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Policy Points from Iowa Fiscal Partners

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Mother’s Day topic: Fostering opportunity

Posted May 11th, 2019 to Blog

Mother’s Day is always a good time to focus on public policies that can make mothers’ important jobs easier.

Too often, policy makers look the other way as wages and work supports erode. Costs rise, debt mounts, children grow, and bills pile up. The challenges become daunting.

One proposal on the table would give mothers in low- and moderate-income families a break. The Working Families Tax Relief Act would help 23 million mothers across the country — and 211,000 in Iowa, 158,000 of them working — to look forward.

The proposal would strengthen both the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) — again, a benefit to millions nationally, kids in low- and middle-income families, according to estimates by the Center on Budget and Policy Priorities (CBPP). These benefits would be shared broadly across racial groups.

In Iowa alone, the plan would benefit 472,000 Iowa children, according to CBPP.

The proposal strikes a stark contrast to the 2017 tax law that targeted benefits heavily toward wealthy households and corporations — not working families. The principal so-called “middle class” tax cut in that bill was a very meager increase in the CTC, from $1 to $75, to 87,000 children in low-income working families in Iowa.

As CBPP’s Chuck Marr notes in this blog post, a single mother of two who makes $20,000 as a home health aide, for example, would see a boost in her CTC by $2,210 and her EITC by about $1,460 — a total gain of about $3,670.

Working parents at lower levels of income need to be able to afford basic necessities, home and car repairs or other costs of transportation and education or training to get better jobs. The EITC and CTC are critical supports that make work pay for families in low-income situations.

Mother’s Day is a good time to honor those values that we all share. So, go to brunch if you want, but don’t avoid this discussion at the table.

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City.

mikeowen@iowapolicyproject.org

Questions — before the answer comes

Posted May 9th, 2019 to Blog

As Governor Kim Reynolds mulls SF634, the property tax limitation bill, there are many questions anyone would have to consider — questions that did not get an adequate hearing before the rush to passage of a backroom-built bill in the waning hours of the 2019 Iowa legislative session.

1)   Why an arbitrary 2 percent limit on new tax revenues? No matter what increasing costs an individual community may face to provide public services, the bill limits growth in revenues to 2 percent.

2)   Why penalize growth? No matter how much property valuation grows in good times, the revenue limits would restrict the public services needed to service a growing community.

3)   Why penalize recovery from disaster? Reduced property value under tax levy limits will reduce revenue for critical public services in recovery.

4)   Why take local tax decisions out of the hands of locally elected officials? It’s never easy for local officials to raise taxes — taxes they also pay — but the bill substitutes the arbitrary will of state legislators for the judgment of board and council members the voters choose to make local decisions.

5)   Why hinder jobs, encouraging local cuts in public service jobs by putting special levies for employee benefits such as pensions under the new, artificial and arbitrary general revenue cap?

6)   Why encourage a reduction of health benefits for local public service employees by putting those costs under an arbitrary revenue cap?

7)   Why should a “no” vote count twice as much as a “yes” vote? That is the effect of the two-thirds super majority required to go above legislative mandated 2 percent revenue growth. Local officials would have to reach that threshold in many cases with actually more than two-thirds approval: four “yes” votes on a five-member board or council, five if there are seven members — and that is the case even if revenues exceeding 2 percent growth would mean a decrease in tax rates!

8)   Why reward backroom deals in the name of transparency? There was no opportunity for a public debate on this deal hatched in the waning hours of the legislative session. There was no transparency in the process.

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City.

mikeowen@iowapolicyproject.org

 

Be sure to see this Iowa Fiscal Partnership backgrounder by Peter Fisher of the Iowa Policy Project for more information about the actual property tax trends in the state — trends ignored by proponents of the legislation who offered a false narrative about this issue.

Also see this blog by Peter Fisher.

Courageous words about ‘timid’ funding

Posted May 2nd, 2019 to Blog

Even farm groups dare not question the timid funding of water quality

Recently the Cedar Rapids Gazette reported a slapdown of the Iowa Soybean Association by the Iowa Legislature.

Thanks to reporting by Erin Jordan of The Gazette, we learn now that a year ago, legislators were angered by comments from Iowa’s main soybean group that Governor Kim Reynolds’ first bill as governor — new money for water quality — was “timid.”

Partly because of that remark, the Gazette reported, legislators stuck back against the group by taking $300,000 in state funds away. Ironically, those funds had gone for research on water quality improvement.

