Andrew Cannon

Following last year’s prolonged legislative session, legislators and the governor congratulated themselves for a budget that fully funded programs and reduced reliance on what they called “one-time funds.”

It is true that state services, systems and structures were funded to a large degree through a stable source, the General Fund (where income and sales taxes are pooled). And funding levels increased generally, especially in comparison to the recession-affected budgets of FY10 and FY11, when many state services and programs took severe cuts.

But the budgeting decisions of last year ought to be viewed in context, as we do in a new report.

First, the use of “one-time funds” proved to be the right choice at the time. Because of the recession, state revenues declined precipitously, which led to a 10 percent across-the-board budget cut. One-time funds now derided by some were used precisely as intended. State “rainy day” funds, reserved for economic emergencies, and the federal Recovery Act (ARRA) combined to fill budget gaps and save services. ARRA provided billions of dollars to Iowa to finance K-12 education, higher education, and health care programs for children, the elderly, Iowans with disabilities and low-income Iowans who had no other access to health insurance.

Second, consider how funding for state services and programs compares to pre-recession funding levels. Even as revenues have bounced back, and funding for many services has stabilized, it is unclear if present levels are adequate to met needs. For instance, state funding for community colleges in FY12 will reach about $164 million, up from FY10 and FY11 levels, but still remain below pre-recession levels. At the same time, community colleges are serving more Iowans than ever, with enrollment reaching 106,000 in FY11, up from 88,000 students in FY08.

Iowa’s other public higher education system, the Board of Regents, this year is working under a 3 percent reduction in funding from FY11. Even with the governor’s proposed FY13 increase, Regents funding would still be below recession levels, to say nothing of pre-recession levels. Students pay the price, with continually increasing tuition costs.

Other programs, such as the Early Childhood Iowa initiative, which provides preschool tuition subsidies and parental education; Child Care Assistance, which helps low-income working parents cover the cost of child care; and the Family Investment Program, which helps the lowest-income families meet basic needs and prepare for employment, all have seen large cuts in funding since before the recession. Even into economic recovery, some programs are still being reduced.

Improving upon last year or the year before is good, but the long-term question asks if we are adequately funding programs to meet Iowans’ needs and to adequately invest in Iowa’s future. Judicious use of public funds is not as simple as cutting services to bring down expenses, but taking a balanced approach that assures adequate funding for services that position Iowa for the future.

Posted by Andrew Cannon, Research Associate

Peter Fisher

The Tax Foundation’s 2012 State Business Tax Climate Index is out, and not much has changed — including the political talk about it.

What this annual release offers is, at its core, an indefensible mish-mash of “Stuff the Tax Foundation Doesn’t Like,” which should be the title. Instead, the group slaps the term “State Business Tax Climate Index” on it, adds its slick logo and pretends the whole thing has meaning. For an ideological message, it may, but for decisions on business locations and expansions, not so much.

Problems with the methodology of this “index” are outlined in my 2005 book, Grading Places, published by the Economic Policy Institute. Much of the latest Tax Foundation (TF) report reads verbatim from earlier versions.

The Tax Foundation rests on contradictory messages. First, it claims that taxes paid make a difference in business decisions or growth, selectively citing literature to back the claim, despite a preponderance of evidence that taxes matter little. Then, it produces an “index” that has little relation to what businesses actually pay. In some cases, lower taxes actually produce a worse score on the index.

Rather than measuring what businesses actually pay, TF instead focuses on selected characteristics of the tax code while ignoring significant features. Results differ wildly from a ranking based on what businesses pay in many cases. This is because of the TF emphasizes rates of tax, without considering the base to which those rates apply. This feature penalizes Iowa, which in fact is a low-tax state for business; according to Ernst & Young, only 18 states have lower overall state and local taxes on business.

In other words, if a state — like Iowa with its single-factor apportionment formula — holds down the base on which tax rates apply, the Tax Foundation ignores the impact on actual taxes paid because it doesn’t like the rate structure.

Ironically, the report penalizes states that offer tax credits, which TF views as harmful to the business climate, a defensible position because it creates an uneven playing field for competing businesses, and jeopardizes critical public services that benefit businesses and their employees. But tax credits have strong lobbies in the Legislature. When the anti-tax politicians crow about Iowa’s low ranking in this report, something tells me that is one part of it they will not mention.

Like the Tax Foundation, they will stick with anything that backs the message they want to share, rather than examine the real issue of effects on business.

Posted by Peter S. Fisher, Research Director

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Andrew Cannon

Two recent reports highlight Iowa’s success in extending health insurance coverage to children. Both reports are the work of the Kaiser Family Foundation (KFF), a nonprofit private operating foundation, based in Menlo Park, Calif., dedicated to producing and communicating the best possible information, research and analysis on health issues.

