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Policy Points from Iowa Fiscal Partners

Posts tagged Natalie Veldhouse

Improve water quality funding equitably

Posted July 5th, 2019 to Blog

Iowa has an opportunity to advance equity while improving water quality. The constitutional amendment voters overwhelmingly passed in 2010 gave us the option to fund water quality programs with the sales tax, but it’s only a starting place, and we need to explore more equitable funding solutions.

The sales-tax option needs to be paired with options that enhance equity in the way we fund all public services. A comprehensive approach adds other sources — even as we recognize that Iowa policy makers have refused the voters’ clearly stated desire for action.

A new IPP report offers policy options to improve water quality in an equitable way. Iowa voters, in a 2010 statewide referendum, showed their willingness to raise the sales tax in order to fund water quality efforts. The trust fund they authorized remains empty today, nine years later.

As we noted in an April 2019 report, Iowa water quality funding is inadequate.[1] Some will claim new water-quality funding passed in 2018, but it was at best window dressing. New programs had no new revenue source and added little to the mainly federal nutrient reduction funding that exists now.

The sales-tax option remains on the table and is promoted by serious advocates for action. The challenge is to find a way to offset the impact of a sales-tax increase on lower- and moderate-income households. Already, those lower-income families pay the most of any income group, as a percentage of their income, on sales tax. This drives the overall regressive nature of Iowa’s state and local tax system.[2] Analysis from the Institute on Taxation and Economic Policy (ITEP) shows why a tax on purchases hits lower income families harder (see graph). Lower-income families spend most of what they earn, and they spend a large share of it on goods and services that are subject to the state sales tax. This is less the case the higher you go on the income scale.

Basic RGB

 

How to fix it? We see two immediate options using existing programs: Boost the Earned Income Tax Credit (EITC) to help working families, and expand Disabled and Senior Citizen Property Tax Credit and Rent Reimbursement Program.

How to pay for it? Use at least part of the revenue from a 1-cent sales tax increase. The constitutional amendment directs three-eights of the first cent to the clean water and recreation trust fund. The key is what happens with the other five-eighths.

According to ITEP data, increasing the state EITC to 20.5 percent of the federal credit (from the current 15 percent) would fully offset that average $124 yearly sales-tax increase for a working family eligible for the EITC. The Rent Reimbursement program can contribute for other low-income families. Those two steps — EITC and Rent Reimbursement — would cost an estimated $30 million,[3] only a small share of the “extra” sales-tax revenue from a 1-cent increase

Taxing the polluter is another policy option for addressing a broader equity concern. Fertilizer used in the agricultural sector is the source of the contamination, yet it is exempt from the general Iowa sales tax. Removing the fertilizer exemption would bring a substantial source of water quality funding: about $110 million annually.[4]

In an already tax system favoring the highest earners, raising the sales tax is not a preferred option. But it can be improved and turned into an opportunity to both improve services and the overall balance in Iowa’s tax system. Those interested in both equity and clean water could embrace that opportunity.

[1] David Osterberg and Natalie Veldhouse, “Lip Service: Iowa’s Inadequate Commitment to Clean Water.” April 2019. Iowa Policy Project. http://iowapolicyproject.org/2019docs/190424-WQfunding.pdf

[2] Institute on Taxation and Economic Policy, “Iowa: Who Pays? 6th Edition.” October 2018. https://itep.org/whopays/iowa/

[3] EITC: $124 for each of the 209,000 taxpayers who receive this credit equals $25,916,000. Renters’ credit: $124 for each of the 32,000 who receive the credit equals $3,968,000. Total about $30 million for the two programs.

[4] $1,845,469,000 X 6 % = $ 110,728,140. The total in the 2017 Census of Agriculture was much smaller than the 2012 figure $2,587,059,000.

 

2018-NV-6w_3497(1)

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

Revenue forecast: A confirmation of failure

Posted October 18th, 2018 to Blog

With new revenue information in hand, it is apparent that:

•   Large cuts to higher education were unnecessary
•   Continuing to short-change K-12 schools was needless
•   Concerns about large tax cuts were warranted.

During the 2018 session we saw legislators craft mid-year cuts and an FY2019 austerity budget behind closed doors. The effect will be the same as it has been for several years now: Iowa lawmakers won’t have much to work with when the 2019 legislative session convenes in January due to large tax cuts, leaving tight purse strings for education.