In her article, Soybean group pays price for calling water bill ‘timid’, Jordan reported:

The Soybean Association had received $400,000 a year in state funding for the On-Farm Network, a program that helps farmers gather data to better manage nitrate fertilizer application on their cornfields. More precise application means less money spent on fertilizer and less excess nitrate washing into lakes and waterways.

IPP used some of the data collected by the Iowa Soybean Association in our recent report on water quality funding by the state. We called our paper “Lip Service” since that is about all Iowans are getting from their top leaders in response to widespread concerns about water quality in the state.

The Iowa Soybean Association research was very good. We found it to be the best out there on what improving nutrient pollution from agriculture was likely to cost. Now, that research has been curtailed because that organization had the temerity to tell the truth about the big talk and little money the state gives to improve water quality in the state.

To read our report or a one-page executive summary, visit the Iowa Policy Project website at http://www.iowapolicyproject.org.

David Osterberg is lead environment and energy researcher at the Iowa Policy Project, which he co-founded in 2001.

dosterberg@iowapolicyproject.org

Perspective for the common good on Tax Day

Posted April 15th, 2019 to Blog
It is so tempting, as we are seeing on social media over the last several days, to talk about filing your taxes and the fact that you (1) paid more or (2) paid less.
Is that really what matters? Let’s take a step back and look at the big picture — the common good. There are three main points to remember:
1) First, what are taxes for? Schools. Roads. National defense. Health care. Fairness and protection in the workplace. Clean air. Clean water. Recreational opportunities. Libraries. There are more examples you may put out front. But in any case, none of those services funded now by taxpayers will be provided without taxes. They will not be provided by the private sector, at least on any scale that provides access to all Americans.
Go ahead. Chart a road to opportunity for all that does not include taxes. You cannot do it. It is integral to the mission, which is why tax reform is an essential stop we identify on our Roadmap for Opportunity. Unfortunately, Iowans have not received tax reform, but a doubling down on bad tax policy trends of the last 20 or 30 years.
2) Our Iowa tax code is inequitable. The rich pay less as a share of their income than people who live paycheck to paycheck. It was already a long-term trend in Iowa (and in many states) and it was worsened by the 2018 tax overhaul. Our state and local tax system is upside down.
3) Cleaning up and restoring balance to our tax code would better assure public money is going to public purposes, rather than subsidizing tax breaks and loopholes for those most politically well-connected. As we have shown: •     Tax credits for business already cost more than $300 million a year. •     Tax loopholes for multistate and multinational corporations already cost between $60 million and $100 million. On Tax Day — and every day — we must ask whether those choices are the best use of public money, when we know education, public safety and environmental quality are being compromised by short-sighted budget decisions in Des Moines. Mike Owen is executive director of the nonpartisan Iowa Policy Project. mikeowen@iowapolicyproject.org

No ‘I’ in sports bets

Posted April 10th, 2019 to Blog

An admitted political compromise would legalize sports betting in Iowa while keeping bets on Iowa student athletes illegal — but only on their individual performance.[1]

Promoters of the plan are betting that this small nod to sports integrity might gain a few votes. However, the compromise in the Legislature shines a light on the integrity issue and to larger weaknesses, which are many.

If legal sports betting were not a threat to sports integrity, no such compromise to the betting bill, HF748, would be needed. The compromise concedes a threat remains to competition outside Iowa that gamblers might influence. Plus, legislative deals made now could be quickly reversed next year once that new betting door is open. I mean, what are the odds?

These are among many points — including fiscal and economic issues — being missed in the rushed drive in 2019 to expand gambling in Iowa with legalized sports betting.

Governing Magazine looked at the revenue states might expect. The magazine cited a Moody’s Investors Service report that noted “sports betting in Nevada accounted for just 2 percent of statewide gambling revenue.”[2] In the first six months of legalized sports betting in New Jersey a mere $3 million in tax revenue was raised from in-casino betting, in a state much larger than Iowa and with a higher tax rate on betting (8.5 percent).[3]

This is not economic development. Sports betting in Iowa is for Iowa residents only; we would not attract any out-of-state spending. And much of the money wagered on sports would come from spending on other forms of entertainment at local businesses, where more of the profits stay in the state.

Casinos want sports betting to entice new customers, who might become regulars at the slot machines and gaming tables.

So for a meager increase in revenue, the state would open up greater opportunities to contaminate sports integrity and create new problems of gambling addiction, along with the attendant family problems and breakups, embezzlement, and job loss.

Already, most families have no savings, or very little. Around half of U.S. families have no or negative net wealth.[4] More than 60 percent don’t have even $1,000 put aside for emergencies let alone for retirement.[5] Having more gambling opportunities keeps people from getting ahead.