The first report — “Performance Under Pressure: Annual Findings of a 50-State Survey of Eligibility, Enrollment, Renewal, and Cost-Sharing Policies in Medicaid and CHIP, 2011-2012” — demonstrates the steps that all states are taking to cover children. For instance, hawk-i, Iowa’s version of the Children’s Health Insurance Program (CHIP), has expansive income eligibility guidelines, allowing children from families with income up to 300 percent of the federal poverty level ($67,050 for a family of four) to enroll in the program. Only two states (New York and New Jersey) have broader eligibility guidelines.

Iowa has enacted other policies that make enrolling in public programs less cumbersome, less costly, and more consistent with the goal of getting kids covered.

KFF’s second report highlights Iowa — along with Alabama, Massachusetts and Oregon — among states leading the way in children’s health coverage. “Secrets to Success: An Analysis of Four States at the Forefront of the Nation’s Gains in Children’s Health Coverage” notes that Iowa has experienced, thanks to its use of CHIP in policies including hawk-i, a nearly 20 percent decrease in the number of uninsured kids. Efforts to expand and simplify the eligibility and enrollment process are key to Iowa’s success in covering kids.

As we noted last month, Iowa’s efforts to cover kid not only help the kids and their families, but also help the state. The U.S. Department of Health and Human Services awarded Iowa with a $9.5 million Children’s Health Insurance Program Reauthorization Act bonus payment in late December, in reward for the state’s efforts to expand children’s health insurance coverage.

Though Iowa has implemented some of the policies that led to success in kids’ coverage in the adult health coverage program, Medicaid, additional policy changes could further reduce the overall rate of uninsurance in the state. For instance, Iowa’s Medicaid eligibility thresholds are Iowa are quite low, especially in comparison to hawk-i eligibility levels. 

Both Kaiser reports note that Iowa, like every state, will face challenges to maintain and further improve its health insurance coverage. Budgetary pressures, burgeoning caseloads and a growing strain on information technology systems make it difficult. However, both articles illustrate a number of policies Iowa could pursue to continue to be a leader in kids’ health coverage.

Posted by Andrew Cannon, Research Associate

Peter Fisher

A consensus seems to be developing to reform tax-increment financing, or TIF. This represents an understanding that responsible use of taxpayer funds is not a partisan issue. The iron is hot for reform, now.

And it is reform that we’re talking about, not elimination of TIF, as some fear. Reform is the case I have made in a recent report for the Iowa Fiscal Partnership about TIF use in Johnson County, and in a public presentation on that issue recently in Coralville.

Another public TIF reform meeting is scheduled Saturday, Jan. 21, from 10 a.m. to 11:30 a.m. at the Johnson County Health and Human Services Building, 855 S. Dubuque St. Iowa City, conference rooms 202B and 202C, second floor. There is public parking on the north side of the building; enter through NW door near the flagpole.

For reform to be meaningful, we need to do more than tinker around the edges with TIF. Fundamental issues need to be understood and addressed.

Let’s start by recognizing that providing subsidies (some say “incentives”) for retail development is simply bad public policy. They are either unnecessary or counterproductive. Retail development occurs when the market for retail justifies it; potential sales are all the incentive that is needed, and that is driven by location. A subsidy, provided through TIF or another means, is really a giveaway of taxpayers’ dollars.

Next, providing infrastructure to accommodate growth is what cities do. They should not need schools and counties to help in most cases. Many city projects are appropriately financed by issuing bonds, repaid by the city’s taxpayers.

Third, once a TIF project is paid off, cities still may have the district in place and often can find a way to keep diverting property taxes from the school district and county. This can be millions of dollars. A sensible law would require the TIF to end with the completion of a project, so that schools and counties are not denied their share of the increased value created in the TIF district.

Beyond those fundamental problems, TIF law in Iowa permits:

• Piracy of businesses from one community to another, even next-door neighbors, as Coralville is doing with over $18 million in breaks to encourage Von Maur to move from Iowa City.

• A shift of responsibility from residents to nonresidents to pay the taxes needed to provide city services.

• A city to cause residents of one school district subsidize tax-base improvements in another.

TIF reform may take many forms in this legislative session, but no TIF reform package will be sufficient unless it firmly deals with the issues noted above.

Posted by Peter S. Fisher, Research Director

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Note: A related guest opinion from Fisher is in the January 19, 2012, Iowa City Press-Citizen.

IPP Research Director Peter Fisher speaks at a forum on tax-increment financing as Sen. Joe Bolkcom, D-Iowa City, and Rep. Tom Sands, R-Wapello, look on.

Peter Fisher’s report for the Iowa Fiscal Partnership about the use of tax-increment financing (TIF) painted a picture of a program that has become a monster. I encourage all to find the report on our website, or to view the forum in Coralville hosted by the bipartisan team of Sen. Joe Bolkcom, D-Iowa City, and Rep. Tom Sands, R-Wapello.

