Basic needs and the minimum wage

Posted April 10, 2014 by iowapolicypoints
Categories: Economic Opportunity, Organization

Tags: , , , , ,

Basic RGBWorking full time is no guarantee that your family will be able to get by.

In fact, 1 in 6 Iowa households with a worker earned less than is needed to support a family at a very basic level. That is the finding of a report released Wednesday by the Iowa Policy Project.

The new report, part 2 of the 2014 edition of The Cost of Living in Iowa, used census data to estimate how many families earned less than is needed to pay for a no-frills basic standard of living – covering rent, food, transportation, child care, clothing and health care.

In all, at least 100,000 Iowa families earn less than the basic needs budget amount (reported in part 1 of the Cost of Living report). For those families, the average shortfall – the break-even income amount minus what they actually earned – was over $14,000.

So how would an increase in the minimum wage help such a family? A full-time wage earner at the current minimum wage of $7.25 would see an increase of almost $6,000 in annual income if the wage were raised to $10.10, as Senator Harkin and others have proposed. That’s a pretty good chunk of the average $14,000 shortfall facing these families.

The situation facing Iowa’s single-parent families is much bleaker. Almost 3 in 5 – over 27,000 families – fall short of the basic needs level of income despite working at least half time, and 29 percent earn less than half the break-even level. The average working single parent’s earnings fall over $21,000 short of what is needed. High child care costs are responsible for much of that shortfall.

How do such families get by? Some move in with relatives or find short-term strategies to survive, but many rely on work supports such as food assistance, hawk-i or Medicaid or the Affordable Care Act subsidies for health care, and the state’s Child Care Assistance program.

Wouldn’t it be better for everyone if Iowa’s low-wage employers followed the lead of Costco and others and quit using these public supports to subsidize their low wages?

An increase in the minimum wage makes all employers responsible for providing something closer to what is needed for a worker to get by in today’s world. Even a single person living alone needs in excess of $13 an hour to pay the bills.

We need to strengthen our work supports in Iowa as well. Child Care Assistance in particular needs to be reformed. We have one of the lowest eligibility ceilings in the country: At an income well below what any family needs to get by, assistance is eliminated.

And we make it difficult for the thousands of students who are parents to work part time while going to school part time to qualify for child care assistance at all. Still, employers need to do their part to make work pay.

Working full time shouldn’t leave a family in poverty.

Peter Fisher

Posted by Peter Fisher, Research Director

Let’s be done with Iowa’s fake job number

Posted March 18, 2014 by iowapolicypoints
Categories: Economic Opportunity, Organization

Tags: , , ,

For some time now, the Iowa Policy Project and others have noted a bogus statistic that has been inserted into official jobs data provided by Iowa Workforce Development (IWD).

It just keeps getting better — the fake statistic — because it is designed to work that way.

“Gross Over-the-month Employment Gains” is an extra line that has been added to IWD’s seasonally adjusted, nonfarm jobs spreadsheet, which provides month-by-month data by job sector, back to January 2008.

Basic RGB

Below the standard table of rows and columns is the special line, with numbers reflecting the gains-only count since January 2011, when Governor Branstad took office. Construction up 200 but manufacturing down 400? No problem. Ignore the manufacturing losses and call it a gain of 200. That is exactly how this method treats job counts.

And now there’s a new wrinkle. Previously, IWD only showed what the count looked like for each month, with no overall total. You had to add the numbers yourself.

Beginning with the latest report, the ever-helpful IWD now takes care of that for you, or for whomever would want the meaningless number. With the latest report, IWD makes it a cumulative count.

Our experience with IWD staff is that they are professionals. No doubt they cringe every time that number comes out of the agency — whoever ordered them to compile it.

But no doubt the Governor is pleased. While the number is a total distortion of reality, it shows him close to the pace he would need after three years (120,000) to get to his magic goal of 200,000 jobs in five years. Kind of like winning a basketball game by shutting off the opponent’s side of the scoreboard, but, whatever it takes, right?

So, in case you’re interested, Iowa’s economy has created a net increase of just under 61,000 jobs since the Governor took office — about half of what he’d need to be on pace toward his goal. For a real analysis of Iowa’s job picture, see IPP’s monthly Iowa JobWatch report, or our annual report on The State of Working Iowa.

140318-jobsat36months2Now it’s one thing if the Governor’s campaign wants to peddle silly job numbers under its own letterhead. But it is wrong — flat out wrong — for official data to be presented by IWD with what amounts to a political campaign line for the Governor.