Many of these problems are only a matter of time. Any bets on how soon we will see them?

2010-PFw5464Peter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City. pfisher@iowapolicyproject.org

 

[1] The Gazette, Cedar Rapids, March 19, 2019, “Compromise advances sports betting bill in Iowa House,” https://www.thegazette.com/subject/news/government/compromise-advances-sports-betting-bill-in-iowa-house-limits-in-play-prop-wagers-on-iowa-collegiate-sports-20190319, and March 22, 2019, “Betting on college pivotal to gambling debate,” https://www.thegazette.com/subject/news/business/iowa-sports-betting-college-sports-20190322.

[2] Liz Farmer. How the Sports Betting Ruling Will Impact State Budgets The Supreme Court outlawed a federal ban on sports betting on Monday, and some states are poised to capitalize. Governing May 14, 2018. https://www.governing.com/topics/finance/gov-how-legalizing-sports-betting-will-impact-state-budgets.html

[3] The Tax Policy Center, “TPC’s Sports Gambling Tip Sheet.”  https://www.taxpolicycenter.org/taxvox/tpcs-sports-gambling-tip-sheet.

[4] The Quarterly Journal of Economics, Emmanuel Saez and Gabriel Zucman, Vol. 1, May 2016, Issue 2, Wealth Inequality in the United States Since 1913: Evidence from Capitalized Income Tax Data, Pg. 554. http://gabriel-zucman.eu/files/SaezZucman2016QJE.pdf.

[5] Bankrate’s Financial Security Index, 2018, https://www.bankrate.com/banking/savings/financial-security-0118/.

Charging all taxpayers private tuition

Posted February 28th, 2019 to Blog

Iowa taxpayers are on the hook for over $65 million in subsidies each year to private schools in Iowa.[1] Nearly all of these schools are religious schools. While only 6 percent of the students in elementary schools in Iowa are in private schools, all taxpayers help pay for their education (and religious training) through the state taxes they pay. And in nearly three-fourths of Iowa public school districts there is no private school option.

Proposals once again making their way through the Iowa Legislature would expand the subsidies to these private schools, and to the parents who choose to send their children there, through the creation of education savings grants. These proposals would end up costing over $100 million per year, and potentially up to $200 million, money that could instead be used to strengthen education in the public schools serving 94 percent of Iowa’s children.[2]

There are 330 public school districts in Iowa. In 242 of those districts there is no private school offering classes in any grade, Kindergarten through 12th. Private schools are concentrated in Iowa’s metropolitan areas. Nearly half of the total private school enrollment in the state is in just 12 school districts, all located in one of Iowa’s nine metropolitan areas.

The map below shows just how scarce private schools are in rural Iowa. While all 21 of the Iowa counties that are part of a metropolitan area (lighter blue in map) have at least one private school, only 38 of the 78 non-metro counties have a private school option. And in 12 of these counties the options are quite limited: a single school with total enrollment ranging from just 20 to 98. (For an interactive version of the map, click on the image.)

[1] http://www.iowapolicyproject.org/2018docs/181105-IFP-pvtschools-bgd.pdf

[2] http://www.iowapolicyproject.org/2018docs/181105-roadmap-vouchers.pdf

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

pfisher@iowapolicyproject.org

For starters, issues to watch in 2019

Posted January 14th, 2019 to Blog

With the 2019 session of the Iowa Legislature officially underway, the Iowa Policy Project is a dependable source for quality information and analysis on Iowa’s most pressing policy challenges. IPP’s Roadmap for Opportunity project will highlight and clarify many of these challenges as they emerge. Among issues to watch:

Public funds for private schools

Vouchers or “education savings grants” stand to take more money away from public schools and add to the $66 million Iowa taxpayers pay every year to support private education. Funding for Iowa’s public schools has failed to keep up with rising costs. Underfunded schools impact student development and workforce potential. Read more in our Roadmap piece, “Strengthening public education, no new subsidies to private schools” and the accompanying backgrounder, “Taxpayer support of private education in Iowa.”

Unemployment compensation

Unemployment insurance is an important program that supports workers experiencing temporary unemployment and acts as a macroeconomic stabilizer during economic downturn.[1] Because states are granted flexibility in shaping the program, there lies potential to undermine it, as other states have recently. More to come on this issue.

Attacks on public pensions

Maintaining a strong public pension system in Iowa ensures that we are able to attract and retain quality state employees who teach our children and protect our communities. It is important that Iowa wards off attempts to restructure the Iowa Public Employees’ Retirement System (IPERS) in ways that erode retirement security. For more, read our Roadmap piece, “IPERS works to boost retirees, economy.”