It takes some folks out of their comfort zone — apparently former Iowa City Council Member Bob Elliott among them in today’s Iowa City Press-Citizen — to see what an otherwise well-intentioned and potentially valuable tool has become due to lax state law. Cities across Iowa have shown an inability to handle the responsibility that goes with the permission to divert other jurisdictions’ tax revenues with TIF. Such projects that are supposed to benefit all whose revenues are being used. Unfortunately, it frequently does not work that way.

The report offers several ideas for reform to rein in abuses; it does not call for elimination of TIF, but for regulation. Perhaps Mr. Elliott missed that, as he states, “For me, an appropriate analogy to the TIF situation would be medical drugs, which can provide great benefit or be dangerously abused. In situations like that, you don’t eliminate it, you regulate against misuse and retain the capacity for beneficial use.” Agreed.

Indeed, the drug analogy is appropriate. Economic development types have become addicted to the idea that they can use TIF to do many things without regard to the impacts on neighbors or even the real purpose of TIF. Fisher’s report offers examples from Johnson County — notably Coralville’s use of property-tax dollars from one school district to create new property-tax base in another, in a project that effectively lured a major department store from Iowa City next door.

If state lawmakers ignore such examples, they will be repeated — in fact, it would give cities tacit approval to consider these practices appropriate. Take that, Clear Creek-Amana school district. Take that, Iowa City.

Fisher’s report is a wonderful example of how a nonpartisan organization that is focused wholly on issues, and not partisan politics, can help people of any political stripe to understand those issues. Iowans use our work and contribute to it because they know they can count on IPP to provide fact-based analysis and relevant research that holds the political spinners accountable. And yes, contributions to our work are welcome. Click here.

Posted by Mike Owen, Assistant Director

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Will Hoyer

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Governor Branstad wants Iowans to focus “like a laser beam” on jobs and education. If we are to do so, he must get us to examine how we’re managing our precious land and water. He cannot expect to achieve his job goals without those important parts of the picture.

What happens when people don’t want the jobs that are available because the air is so dirty that people get sick? What happens when well-educated, highly qualified job candidates pass up Iowa for another state that demonstrates a commitment to clean water and air? A variety of aspects make Iowa a desirable place to bring a business or a family. Most focus on quality of life.

If our children are educated in world-class schools they will have job opportunities everywhere. Companies across the country and across the world will be clamoring to hire hard-working, well-educated Iowa kids and those kids will have choices. Will they want to live in a state that demonstrates a commitment to clean air and clean water? Will they want a place that invests in parks and recreational opportunities? Absolutely.

As The Des Moines Register has pointed out, Iowa consistently ranks near the bottom in per-capita spending on recreation and conservation.

Politicians often talk of a “mandate” when they win an election with 52 or 53 percent of the vote. Why, then, can they not look back on the November 2010 election and recognize that a whopping 63 percent of Iowans voted for an amendment that would dedicate funding to improve Iowa’s waters and land? Now, that is a mandate.

Nobody will argue against creating jobs or improving education. It is a mistake to assume we can do either without other things that attract new people to Iowa and keep them here.

We educate smart people. If a smart Iowa-educated college grad can choose between a job in an Iowa town where the smell of a large hog confinement or industrial grain processor pollutes the air, or where nobody feels safe getting in the river water that runs through downtown, and a comparable job outside Iowa where clean air and water are the norm, we know what the choice will be.

We must invest in children’s education here in this state but we also must invest in protecting the environment so those children grow up healthy. We must invest in creating good jobs where people can work eight hours a day but we must also invest in protecting the environment where those workers live 24 hours a day.

Posted by Will Hoyer, Research Associate

City Channel 4 — Iowa City Cable TV — will show the forum, which features a presentation by Iowa Policy Project Research Director Peter Fisher and comments by Iowa lawmakers and local officials. Fisher’s recent report, Tax-Increment Financing: A Case Study of Johnson County, was the focus of commentary throughout the hearing.

Hosted by State Sen. Joe Bolkcom, D-Iowa City, and State Rep. Tom Sands, R-Wapello, the forum has drawn much attention including media coverage by The Gazette in Cedar Rapids and The Press-Citizen in Iowa City.

The Iowa City cable presentation of the forum will be shown six times in the coming week, beginning at midnight today. The program runs 1 hour, 49 minutes. Here is the full schedule, also found on the Channel 4 website:

Saturday, January 07, at 12:00 a.m.
Saturday, January 07, at 9:30 p.m.
Monday, January 09, at 8:00 a.m.
Tuesday, January 10, at 5:30 a.m.
Wednesday, January 11, at 4:00 p.m.
Thursday, January 12, at 1:30 p.m.

To view slides that Fisher used in his presentation, click here.

