For starters, issues to watch in 2019

There are many issues to watch in the new Iowa legislative session. Here is a non-exhaustive list, identifying where policy changes could affect opportunity for many thousands of Iowans.

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

Iowa jobs: Where we are

Over a decade later, post-recession Iowa is way behind where it should be in jobs, wages and economic security.

Over a decade since the housing bubble burst in late 2007, and almost nine years since the start of the recovery, we are far from where we should be in job growth, wages, and economic security.

Iowa climbed back to pre-recession levels of nonfarm employment in July 2013. But, as the recovery staggers along, that threshold becomes increasingly meaningless. Since 2007, the state has continued to add to its labor force through immigration, domestic in-migration, and high school or college graduation.

Just to keep pace with growth in the working-age population (about 7 percent since 2007), while sustaining pre-recession rates of employment and labor force participation, we should have added (as of last month) 106,100 net jobs over that span. Instead, we gained back only 67,800 jobs — leaving a jobs deficit of 38,300.  For the latest numbers, see our monthly “JobWatch” report.

In turn, we face another persistent deficit: a shortage of good jobs. In our State of Working Iowa discussion of wages, we underscored remarkably weak wage growth in Iowa despite historically low rates of unemployment.

This partly reflects the lack of worker bargaining power: Without access to collective bargaining and robust, well-enforced labor standards, there is little prospect of winning wage real and lasting gains. And in part, this reflects the changing contours of Iowa’s labor market. Over the last generation, and across the last business cycle, we are steadily trading good jobs for bad.

Two factors are driving the loss of good jobs: the composition of jobs (which sectors are growing or declining), and the quality of jobs (declining wages and standards within sectors or occupations).

During the recession, employment losses were heaviest in middle- and high-wage sectors of the economy — especially manufacturing, which shed nearly 30,000 jobs between December 2007 and June 2009. Early in the recovery, these losses continued and — in Iowa and across the nation — job gains were concentrated in low-wage occupations.

181227-SWI-Figure1a

The pattern of gains and losses across sectors in Iowa is summarized in the figure above. As of late 2018, large recessionary losses in manufacturing and information have still not been recovered (indeed, the information sector continued to shed jobs during the recovery).

The largest net gains are in the low-wage leisure and hospitality sector, construction, professional and business services, and education and health services.

In the latter, the job gains are all on the health care side of the ledger. This largely reflects hiring in health care in response to a surge in demand sparked by increased coverage under the Affordable Care Act — something to consider about the consequences of public policy choices on health care.

 

2015-CG-5464Colin Gordon is Senior Research Consultant for the Iowa Policy Project.

cgordonipp@gmail.com

View from the low road

Absent action in Washington for a higher national minimum wage, the issue is in Iowa lawmakers’ court.

170330-minwage-map-NEIGHBORS2
Current (2018) minimum wage levels in Iowa and surrounding states — before 2019 adjustments in Missouri, Minnesota and South Dakota.

It’s that time again, when low-wage workers in many states can count on a small New Year’s Day pay increase to keep up with inflation, or even a significant increase due to a change in the state minimum wage.

Iowa, you can sit this one out. Your state legislative leadership and your governor have felt no need to make sure the lowest-paid workers in our state can make ends meet.

David Cooper of the Economic Policy Institute has a good blog on what will be happening Jan. 1 around the country. His summary shows the low road runs through Iowa — which is interesting because throughout 2019, the presidential campaign will be running through Iowa as well.

Minimum-wage workers in two neighboring states get inflation adjustments next week, from $9.65 to $9.86 in Minnesota and from $8.85 to $9.10 in South Dakota. In Missouri, a ballot measure is scheduled to raise the wage from $7.85 to $8.60.

Iowa sits at $7.25, along with its low-road neighbor to the northeast, Wisconsin. While Nebraska and Illinois have no increase scheduled Jan. 1, both are above the national minimum wage, unlike Iowa, Wisconsin and Kansas.

When the candidates drop by Iowa looking for 2020 votes, they might not see a lot of the people affected by this issue. But that’s only because when Iowans are working hard at $7.25 or slightly above to put food on the table (as we have shown elsewhere, 84 percent of those who would gain from an increase in the minimum (to $12) are over the age of 20, and about a quarter have children) there’s not a lot of time to attend campaign events — or, for that matter, the Iowa caucuses.

While the candidates drop by Iowa looking for 2020 votes, they might not see a lot of the people affected by this issue. Because when people are working two jobs at $7.25 or slightly above there’s not a lot of time  to attend campaign events — or, for that matter, the Iowa caucuses.

Will anyone be speaking up for them?

Iowa has not raised its minimum wage since lawmakers in 2007 passed a two-step bump that raised Iowa to $7.25 on Jan. 1, 2008. Iowa has been stuck there ever since.