The October 2018 Revenue Estimating Conference (REC) projections show a $127 million surplus — up $95.6 million from what was expected for fiscal year 2018, which ended in June.[1] Many in the state are searching for factors they think contributed to the surplus. In reality, the discrepancy in expected and actual revenue is related to errors in forecasting. The REC used a slower rate of growth in calculating these projections after overestimating revenues for the past two fiscal years.

A significant factor contributing to the surplus is a state revenue boost caused by new federal tax cuts, especially for higher-income families. Iowa has a special state break for federal taxes paid. But because fewer federal taxes are being withheld, additional income is subjected to state tax.

Proponents of the state tax cuts seek to attribute the budget surplus to the cuts themselves. First, it is impossible to credit the budget surplus to the 2018 state tax cuts, most of which will not take full effect until 2019 and beyond.

Second, even the REC estimates do not predict continued growth at the FY18 levels. Iowa will have already given away the FY18 surplus before the beginning of the next legislative session, because tax cuts mean less revenue. The FY20 budget will be tight. This will steer the legislative discourse to hold down K-12 spending, to push higher-ed costs toward tuition and student debt, and to threaten needed services and institutions — as the administration is doing right now to the University of Iowa Labor Center.

Sustainable budgeting requires realistic forecasts and working to help all Iowans understand the impacts of budget and tax choices. It also means generating adequate revenue to pay for essential services such as education, health care and environmental quality, and helping to create opportunity for all.

[1] Iowa Department of Management, “Iowa budget closes with higher-than-expected revenue, $127 million surplus.” September 2018.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project in Iowa City. nveldhouse@iowapolicyproject.org

Eye on the ball: Wages and the cost of living

Posted July 17th, 2018 to Blog

 

 

 

Our 6th edition of The Cost of Living in Iowa finds that roughly 100,000 Iowa working households are unable to make basic needs.[1] Put another way, about 17 percent — or 1 in 6 — households cannot get by on their income alone. It is a critical number that should inform countless public policy discussions for the remainder of 2018 and on into the next legislative session.

Part One of this report details how much working families must earn in order to meet their basic needs, while Part Two estimates the number and proportion of Iowa working households able to earn enough. This latest edition adds new analysis by race, Hispanic origin, and gender.

These pieces provide the foundation for Part Three, which is forthcoming and will connect the dots further illustrate the importance of public work support programs for many Iowans, who despite their work efforts, are not able to pay for the most basic living expenses.

We construct basic needs budgets that represent what it takes to survive rather than thrive in the state of Iowa. These budgets include allowances for rent, utilities, food prepared at home, child care, health care, transportation, clothing and other household necessities. The basic budget does not include savings, loan payments, education expenses, any entertainment or vacation, social or recreational travel, or meals outside the home.

In Part One, we find statewide that a single parent with two children needs to earn a wage of $23.91 per hour in order to meet basic needs. A two-parent household with one child and one parent working need an hourly wage of $13.29, compared to $16.30 for the same family type with two workers. Differences in cost from one county to another can be dramatic. The total annual basic needs budget for a family with two working parents and two children was $10,600 higher in the highest cost county compared to the lowest cost county. No family type is able to meet basic needs on Iowa’s $7.25 minimum wage.

Part Two uses census data to estimate the number of Iowa working households that are able to meet the basic needs without public assistance. In 2018 we find that 17 percent of households or 227,000 Iowans live below this threshold.[2] Broken down further, fully 62 percent of single-parent working households are unable to meet basic needs. For this family type, there is an average gap of $20,000 between after-tax income and basic needs expenses. A larger share of African American (30 percent), Hispanic (28 percent), and female-headed (19 percent) households are unable to meet basic needs in Iowa.

The cost of living in Iowa continues to rise. Working families and individuals in Iowa must earn substantially above the official poverty threshold — in some cases nearly three times the poverty level — to achieve a very basic standard of living in Iowa without the help of public supports. Part Three of The Cost of Living in Iowa 2018 will show the role of work support programs in bridging this gap.

[1] The Cost of Living in Iowa, 2018 Edition, Part 1: Basic Family Budgets. Peter S. Fisher & Natalie Veldhouse, July 2018, the Iowa Policy Project. 