For those of us engaged in nonpartisan research and analysis, the political tainting of IWD reports is a great disappointment. Like us, IWD should be trying to determine and illustrate the actual job picture facing our state, so policy makers can make decisions in that light.

IWD and all state agencies must be neutral players if their mission is to serve all Iowans — not someone’s political agenda.

Owen-2013-57Posted by Mike Owen, Executive Director

Two numbers say so much

Posted March 6, 2014 by iowapolicypoints
Categories: Budget and Tax, Organization

Tags: , , , ,

Two numbers say so much: 140 and $36 million.

Last year, 140 companies paid no income taxes in Iowa but — through the tax code — received $36 million in research checks.

Those two numbers alone tell us two things: We have a problem with transparency, and we have a problem setting priorities.

We know those two numbers because Iowa’s Department of Revenue is required every February to report on the use of the state’s Research Activities Credit.

We don’t know enough about what’s behind those two numbers — the problem of transparency. As it’s public money, the assumption should be that we are owed full information about where every dollar is spent (a case made well by The Des Moines Register in a recent editorial). Cities, schools and counties are required to disclose this routinely.

In fairness, some lawmakers worked hard in 2009 to assure the transparency that we do have, passing a good law that required the annual reports. Before that, we had even less information. Big business fought hard to stop the law, and failed. And because we have the law, we can make several noteworthy observations that are detailed in this Iowa Fiscal Partnership backgrounder, and get some insights on who benefits, as in the table below.

Table3-RACrecipients-w

But the annual reports do not tell us — or indicate with certainty — which companies receive the benefit as checks, how much each receives or how the money is used. There is no evidence of jobs created. There is no evidence of need or of public benefit, or return on the public investment.

There is no point where we say, “Enough already. You know, Company X, you had $200 million in profits last year — we don’t really think your shareholders need Iowa taxpayers’ help when our schools can’t keep up with costs and our city water systems need updates and our roads have potholes. And, by the way, your company and your employees are better off if we take care of those priorities before we give money to you.”

This exposes the problem with budget priorities: This spending is done outside the budget process. Spending on the RAC is decided before the Legislature even convenes. It’s automatic. The decision has already been made for 2015, and 2016, and so on, and we don’t even know for sure how much it will cost — though the Revenue Department projects it to grow precipitously.

State law provides that companies are entitled to that money regardless of any other pressures on state budget choices — including cuts to education. Example: In 2013, Iowa spent that $36 million to help companies that contributed no income tax, but for the current fiscal year that started in July 2013, the state reneged on its commitment to the school funding formula. The state fell more than $60 million short of its share, leaving property taxpayers to pay it — in the same year, by the way, that legislators boasted about property-tax reform.

I think I know where we could have found $36 million of that lost school funding.

A special state panel that reviewed all Iowa tax credits in 2009 singled out the so-called “refundability” of the RAC as a special problem. It recommended eliminating refundability for big companies, which have dominated the spending on this credit. And it also recommended putting a sunset — an automatic elimination — on all tax credits after five years. To keep them going, the Legislature would actually have to take a vote on them. That is accountability.

As it stands, our Legislature does not touch this issue. Meanwhile, big and immensely profitable companies are sucking dollars away from our local schools, state universities, community colleges, local police, county mental health services, environmental quality programs and enforcement, wage and hour enforcement … well, you get the idea.

That is the budget choice being made, because our state is happily spending on autopilot with no proof of a public benefit.

Owen-2013-57Posted by Mike Owen, Executive Director

Minimum wage — why Iowa is behind

Posted March 3, 2014 by iowapolicypoints
Categories: Economic Opportunity, Organization

Tags: , , ,

When we start talking about raising the minimum wage in Iowa the most important point is that we’ve been at $7.25 since Jan. 1, 2008, more than a year before the federal minimum rose. And every year that goes by without an increase affects Iowa families who are struggling to keep their heads above water. Families that count on minimum wage income for a major share of their household budget have seen their costs rise dramatically over the past six years.

In both Iowa and in Congress, there are proposals to raise the minimum wage to $10.10. In both Iowa and in Congress, many issues are raised to cloud what is really a pretty straightforward issue.

As we have shown in our most recent Cost of Living in Iowa report, the current minimum wage doesn’t even come close to paying the bills. A single parent with two children working a full-time job would need to make $28.11 per hour just to be able to pay for a basic, no-frills monthly budget; $56,212 annually before taxes and credits. Two-parent families with two children would each need to make $16.93 an hour or a combined total of $67,724 a year before taxes and credits. A single parent with two children working full time making $7.25 per hour is making $4,700 below what the federal government deems poverty for a family of this size and nearly four times less than what is needed for a family supporting hourly wage.