Iowa legislators refused in 2007 to index the rate to inflation. Had they done so, minimum-wage workers in Iowa would already be making $8.49 and presumably looking at a new increase Jan. 1. An $8.50 or higher wage would still be way too low to make ends meet working full time, as Peter Fisher and Natalie Veldhouse show in our Cost of Living in Iowa report — but better than the status quo and at least in the ballpark regionally.

Two weeks into the new year, the Legislature will be back in session and have new opportunities to address the disparity between wages and the cost of living, and the disparity between Iowa and its neighbors who have higher standards. Absent action in Washington for a higher national minimum wage, the issue is in Iowa lawmakers’ court.

M

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

 

Open Letter to Grinnell College

We could not in good conscience patronize campus facilities to discuss our work to advance economic opportunity and justice for all Iowans when a serious threat to workers’ rights was being mounted in front of us.

An Open Letter to the President of Grinnell College

The Iowa Policy Project Board of Directors met Tuesday in Grinnell. This would not normally be particularly noteworthy, but circumstances are not currently normal in Grinnell.

Grinnell College is a true asset to the state of Iowa, a private college with a strong educational reputation. Our organization has enjoyed holding our board meetings on the college campus in recent years, but this week decided we could not in good conscience patronize campus facilities and chose to relocate our scheduled meeting to a nearby off-campus restaurant.

We are deeply disturbed that the college’s leadership has so far refused to honor the results of a recent election in which student workers exercised their legal right to indicate their desire to bargain collectively with their employer. We were even more deeply disturbed that December 10th, one day prior to our meeting, the college took the extreme step of attempting to deny Grinnell student workers any rights as employees, via an appeal to the National Labor Relations Board. With this move, college leaders signaled their clear intent to trigger a federal Board decision that they know could in turn strip rights from millions of college and university employees (if they also happen to be students) across the country.

The college’s position matters to us because it matters for Iowa and the nation. We cannot promote the work our organization does to encourage economic opportunity and justice for the people of our state — including the rights of workers to organize and collectively bargain — and ignore a serious threat to those rights being mounted right in front of us.

We wish the college, its students, administrators, instructors and staff the best, and hope we will be able to return to campus for our next meeting upon learning the college has reversed its position.

Mike Owen
Executive Director, Iowa Policy Project

Tuition rising: Do students approve?

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:
unnamed-1
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

Restoring equity in tax policy — Plug tax loopholes

Iowa is out of step with the majority of states by refusing to close corporate tax loopholes. Equity demands better.

Through the years in Iowa, very few lawmakers have had the courage to take on an utter abomination in our corporate tax system: tax loopholes.

It is one thing to expressly pass a tax preference — a credit, exemption or deduction — with a specific purpose, clearly defined for all taxpayers to see and reviewed for its effectiveness. (Iowa does not provide such accountability with many such preferences, but that is for another post.)

It is quite another thing, however, to see weaknesses in your tax code exposed and exploited by large companies, and to leave those holes open for routine abuse. Welcome to Iowa.

A new report by the Center on Budget and Policy Priorities discusses this issue as part of overarching tax policy that states can use to advance racial equity and sustain services responsibly. From the report:

States can nullify a variety of tax avoidance strategies employed by large multistate corporations by adopting a reform known as “combined reporting,” which treats a parent company and its subsidiaries as one entity for state income tax purposes, thereby minimizing companies’ ability to shift income earned in a state to other states that are tax havens (like Delaware and Nevada).

The figure below shows Iowa is out of step with the majority of states on this issue. All but one of our neighboring states has a corporate income tax, and all but one of those states has combined reporting to stop companies from avoiding taxes that were originally intended by the tax code to be collected.

The Iowa Policy Project and Iowa Fiscal Partnership have been encouraging Iowans to look at this issue for many years. We made it part of our 2018 Tax Policy Kit — explaining here how Iowa could save itself tens of millions of dollars that are squandered to companies that effectively set their own tax policy. The Iowa Taxpayers Association consistently defends this break that not only burdens our state, but tilts the playing field to big, multistate corporations and against Iowa-based, Iowa-focused businesses.

Two governors, Tom Vilsack and Chet Culver, at times proposed adoption of combined reporting, but the issue — while getting some attention at the committee level — has not reached a floor vote in the House or Senate.

Iowa’s tax code needs to be fair to all residents. It needs to generate revenue to sustain services that are important to all residents, from education to water quality to law enforcement to health care. To allow corporations to set their own rules by exploiting weaknesses in the tax code defies these oft-stated Iowa values of fairness and accountability.

Posted by Mike Owen, Executive Director of the Iowa Policy Project.

mikeowen@iowapolicyproject.org

Tax reality: No pumpkin spice added

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.

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