within a couple hours of the DAS news conference, bank robbers shot two law enforcement officers — critically wounding the Sumner police chief and injuring a state trooper.

We count on public servants every day, sometimes when lives are at stake, sometimes in enriching life with education, sometimes in just keeping life orderly enough that we can enjoy it without worrying whether the water or food will poison us, or that our job will not put us in danger we did not sign up for.

Oh, and the report? It found that pay scales for Iowa state workers are generally competitive. Where the report cited potential problems, the information provided was too sketchy to delve in and really go through it. And, being produced by a private company that copyrighted the report, we might just never know what our tax dollars produced. This is what happens with privatization, folks. But if you want a quick look at the holes in the report, see the review Tuesday by IPP’s Peter Fisher.

So, for those less inclined toward knee-jerk appeals against public workers, the timing of this report, you might say, wasn’t too bad.

Posted by Mike Owen, Assistant Director

 

Small businesses understand competitive realities, role of government

Posted October 25th, 2012 to Blog
Mike Owen

Mike Owen

Political talk pandering to small businesses is commonplace, and often involves inaccurate assumptions about positions on taxes and the role of government. Thus, they are not only frequent, but frequently wrong.

A survey released today by the Small Business Majority (SBM) www.smallbusinessmajority.org — a nonpartisan small-business advocacy group — found wide acknowledgement of the need for more equitable, sustainable fiscal choices in Washington. As noted by SBM:

Contrary to popular belief, nationwide scientific opinion polling conducted earlier this month found that the majority of small business owners—more of whom identify as Republican than Democrat (47%-35%)—believe that raising taxes on the wealthiest 2% is the right thing to do in light of our budget crisis. What’s more, 40% strongly believe this.

The polling also found the majority of entrepreneurs see a productive role for government in helping small businesses achieve success. Nearly 6 in 10 agree government can play an effective role in helping small businesses thrive.

These are interesting results but they should not be terribly surprising.

Folks in small business know:

  • Budgets have two sides — spending and revenue.
  • Small businesses benefit when employees and consumers are educated, safe, healthy and financially secure.
  • Small businesses can compete when the playing field is level for all businesses; it’s hard to compete with bigger competitors who are getting special breaks from the referee — government.

And there are lessons in this for state policy makers as well.

Tax breaks geared to multistate corporate giants that can shift profits to other nations or states do not benefit small businesses, or all businesses equitably, and do not always help the economy. It is clear that people running small businesses understand this.

Iowa can make the playing field better, and restore squandered revenue, by plugging tax loopholes that are costing the state $60 million to $100 million a year. Several states already do this, including four of the six states that border Iowa: Illinois (home of Deere & Co.), Wisconsin, Minnesota and Nebraska. But Iowa lawmakers have refused to defy the big corporate lobbyists that have stood in the way of this important reform, known as “combined reporting.”

You can learn more about that and other inequitable, unaccountable tax breaks in Iowa at the Iowa Fiscal Partnership website, www.iowafiscal.org.

Posted by Mike Owen, Assistant Director


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Score one for economic reality: Public jobs matter

Posted October 22nd, 2012 to Blog
Mike Owen

Mike Owen

Today’s New York Times editorial, “The Myth of Job Creation,” takes both President Obama and challenger Mitt Romney to task for their comments in the second debate about the importance of public-sector (government) jobs.

As the Times noted:

Public-sector job loss means trouble for everyone. Government jobs are crucial to education, public health and safety, environmental protection, defense, homeland security and myriad other functions that the private sector cannot fulfill. They are also critical for private-sector job growth in … fundamental ways.

At the Iowa Policy Project, we have made this case repeatedly in Iowa over the last few years, both in response to cutbacks in Iowa budgets and to misinformed political assaults on federal stimulus spending, which did a good job bridging revenue gaps in Iowa to prevent worse cutbacks in public-sector spending. See our latest “Iowa JobWatch.”

In Iowa, 1 in 6 jobs is a government job, at the local, state or national level. How is it possible that roughly a quarter-million jobs in our state do not have an important impact on our economy? The answer of course is that they do. The lion’s share of those jobs are in local government, so they are scattered across the state. They are filled by our neighbors, buying goods and services from local businesses and keeping kids in our schools. As the Times notes, regarding comments by both presidential candidates suggesting that “government does not create jobs”:

Except that it does, millions of them — including teachers, police officers, firefighters, soldiers, sailors, astronauts, epidemiologists, antiterrorism agents, park rangers, diplomats, governors (Mr. Romney’s old job) and congressmen (like Paul Ryan).

As with shortsighted approaches in budgeting that attempt to resolve all deficit issues with spending cuts, instead of taking a balanced approach to both the spending and revenue sides of the budget ledger, our leaders make a mistake when they think all new jobs have to be in the private sector or they don’t matter. Public-sector spending feeds private industry, and creates new jobs in the private sector. To pretend otherwise is foolish.

It’s always good when a dose of fiscal and economic reality hits the public debate. But it is unfortunate that it doesn’t happen more often.

Posted by Mike Owen, Assistant Director


The bridge to recovery

Posted August 29th, 2012 to Blog

There’s a whole lot of politickin’ going on these days and one of the targets is the American Recovery and Reinvestment Act, or ARRA, or the “stimulus.”

One of the points we made at the Iowa Fiscal Partnership during and after the adoption of the Recovery Act was its use as a “bridge” for state services. As we note on our IFP website, “economic stimulus measures need to be targeted, timely and temporary, to act as a bridge across the economic and fiscal valley of a recession.”

Recall that some in the Legislature, and some folks during the 2010 campaign season, complained that such use of “one-time funds” was a bad idea for ongoing services — that it would create a “cliff” in funding that, once exhausted, would leave the state on the hook for new responsibilities it might not be able to afford.

Late last week, the nonpartisan Legislative Services Agency shed new light on this discussion with a simple bar graph on the front page of one of its “Issue Review” reports, this one about Iowa state appropriations over time.

Iowa appropriations graph

Source: Iowa Legislative Services Agency, August 2012

Note the green portion of the bars, representing where ARRA funds filled in for lower state revenues caused by the Great Recession. No cliff emerged following the use of ARRA funds as state revenues (the red portions of the bars) rose. But note from FY2009 to FY2010 how state resources might have fallen without the ARRA funds. That potential cliff would have threatened state funding of education and health services that Iowans depend upon.

Clearly, the folks promoting one-time-fund orthodoxy were wrong, and the “bridge” analogy was spot-on.

The stimulus successfully bridged the gap in revenues to stop the critical loss of state services, and maintain the benefit of those services to the state’s economy.

Posted by Mike Owen, Assistant Director