[2] The Cost of Living in Iowa, 2018 Edition, Part 2: Many Iowa Households Struggle to Meet Basic Needs. Peter S. Fisher & Natalie Veldhouse, July 2018, the Iowa Policy Project. 

Posted by Natalie Veldhouse, research associate for the nonpartisan Iowa Policy Project. She and IPP Research Director Peter Fisher are the authors of the latest edition of The Cost of Living in Iowa. nveldhouse@iowapolicyproject.org

Tight margin — big difference

Posted June 22nd, 2018 to Blog

More Iowans than you might expect have a stake in what happens in Washington in the coming days on the Farm Bill. It’s not just farmers.

While the Farm Bill addresses conservation, commodities, rural development, and crop insurance, among other issues, it also carries reauthorization of the Supplemental Nutrition Assistance Program (SNAP) — formerly known as Food Stamps.

In the 2014 Farm Bill, SNAP constituted 80 percent of spending.[i] That investment makes a big difference to about 1 in 9 Iowans — and to the local stores where they use their SNAP benefit. About 350,000 Iowans received SNAP assistance in April of 2018.[ii]

The Senate proposal, which may come to a vote next week, differs markedly from the House bill, which passed 213-211 despite bipartisan opposition. The House bill would cut SNAP for 1 million households, imposing new and unnecessary work requirements on households where people are already working, or unable to work.[iii]

Robert Greenstein, president of the nonpartisan Center on Budget and Policy Priorities, summarized the challenge for low-income working people under the House bill:

Robert Greenstein,
Center on Budget and Policy Priorities

Among those likely to lose food assistance are a considerable number of working people — including parents and older workers — who have low-wage jobs such as home health aides or cashiers and often face fluctuating hours and bouts of temporary unemployment that could put their SNAP benefits at risk. In addition, substantial numbers of people with serious physical or mental health conditions, as well as many caregivers, may struggle either to meet the monthly work-hours requirement or to provide sufficient documentation to prove they qualify for an exemption — and, consequently, may be at risk of losing nutrition assistance.[iv]

The Senate bill looks to improve the SNAP job training program by using feedback from local employers on the skills and opportunities needed in the area. It continues to invest in pilot testing of job training programs, while House-proposed work requirements have not been tested in such state-level pilots.[v]

The bill would also focus assistance on underserved populations, fund nutrition education initiatives, and reauthorize SNAP. It reduces verification barriers for elderly and disabled households by extending certification periods for two to three years.

SNAP is critically important for child development, educational attainment, preventing disease, and lifetime earnings.[vi]

The Senate and House Farm Bill proposals offer decidedly different directions for a proven anti-poverty program that already assures that thousands of Iowans receive nutrition assistance.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

 

[i] United States Department of Agriculture, “Projected Spending Under the 2014 Farm Bill.” January 2018. https://www.ers.usda.gov/topics/farm-economy/farm-commodity-policy/projected-spending-under-the-2014-farm-bill/
[ii] Iowa Department of Human Services, “F-1 Food Assistance Program State Summary – April 2018.” May 2018. http://publications.iowa.gov/27559/
[iii] Center on Budget and Policy Priorities, “House Agriculture Committee’s Farm Bill Would Increase Food Insecurity and Hardship.” April 2018. https://www.cbpp.org/research/food-assistance/chairman-conaways-farm-bill-would-increase-food-insecurity-and-hardship
[iv] Robert Greenstein, Center on Budget and Policy Priorities, “Greenstein: Partisan House Farm Bill Would Turn Clock Back on Efforts to Reduce Hunger and Hardship.” June 21, 2018. https://www.cbpp.org/press/statements/greenstein-partisan-house-farm-bill-would-turn-clock-back-on-efforts-to-reduce
[v] Center on Budget and Policy Priorities, “Senate Agriculture Committee’s Bill Strengthens SNAP and Avoids Harming SNAP Households.” June 2018. https://www.cbpp.org/research/food-assistance/senate-agriculture-committees-bipartisan-farm-bill-strengthens-snap-and
[vi] Feeding America, “Child Food Insecurity: The Economic Impact on our Nation.” 2009. https://www.nokidhungry.org/sites/default/files/child-economy-study.pdf

Housing threat to 65,000 Iowans

Posted June 12th, 2018 to Blog

Over 36,000 low-income households in the state of Iowa depend on rental assistance from the U.S. Department of Housing and Urban Development (HUD)[1] Rental programs are crucially important for the financial security of Iowans who are able to receive benefits. However, 3 of 4 households qualifying for rental assistance are unable to access them due to funding constraints.[2] A proposal from the Trump Administration and a House bill proposed by Rep Dennis Ross seek to further stifle this shrinking program.

