Archive for the ‘Economic Opportunity’ category

Building blocks of inequity

February 10, 2016

Iowa’s school funding process is broken.

Consider:

  • The Legislature repeatedly violates the law by failing to set state aid in time for districts to adequately plan their budgets.
  • The levels of funding lawmakers set — averaging less than 2 percent growth over the last six years — are routinely below the growth in costs that schools face.

As if those two things are not bad enough, inequities grandfathered into the school funding formula have not been corrected. While the four-decades-old formula was designed to reduce inequities between districts of higher and lower property values by augmenting property tax revenues with state aid, a gap persists.

Long and short: There is a $175 range in the “cost per pupil” that school districts must use as the building block of their annual budgets. While the minimum cost for this year is set at $6,446 per student, six districts are as high as $6,621.

The inequities have been known for some time. When combined with chronic underfunding, these inequities are magnified. In one case, Davenport school officials are defying state limits on use of their own resources to make sure their students have the same opportunity as students in other districts.

For example, as school budgets are based on enrollment, a district with 1,000 students and operating at the minimum — the state cost per pupil — is losing out on $175,000 per year in comparison with a district at the maximum. In a district the size of Davenport, that’s about $2.8 million a year.

What many Iowans might not realize is that their own school district may be in a similar situation to that of Davenport.

Few districts (only six) are at the maximum per pupil cost; most districts (84 percent) are $100 or more below the maximum per pupil cost. Nearly half of all districts (164 of 336) are at the minimum.*

Basic RGB

The more you look at this, you can see it is not a Davenport issue, but an Iowa issue, and a failure of public policy.

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

 

*Iowa Department of Management, www.dom.state.ia.us/local/schools/files/FY16/DistrictCostPerPupilAmountsAllFY2016.xls

Remembering Dave Hurd

February 8, 2016

Dave Hurd supported many Iowa organizations. He had an essential role in our creation of the Iowa Policy Project. In 2001 Joyce Foundation offered our new policy organization a large grant but my grant officer said she wanted to see diverse in-state support. Dave wrote a letter on our behalf to several of his friends who he thought would endorse the work we were beginning at IPP. The amount raised from him and others who responded to that letter gave us the match we needed.

Dave continued to donate to IPP as did many of those who responded to that first fundraising letter. He liked especially our work on water quality but supported our reports documenting the needs of low-income Iowans and our data on fair taxes. He believed that people and the environment deserved protection. In all his charitable work he sought to make this state better. We will miss this great man.

IPP-osterberg-75Posted by David Osterberg, co-founder of the Iowa Policy Project

State aid up 13 percent — for business breaks

January 27, 2016

What do you expect would be the outcry if Iowa’s public schools asked for 13 percent growth in state aid?

Yet few bat an eye when this happens with business tax breaks, as we can expect for FY2017.*

The early scorecard gives business tax breaks the big edge, a 13 percent increase, vs. between 2 and 4 percent for schools.

The Senate approved 4 percent for FY2017 (covering next school year), but the Iowa House on Monday approved 2 percent — even though schools have averaged less than 2 percent for six years, from FY2011-16.

In fact, the Iowa Association of School Boards this year did not even ask for a specific growth number, but rather, that it be set in a timely manner (it’s almost a year late already), and “at a rate that adequately supports local districts’ efforts to plan, create and sustain world-class schools.”

That hasn’t happened for some time. Over the last six budgets, per-pupil growth has been held to 2 percent or below in all but one year. Depending on enrollment trends, some districts even see less.

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Business tax breaks do not face the same budget constraints — ironic, since the cost of those breaks limits what lawmakers permit themselves to spend on services that their constituents demand, not the least of which is education. Other areas — environmental quality, child care, health care and public safety — also are constrained.

A much greater percentage increase in business tax breaks is set in place, as shown below. The total increase of $71 million from this budget year to the one lawmakers are working on now actually may be understated. The $35 million for a new sales-tax exemption for manufacturers is considered a conservative estimate. Even at $71 million overall, however, it represents a 13 percent increase.

160108-IFP-Budget-Fig2FB

Spending on business tax breaks is rarely burdened by the public scrutiny and debate that comes with spending on schools and water programs, which must be approved annually.

Most business tax breaks, once passed, are never touched again unless they are expanded. And as shown by the sales-tax break for manufacturers scheduled to begin this summer, a break may never receive legislative approval but still become law. The Governor is implementing this one on his own, with a split legislature unable to stop him.

Budget choices? Instead of that $35 million in FY2017 for the new sales-tax break, the Legislature could provide about 1 percent growth in per-pupil school funding. We can expect to find another 1 percent in what we’ll spend in checks to companies that do not pay any state income tax, but have more research tax credits than they owe in taxes.

Perhaps one day we will treat all spending the same, whether the spending comes before or after revenues reach the state treasury. Then the wealthy corporations can compete directly for their tax breaks against education for the skilled people they want to work for them.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
Mike Owen is a member of the school board in the West Branch Community School District, first elected in 2006.
* For more about Iowa tax breaks for business, see Peter Fisher’s report for the Iowa Fiscal Partnership, “Here a tax break, there a tax break, everywhere a tax break.” http://www.iowafiscal.org/here-a-tax-break-there-a-tax-break-everywhere-a-tax-break/

Reading, ’Rithmetic & Politics

January 18, 2016

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

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

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

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

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

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

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

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

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

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

 

 

Time is right for minimum wage increase

January 12, 2016

It’s now been eight years since Iowa’s minimum wage has changed, and Governor Branstad stated in a newspaper interview that he would consider signing an increase if it were to reach his desk.