Andrew Cannon

Iowa has made a huge effort in recent years to expand health insurance coverage to children. Those efforts are paying dividends to the newly covered children and their families, of course, but also to the state.

The 2009 Children’s Health Insurance Program Reauthorization Act (CHIPRA) gave states new tools to make insuring kids easier. Many of these tools meant a reduced workload for state enrollment officials, and made it easier for families to obtain coverage for their children. CHIPRA also provided cash bonuses to states that implemented the tools and excelled in enrolling children in public health insurance programs.

On Wednesday, the U.S. Department of Health and Human Services announced that Iowa is one of 23 states receiving a CHIPRA bonus for performance in 2011. Iowa is one of just five states to have implemented nearly all of the CHIPRA enrollment tools. Iowa’s $9.5 million bonus can be used to further improve enrollment and eligibility processes or to offset the cost of increased enrollment.

In addition to streamlining the  Medicaid and hawk-i (Healthy and Well Kids in Iowa — the state’s CHIP program) enrollment process, Iowa has also increased enrollment beyond a baseline level, further increasing the size of the bonus. In November 2011, more than 34,000 children were enrolled in hawk-i, with 248,000 enrolled in Medicaid, compared to 22,300 and 219,000, respectively, in July 2009, just months after CHIPRA passed.

Undoubtedly, the effect of thousands of Iowa parents losing their jobs and health insurance has contributed to enrollment increases. Nonetheless, the tools CHIPRA made available, as well as Iowa’s implementation of many of them, made the process of enrolling kids in public health insurance programs less onerous for many parents at a time they most needed assistance.

Posted by Andrew Cannon, Research Associate

Iowa’s jobless rate is 6 percent, two-thirds that of the nation as a whole, but nevertheless high for what we’re used to and representative of the fact that our payroll jobs are significantly below where they were before the recession started hitting Iowa. In our state, jobs are about 44,000 below where they stood in May 2008.

Today in the U.S. House, legislation is expected to come to a vote to cut unemployment benefits. It would cut up to 40 weeks of benefits next year — most from the states hardest hit by the recent recession. Our neighbors in Illinois, Missouri, Wisconsin and Kansas would see varying losses of weeks of benefits by next July. See the map below from the Center on Budget and Policy Priorities (CBPP).

As Chad Stone of CBPP notes in a recent blog post, cutting off benefits in the hardest-hit states “greatly raises the risk that unemployed workers will run out of UI benefits before they find another job, imposing even greater hardship on them and their families. It also reduces the amount of support that UI — one of our highest-bang-for-the-buck stimulus programs — can provide for the struggling recovery.”

But even Iowa would be affected, if not with the benefit cut the way other states would be hit, then in the indirect impact on the state’s economy.

The cuts would shut off a flow of funds into the U.S. economy, the impact of which we cannot avoid. Sooner or later, it will hit our own stores, factories and services.

In short: We don’t need our lack of beaches to show us that Iowa is not an island. Jobs are at stake, right here in Iowa, with the vote in the House today.

Posted by Mike Owen, Assistant Director

Andrew Cannon

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Hunger will probably be the last thing on our minds this Thursday, as we enjoy Thanksgiving feasts.

But for thousands of our neighbors, hunger an everyday reality.

Each year, the U.S. Department of Agriculture (USDA) measures food security in the United States. Food security is defined as having adequate food and nutrition at all times for a healthy and active lifestyle.

An average of 12 percent, or 340,000 Iowans lacked adequate food and nutrition, or was food insecure, over a three-year period ending in 2010.

This is certainly not a new problem, but it is one that is on the rise in recent years.

Thousands of Iowans lost jobs or saw income drop as a result of the most recent recession. Food insecurity rates subsequently rose. But that number has been on the rise for much longer than just the past several years. In the mid-’90s, about 8 percent of Iowans were food insecure. By 2003, that figure had risen to 9.5 percent. By 2005, nearly 11 percent of Iowans were food insecure.

Solutions for problems as complex as food insecurity are never obvious. One thing, however, is obvious: Cutting food assistance programs will not help.

There’s an epidemic of budget-cut fever right now. Lost in the fiscal austerity discussions, however, are the effects such cuts would have on those who have been hardest hit by the recent recession, continuously rising food and fuel costs, and stagnant wages.

While some food assistance programs like the Supplemental Food Assistance Program or SNAP (formerly Food Stamps) are safe — for now — from cuts, many others, including free and reduced-price school lunch, the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) and the Emergency Food Assistance Program (TEFAP), which distributes nutritious fruits, vegetables, meat and poultry and other foods to food banks and pantries, are at risk of severe cuts.

As we discuss and debate our fiscal future, proposals should be weighed by their effects on people, not with how well the line up with some ideological ideal.

I recognize that I have so much for which to be thankful. The adoption of that standard by lawmakers would only make me more grateful.

Posted by Andrew Cannon, Research Associate