Further tax cuts

During the 2018 session, legislators passed a package of tax changes that largely benefit wealthy Iowans, with 2.5 percent of Iowa earners taking nearly half of tax cuts. The current administration has signaled support for further cuts that would endanger services that promote thriving communities such as education and healthcare. Read more on “What real Iowa tax reform would look like.”

Protecting Iowans’ health

Iowa’s privatized Medicaid system continues to cut off patient care and miss payments to providers. With little hope of returning the program to state control anytime soon, we must ensure that cost savings are achieved by increasing innovation and efficiency, not by undercutting health care providers or denying services to the sick and disabled. We should also stay away from Medicaid work requirements, which lead to disenrollment and additional barriers for elderly and disabled Iowans without meaningfully improving employment.[2] For more, read out Roadmap piece, “Restoring success of Iowa Medicaid.”

As noted above, this is not an exhaustive list — only a start. Stay up to date on our analysis through Facebook, Twitter, and our email newsletter.

[1] Chad Stone and William Chen, “Introduction to Unemployment Insurance.” July 2014. Center on Budget and Policy Priorities. https://www.cbpp.org/sites/default/files/atoms/files/12-19-02ui.pdf

[2] Center for Law and Social Policy, “Medicaid Works: No Work Requirement Necessary.” December 2018. https://www.clasp.org/publications/report/brief/medicaid-works-no-work-requirement-necessary

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

Tuition rising: Do students approve?

Posted November 16th, 2018 to Blog
As I spoke to a University of Iowa finance class this week, I wondered: Did they vote?
I showed these students data on a variety of issues, closing with the reversal from state support to tuition as the largest share of funding Iowa universities, an issue affecting most if not all of the class. Here is what it looks like for the University of Iowa:
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We have more about this in our new “Roadmap for Opportunity” series. See this two-pager.
Today, The Gazette of Cedar Rapids landed on my doorstep with a page 1 story about the Board of Regents’ plans to raise tuition 3 percent to 5 percent a year for the next five years at the UI and Iowa State University. The size of the increase will depend on new funding. An increase of at least 3 percent a year results from years of cutting.
My talk to the finance class came six days after Iowa voters retained Statehouse leadership that has forced the regents to tell families to plan on tuition increases for the next five years. The regents’ plan implicitly shows they expect more of the same from the Legislature and Governor.
I told the students that I hoped they had voted, and that they would pay attention to the impacts of public policy choices on their lives. Maybe they did, and maybe they are OK with the policy choices made, and coming.
They will be living with these impacts — student loan debt among them — long after many of us are gone. If they want something different, they will have to speak up, and they will have to do so in large numbers.
M
Mike Owen is executive director of the nonpartisan Iowa Policy Project.
mikeowen@iowapolicyproject.org

Tax reality: No pumpkin spice added

Posted November 1st, 2018 to Blog

You find it everywhere these days: pumpkin spice this, pumpkin spice that … tax cuts this, tax cuts that. It’s so easy to overdo it — with pumpkin spice or with tax-cut rhetoric.

Keep it simple. The tax cuts are for the wealthy, and come at great cost of services while making the tax system less fair.

Just ask the Iowa Department of Revenue, which produced the following analysis in May, just before state legislators rammed their backroom tax package for the rich through both houses of the Legislature and to the Governor’s desk. Yes, she signed it.

And here are the numbers behind those sections of the pumpkin above:

Put another way, almost 40 percent of resident taxpayers will get about 3 percent of the benefit of the tax cut in tax year 2021; over four-fifths of taxpayers will together see only about 26 percent of the benefit. On the other hand, the top 2.5 percent — families making over $250,000 — will receive 46 percent of the benefit.

This was a tax cut for the richest Iowans, who did not need a cut, and the bill overall will cost almost a half billion dollars in 2021.[1]

These effects have been apparent for months,[2] despite claims that are obvious distortions, according to the Department of Revenue analysis.

That analysis shows the average tax change in tax year 2021 for people making between $50,000 and $60,000 — this covers the latest median-income level of $58,570 — would be a $156 cut, or less than $3 a week. Don’t spend it all in one place. Meanwhile, the cut for millionaires would, on average, be $24,636.

By the way, the “fact checkers” who let loose-speaking pols off the hook for their exaggerations about tax cuts are often missing a critical point: Many Iowans, including some middle- and moderate-income working families, actually will see tax increases, or no change at all, if the new law is not changed.

Of course, most won’t see these effects right away, despite the promises. How convenient.

M

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. mikeowen@iowapolicyproject.org.