Basic RGBThirteen states have already seen an increase this year and now 21 states and the District of Columbia have a higher minimum wage than the federal. As these states have shown, there is no reason to wait for Congress because it’s not guaranteed that they are going to act in the near future.

One of the myths we hear is that increasing the minimum wage would lead to serious job losses — but the weight of the evidence shows that the net employment effect is minimal and that any slight loss of jobs is compensated by the increase in income for those low-wage families. Low-wage workers who see a wage increase are more likely to spend that additional income immediately, which puts more demand on goods and services and more money in the hands of small-businesses owners who may need to hire more people to keep up with that demand.

A prominent study last year by the Center for Economic and Policy Research explains why this employment effect is so small. Employers can adapt to wage increases through various channels. Employers might reduce the number of hours worked, for example, but the higher pay can raise the standard of living for affected employees. Higher pay can make it easier to find and keep employees; less employee turnover reduces training costs. There could be reductions in non-wage benefits, improvements in efficiency, higher demand from increased consumer spending, and employers may start upgrading the skill level of their workforce rather than cutting the level of their staffing. Employers might pass on some added costs as higher prices to consumers, but this increase is estimated to be very small.

On one point there can be no dispute: A higher minimum wage will substantially lift the earnings of low-wage workers and families will be better off. Now at six years, how long will the minimum wage be held down for families facing higher and higher costs?

  IPP-gibney5464Posted by, Heather Gibney, Research Associate 

Investor-owned utilities must deal with climate change

Posted February 25, 2014 by iowapolicypoints
Categories: Energy & Environment, Organization

Tags: , , , , , ,

Editor’s Note: This post is excerpted from a statement by David Osterberg, founder of the Iowa Policy Project, to the Iowa Utilities Board, February 25, 2014, in docket NOI-2014-0001
Full statement submitted to IUB is here

The Iowa Utilities Board must recognize that this docket has implications for confronting climate change. To look narrowly and make a decision based only on what is best for the stockholders of Alliant or MidAmerican Energy would be the wrong choice. Climate change is a reality and the investor-owned utility companies must adjust their business model to contend with it. The question for the Board should be, “How does the state of Iowa procure more distributed electric generation installed in a way that gives the utilities a way to be part of the solution?”

First, there is no scientific debate about whether the climate is changing and whether humans are the main cause. In October 2013, 155 science and research staff at 36 Iowa colleges and universities signed a statement on the reality of climate change. As one of the signers I would like to submit the first paragraph and the last sentence of that statement:

“Our state has long held a proud tradition of helping to ‘feed the world.’ Our ability to do so is now increasingly threatened by rising greenhouse gas emissions and resulting climate change. Our climate has disrupted agricultural production profoundly during the past two years and is projected to become even more harmful in the coming decades as our climate continues to warm and change.”

Rather than being a vague threat lurking somewhere on the horizon, scientists from around the globe confidently stated in the latest Intergovernmental Panel on Climate Change report that temperatures and rainfall patterns are shifting due to additions humans have made to the atmosphere by burning coal and oil. We who work in this area are alarmed at the lack of action to reduce the pollutants that are the root of this problem.

Children born today will spend their lives under climates that are different from those any generation of Americans has experienced. The same will be true for their children, and their grandchildren. Agriculture, the lifeblood of Iowa, is being threatened with more frequent droughts and floods. Switching to modern renewable power sources and becoming more efficient in how we use energy cannot roll back the clock, but it can help make these climate changes less extreme.

I applaud the Board for looking deeply into distributed electric generation such as wind and solar power. It is the solution to the biggest environmental problem in modern times.

IPP-osterberg-75David Osterberg is the founding director of the Iowa Policy Project, and a Professor in the Department of Occupational and Environmental Health in the University of Iowa College of Public Health.

More information:

Information on January 2014 Notice of Inquiry by Iowa Utilities Board

Previous IPP publications:

IUB Inquiry is Opportunity to Find Acts in Cap-and-Trade Debate — July 2009
News release
IUB Notice of Inquiry

Proposals in Congress Do Provide Relief to Consumers — June 2009
Backgrounder
News release

Electric Rate Reform Could Spur Energy Savings, Help Low-Income IowansJune 2009
Full report
Executive summary

News release

A taste of transparency

Posted February 11, 2014 by iowapolicypoints
Categories: Budget and Tax, Organization

Tags: , , , , , ,

This week we will get a taste of what transparency could look like for the hundreds of millions of dollars that Iowa spends through the tax code.