Iowans projected to be affected by housing proposals
By congressional district (Source: Center on Budget and Policy Priorities)


In Iowa, the average income of households using rental assistance is just over $12,000. Ninety-seven percent of Iowans using rental assistance fit the category of very low income, meaning they earn 50 percent of the local median income or less. Housing affordability is an issue in both rural and urban areas — 18,700 of Iowa households using rental assistance are in non-metropolitan areas.[3]

The HUD proposal seeks to increase the percentage of a household’s income that they must contribute to rent from 30 to 35 percent. That 17 percent increase is on average a $55 monthly rent increase for families.[4] The changes proposed by the Trump Administration would impact 65,400 Iowans, including 24,600 children. The plan also stands to triple minimum rents for households with a non-elderly or disabled member[5] and eliminate deductions used by the elderly and disabled, and by working families for childcare expenses.

The Ross bill also would eliminate income deductions for eligibility and increase rents for Iowa’s elderly and disabled rental assistance recipients.[6] The bill would impact over 24,400 Iowa households receiving rental assistance; with a 41 percent monthly rent increase for recipients.

Rental assistance encourages work by freeing up household income for work-enabling basic needs such as food, transportation and child care. Secure housing has tremendous impacts on child development including social and emotional well-being, and physical health.[7] These two proposals threaten to destabilize housing for many working low-income households with children, as well as for the elderly and disabled all across the state of Iowa.

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. Contact: nveldhouse@iowapolicyproject.org

 

[1] Center on Budget and Policy Priorities analysis of 2016 HUD administrative microdata

[2] Center on Budget and Policy Priorities, “Policy Basics: Federal Rental Assistance.” November 2017. https://www.cbpp.org/research/housing/policy-basics-federal-rental-assistance

[3] U.S. Department of Housing and Urban Development. “Assisted Housing: National and Local Dataset.” 2017. https://www.huduser.gov/portal/datasets/assthsg.html#2009-2017_query

[4] Center on Budget and Policy Priorities, “Trump Plan Would Raise Rents on Working Families, Elderly, People with Disabilities.” April 2018. https://www.cbpp.org/blog/trump-plan-would-raise-rents-on-working-families-elderly-people-with-disabilities

[5] Center on Budget and Policy Priorities, “Trump Plan to Raise Minimum Rents Would Put Nearly a Million Children at Risk of Homelessness.” April 2018. https://www.cbpp.org/blog/trump-plan-to-raise-minimum-rents-would-put-nearly-a-million-children-at-risk-of-homelessness-0

[6] Center on Budget and Policy Priorities, “House Bill Would Allow Sharp Rent Increases on Struggling Low-Income People.” May 2018. https://www.cbpp.org/blog/house-bill-would-allow-sharp-rent-increases-on-struggling-low-income-people

[7] Research and Practice, “US Housing Insecurity and the Health of Very Young Children.” August 2011. https://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2011.300139

 

 

SNAP changes: Ignoring what works

Posted April 19th, 2018 to Blog

EITC and child care more effective than drug tests and work requirements

Work requirements for public assistance seem to be all the rage — at both the national and state levels — when other policies would do more to encourage and support work.

President Trump signed an executive order April 10 enhancing enforcement of federal public assistance work requirement laws, evaluation of program effectiveness, and consolidation or elimination of “ineffective” programs.[1] The Trump administration also is considering drug tests for SNAP (Food Stamp) recipients.[2]

Similar legislation in Iowa (Senate File 2370) intended to expand regulations on and further monitor recipients of public assistance in Iowa, but appears to have stalled as the 2018 session nears an end. This included implementing work requirements, drug testing, quarterly reviews of eligibility, and a one-year residency requirement.[3]

The Farm Bill draft[4] released April 12 would reduce or eliminate SNAP benefits for 1 million households, or 2 million recipients, according to the Center on Budget and Policy Priorities (CBPP). Work requirements would force able-bodied adults without dependents to prove every month that they work or participate in a training program 20 hours per week. Severe sanctions for noncompliance would cut off benefits for one year the first time — three years the second.[5]