Getting there is a big “if” as the House has not permitted the issue to come to the floor. New House Speaker Linda Upmeyer, in the same Cedar Rapids Gazette news story in which the Governor left open the door to an increase, had this to say:

“I believe we really need to focus on how to get people into jobs with livable wages. I don’t think anybody has as their goal in life to have a job that pays minimum wage. People want to have a job that pays a livable wage.”

The Speaker’s comment merely deflects attention from a popular idea: raising the wage. The issue of course is not about making the minimum wage a “goal in life,” but facing up to the reality that it is low. It is holding down hundreds of thousands of Iowans in their quest to reach what are their life goals.

Furthermore, an interest in “livable wages” does not preclude action on a minimum wage. Nothing is stopping lawmakers from passing a “livable” minimum wage, or by boosting the minimum as part of a larger strategy to encourage better wages across the board in Iowa.

This is not some small slice of our population who could gain. Statewide, a minimum wage increase would give a raise to hundreds of thousands of Iowa workers. An increase from $7.25 to $10.10, for example, would help 306,000 Iowa workers; and a raise to $12, 436,000. Raise it to $15, closer to an actual cost of living, and it would help far more.

A new report by IPP’s Peter Fisher notes that in Linn County alone, a wage at $10.10 by 2017 would raise wages for 18,400 workers directly — over half of them full-time workers and a third of them supporting families.

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Speaker Upmeyer reportedly noted concerns about a “big patchwork” of minimum wages across the state in the wake or Johnson County stepping forward with a wage to be phased in to $10.10 by this time next year. She can fix that. The Speaker has the opportunity to put a popular issue on her agenda during an election year.

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

Mark Smith ‘passionate and tireless’ leader

December 5, 2015
Mark Smith at the dedication of the IPP conference room in his honor, May 2009.

Mark Smith at the dedication of the IPP conference room in his honor, May 2009.

IOWA CITY, Iowa (Dec. 5, 2015) — The Iowa Policy Project today issued the following statement from Jennifer Sherer, president of the organization’s board of directors, about the passing of Mark Smith, who co-founded IPP in 2001 with David Osterberg. Mark Smith was 71.

“It is with deep sadness that we mark the passing of Iowa Policy Project co-founder Mark Smith.
“Mark will be remembered for his passionate and tireless leadership on behalf of workers, families, the poor, and all who struggle to reverse inequity or discrimination. As a labor and civic leader, he devoted his life to strengthening the voices of Iowans seeking fairness and equal opportunity in their workplaces, communities, and at the state Capitol.
“Mark started his career as an educator and maintained a lifelong commitment to the power of organized people and good ideas to transform the world. He leaves behind a remarkable legacy of building durable institutions — including the Iowa Policy Project — that continue to make a difference in the lives of Iowans.
“All of us at the Iowa Policy Project mourn our loss — and Iowa’s loss — of Mark Smith.”
The Iowa Policy Project is a nonpartisan, nonprofit public policy research and analysis organization based in Iowa City. Reports are at www.iowapolicyproject.org.

ALEC Gets it Backwards in Rich States, Poor States

November 30, 2015

We hear a lot about business climates from people who are looking for ways to cut taxes. But they usually get it wrong. One example is the Rich States, Poor States analysis produced by the American Legislative Exchange Council, or ALEC, an organization frequently considered a “bill mill” for corporate-friendly legislation.

The centerpiece of Rich States, Poor States is the “Economic Outlook Ranking,” which ranks states on their conformance to ALEC’s preferred policies, with the best state ranked number one. But when we can compare states ranked the best by ALEC with states ranked the worst, it turns out that ALEC’s 20 “best” states have lower per capita income, lower median family income, and a lower median annual wage than the 20 “worst” states. ALEC’s “best” states also have higher poverty rates: 15.3 percent on average from 2007 through 2013, versus 13.7 percent in the “worst” states. The states favored by ALEC include the likes of Utah, South Dakota, and Idaho, whereas ALEC’s “worst” states include New York, California, and Vermont.

Basic RGB*Best and worst states according to the average Economic Outlook Ranking in Rich States, Poor States, 2007-2015. Income measures are an average over the period 2007 to 2014 (2013 for Median Income).

Looking at it another way, the 20 states that performed best on the four measures of income (the actual rich states) actually score much worse on ALEC’s ranking than the 20 states with the lowest income (the actual poor states).

151130-ALEC-poor-rich

*Average ALEC ranking of the 20 states that performed best on four measures of income — per capita income, median family income, median annual wage, and poverty rate — vs. average ALEC ranking of the 20 poorest states. An ALEC ranking of 1 is best. ALEC ranking is the average of the state’s rank in the first through eighth editions of the Economic Outlook Ranking; rich and poor states are defined on the basis of their average ranking on the four income variables from 2007 through 2013 or 2014.

While Rich States, Poor States purports to provide a recipe for economic growth and “policies that lead to prosperity,” it actually advocates measures to lower wages and reduce opportunity for most Americans. To attain the highest EOR would require a state to have no individual or corporate income tax, no estate or inheritance tax, no state minimum wage, severe tax and expenditure limits, limited public services, and weak labor unions. The evidence and arguments cited to support these policies range from deeply flawed to nonexistent.

We conclude that the actual purpose of Rich States, Poor States is to sell the ALEC-Laffer package of policies — fiscal austerity, taxing lower income people more than the wealthy and wage suppression — in the sheep’s clothing of economic growth. In actuality, the book provides a recipe for economic inequality and declining incomes for most citizens and for depriving state and local governments of the revenue needed to maintain public infrastructure and education systems that are the underpinnings of long- term economic growth.

2010-PFw5464Posted by Peter Fisher, Research Director of the nonpartisan Iowa Policy Project

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