We’ll only get a taste, to be sure, as what we’ll see won’t be enough. But, thanks to a law that passed against difficult and powerful lobbying interests in 2009, we do get that taste — a glimpse into who benefits from Iowa’s largest and most generous business tax credit.

It’s the Research Activities Credit (RAC), a costly little gem that has provided big companies some big checks from the state — in some cases even when they pay nothing in income tax. The Iowa Department of Revenue projects the cost of this credit to grow by more than half in the next five years, from $52.4 million to $80.3 million.[1]

projected growth of RACCould this be a shrewd investment for the state? Not likely, or at least that must be the presumption, as the beneficiaries have neither shown nor had to show the state’s real taxpayers what they get in return for the giveaway. Click here for a look at the recent history on this credit.

Projected RAC costs tableThe economic development gurus defend the RAC with little more than a “trust us” argument, which of course is not a strong enough argument for public schools, or state universities, or community colleges, or cities with law enforcement and infrastructure challenges, or counties with mental health services and emergency response challenges.

And the costs just keep rising for the RAC and many other business tax credits, with virtually no public accountability. What little that is available will come in the Department of Revenue report that is due yet this week. It will show the total amount of claims, the total amount paid as checks to companies that do not pay state income tax, and will identify companies with over half-a-million dollars in claims. Stay tuned.

[1] Iowa Department of Revenue, Tax Credits Contingent Liabilities Report, December 2013, http://www.iowa.gov/tax/taxlaw/1213RECReport.pdf

Mike OwenPosted by Mike Owen, Executive Director

Watch tax spending more closely

Posted February 4, 2014 by iowapolicypoints
Categories: Budget and Tax, Organization

Tags: , , , , , ,

Iowa is behind — not that we didn’t already know that.

A new report by the Center on Budget and Policy Priorities (CBPP) examines several aspects of what states do in budget planning. Particularly noteworthy in the report for Iowa is its poor attention to the impact of tax expenditures — spending through the tax code. When we have a tax break on the books, such as a credit or exemption, it has an impact on the budget bottom line the same as if the lost revenues were spent on the other side of the ledger.

Most of this spending, as the Iowa Fiscal Partnership has shown over the years, is on autopilot. These breaks exist year to year, never requiring renewal — unlike the kind of spending we do through direct appropriations, where critical services are subjected to annual scrutiny to exist or not for another year.

Here’s why it matters, according to the executive summary of the CBPP report:

When recessions occur, states must scrutinize all forms of spending.  An important tool for this is oversight of various tax expenditures (tax credits, deductions, and exemptions that reduce state revenue), which in many ways function as spending through the tax code. This will enable states to make sound choices between the most essential tax expenditures and those the state can forgo. For example, states can regularly publish tax expenditure reports that list each tax break and its cost. And states can enact sunset provisions so that tax breaks expire in a specified number of years unless policymakers choose to extend them.

The problem in Iowa is not a lack of analysis or data. The Iowa Department of Revenue (DOR) has produced solid tax expenditure studies in 2000, 2005 and 2010. They are found here on the DOR website. And there is considerable information outside those formal studies that illustrate overall costs — primarily a so-called “tax credit contingent liabilities report” offered three-to-four times a year by DOR for use by the Revenue Estimating Conference. Furthermore, a number of important tax expenditures have been the subject of in-depth reports to the legislative committee charged with reviewing tax credits.

So in what way is Iowa behind the curve? The CBPP report lists 10 ways states can better budget for the future, including one on the tax-expenditure oversight issue:

Oversight of tax expenditures:  expiration dates for tax expenditures after a set number of years to subject them to regular scrutiny of their cost and effectiveness, in addition to tax expenditure reports that list the costs of individual tax breaks.

Such expiration dates are called “sunsets.” A special Tax Credit Review Panel appointed by then-Governor Culver in the wake of the 2009 film-credit scandal produced a set of strong recommendations for reform, among them a five-year sunset on all credits. This proposal was ignored.

Furthermore, a review of tax credits on a five-year rotation set up by lawmakers in response to that panel’s recommendations has produced no apparent policy change; this perhaps is not surprising since the committee that reviews the credits has not issued findings that the credits are meeting the intent of policy, or producing a return on the taxpayers’ investment.

The bottom line is this: Unless tax expenditures sunset, there is little incentive for legislative committees to take evaluations seriously.

Mike OwenPosted by Mike Owen, Executive Director


Follow

Get every new post delivered to your Inbox.

Join 25 other followers