Recent research found recipients under work requirements for Temporary Assistance to Needy Families (TANF) continued to live below the federal poverty level, and that small increases in employment diminished over time and did not result in stable employment in most cases.[6] In the long term, programs that provide training, skill building, and educational opportunities to recipients are shown to be more successful than only implementing work requirements.[7]

Evidence shows that people in SNAP households who can work do work. More than 80 percent work during the year before or after receiving benefits.[8]

Drug testing public assistance recipients has proven to be costly and frivolous. States that have implemented drug testing found that applicants have lower drug usage rates than the general population. The state of Missouri spent $336,297 in 2015 to test 293 of 31,336 TANF applicants and found only 38 positive results.[9]

Eleven percent of Iowans received public assistance in February of 2018.[10] Already, able-bodied adult without dependents have work requirements to receive SNAP in the state of Iowa.[11]

By contrast, the Earned Income Tax Credit and Child Care Assistance (CCA) are policies that are effective in encouraging work. In addition, Iowa could make changes in work support programs, such as CCA,[12] to reduce what are known as “cliff effects” — when families with a pay raise or a new job are faced with a net loss because a reduction in benefits exceeds the new income.

Policies that support working families, not drug testing and work requirements, would do more to encourage work, raise family incomes, and boost local economies.

 

[1] The White House, “Executive Order Reducing Poverty in America by Promoting Opportunity and Economic Mobility.” April 2018. https://www.whitehouse.gov/presidential-actions/executive-order-reducing-poverty-america-promoting-opportunity-economic-mobility/

[2] Associated Press, “Drug testing plan considered for some food stamp recipients.” April 2018. https://www.apnews.com/6f5adff5efeb4f9a9075f76bf9cf5572

[3] IA Legis, “Senate File 2370” February 2018. https://www.legis.iowa.gov/legislation/BillBook?ga=87&ba=SF2370

[4] House Agriculture Committee “H.R. 2: the Agriculture and Nutrition Act of 2018.” April 2018. 115th Congress. https://agriculture.house.gov/uploadedfiles/agriculture_and_nutrition_act_of_2018.pdf

[5] Center on Budget and Policy Priorities, “Chairman Conaway’s Farm Bill Would Increase Food Insecurity and Hardship.” April 2018. https://www.cbpp.org/research/food-assistance/chairman-conaways-farm-bill-would-increase-food-insecurity-and-hardship#_ftn1

[6] Urban Institute, “Work Requirements in Social Safety Net Programs.” December 2017. https://www.urban.org/sites/default/files/publication/95566/work-requirements-in-social-safety-net-programs.pdf

[7] Center on Budget and Policy Priorities, “Work Requirements Don’t Cut Poverty, Evidence Shows.” June 2016. https://www.cbpp.org/research/poverty-and-inequality/work-requirements-dont-cut-poverty-evidence-shows

[8] Center on Budget and Policy Priorities, “Making SNAP Work Requirements Harsher Will Not Improve Outcomes for Low-Income People.” March 2018. https://www.cbpp.org/research/food-assistance/making-snap-work-requirements-harsher-will-not-improve-outcomes-for-low

[9] Center on Law and Social Policy, “Drug Testing SNAP Applicants is Ineffective and Perpetuates Stereotypes.” July 2017. https://www.clasp.org/sites/default/files/publications/2017/08/Drug-testing-SNAP-Applicants-is-Ineffective-Perpetuates-Stereotypes.pdf

[10] Iowa Department of Human Services, “Food Assistance Report Series F-1.” March 2018. http://publications.iowa.gov/27299/1/FA-F1-2016%202018-03.pdf

[11] Iowa Department of Human Services, “ABAWD Letter.” September 2017. https://dhs.iowa.gov/sites/default/files/470-3967.pdf

[12] Peter S. Fisher and Lily French, Iowa Policy Project: Reducing Cliff Effects in Iowa Child Care Assistance, March 2014. https://www.iowapolicyproject.org/2014docs/140313-CCA-cliffs.pdf

 

2018-NV-6w_3497(1)Natalie Veldhouse is a research associate at the nonpartisan Iowa Policy Project.

nveldhouse@iowapolicyproject.org