 

[1] Iowa Department of Revenue analysis for Legislative Services Agency, May 2, 2018

[2] Charles Bruner and Peter Fisher, Iowa Fiscal Partnership, “Tax plan facts vs. spin,” May 5, 2018, http://www.iowafiscal.org/tax-plan-facts-vs-spin/

See also: “A Roadmap for Opportunity: What real tax reform would look like,” Iowa Policy Project, http://www.iowapolicyproject.org/2018docs/180906-roadmap-taxes.pdf

IPERS defenses are ‘care tactics’

Posted October 30th, 2018 to Blog

IPERS, the Iowa Public Employees’ Retirement System, has come under attack in recent years for no substantive reason — only ideology and politics. Understandably, IPERS members, who number well over 10 percent of the population of Iowa, are concerned.

So, some folks are engaged in what might be called “care tactics,” to make sure the stakes on that issue are well-understood. People who care want good information, and are asking for it.

These efforts and concerns are being dismissed by those who claim there is no threat to IPERS. Political scare tactics indeed are part of the 2018 campaign on several issues — primarily taxes, as illustrated by the hair-on-fire ads on television that do more to distort than inform.

But it’s hard to make that case about pension concerns, which stem directly from leaders’ comments, proposed legislation and a longtime goal of ideologues on the right who have become more strident.

Those now dismissive of pension concerns point to recent campaign-season comments by Governor Kim Reynolds. Yet not so long ago Reynolds herself raised the prospect of some change in IPERS’ actual pension structure to a “defined contribution” or 401k-style structure for new employees.[1] Her predecessor, Terry Branstad, had made similar comments.[2] Legislation was proposed in 2017 in the Senate.[3] All of this remains fresh in the minds of those who are worried, as do efforts by others to undermine IPERS.

IPERS critics have promoted that riskier “defined contribution” structure, needlessly scaring Iowa taxpayers about Iowa’s secure IPERS system. The Des Moines Register has run such scare pieces, by Don Racheter of the Public Interest Institute[4] and by Gretchen Tegeler of the Taxpayers Association of Central Iowa.[5]

Neither the media nor IPERS critics have been able to explain how a separate system based on a 401k style structure — “defined contribution” — could be introduced for new employees without undermining existing and promised IPERS benefits for current members.

Contributions plus Interest investments equal Benefits plus Expenses in administration of the system— this is what is required for full funding of IPERS. If you reduce that first item, contributions, by setting new employees apart in a different plan, clearly that matters. It’s math.

In fact, it affects more than those new employees. Reducing contributions by diverting those from new employees reasonably means lower benefits — for current members!

The media and all policy makers should be asking more about this. It’s not enough to accept a “nothing to see here” argument from someone who in the recent past declared herself open to a change — especially when activists have pushed for it, and legislation has been proposed. The dismissal — not exposing it — is the “scare tactic.”

Let’s stay away from the “scare tactics,” and focus on the “care tactics.”

 

[1] Ed Tibbetts, Quad-City Times, “Reynolds says state looking at IPERS task force,” Jan. 26, 2017. https://qctimes.com/news/local/government-and-politics/reynolds-says-state-looking-at-ipers-task-force/article_bf76d410-c70b-5300-951c-ad1cb6bced3f.html

[2] William Petroski, The Des Moines Register, “IPERS cuts key target; unfunded pension liabilities up $1.3 billion,” March 24, 2017. https://www.desmoinesregister.com/story/news/politics/2017/03/24/ipers-cuts-key-target-unfunded-pension-liabilities-up-13-billion/99600866/

[3] O. Kay Henderson, RadioIowa, “Democrats accuse GOP of plotting that IPERS be dismantled,” December 11, 2017. https://www.radioiowa.com/2017/12/11/democrats-accuse-gop-of-plotting-that-ipers-be-dismantled/

[4] Don Racheter, Public Interest Intitute “Replace IPERS with defined-contribution plan,” The Des Moines Register, May 27, 2016. https://www.desmoinesregister.com/story/opinion/abetteriowa/2016/05/17/replace-ipers-defined-contribution-plan/84492576/

[5] Gretchen Tegeler, Taxpayers Association of Central Iowa, “Don’t minimize Iowa’s public pension debt,” The Des Moines Register, January 16,2018, https://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2018/01/16/iowas-public-pension-debt-eclipses-other-public-debt/1035979001/; also “Public retirement systems are not ideal for young, mobile employees,” The Des Moines Register, December 8, 2016, https://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2016/12/08/public-retirement-systems-not-ideal-young-mobile-employees/95148216/

 

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