Workforce Education: Good investment for Iowa

No matter the indicator — unemployment rates, wages or poverty — it is undeniable that education pays for Iowans.

Lily French
Lily French

Investments in workforce education improve economic prospects for Iowa families, and in the process boost the state budget. We have found that investing in postsecondary education for low-income adults returns tax revenue more than double the state’s costs. In fact, the state can garner $3.70 in increased tax revenue for every dollar invested in an associate’s degree and $2.40 for every dollar invested in a bachelor’s degree for low-income adults. (See Education Pays in Iowa, Executive Summary; Full Report)

State investments in workforce education can also greatly improve the economic futures of Iowans struggling to support their families. No matter the indicator — unemployment rates, wages or poverty — it is undeniable that education pays for Iowans. In a state where wages are stagnating for less-educated workers, many Iowans were having a difficult time making ends meet even before the current recession began.

Further, a projected shortage of skilled labor combined with the rising cost to families for postsecondary education demands that Iowa invest in workforce education to address our state’s education gap. When low-income adults have access to increased education and training, their lifetime earnings increase substantially, generating tax revenue for the state that more than offsets the cost of investing in this access.

To garner the largest fiscal returns and set the state firmly on the path toward economic growth, Iowa should:

■ Expand financial aid to help low-income working adults pay for postsecondary education, by

  • creating a tuition scholarship program for low-income workers to pursue an associate or bachelor’s degree at one of Iowa’s public colleges;
  • fully funding Iowa Work-Study at its standing-limited appropriation of $2.75 million.

■ Promote education and training within Iowa’s TANF program, by

  • directing program administrators and case managers to promote education with Promise Job clients;
  • using American Recovery and Reinvestment Act (ARRA) TANF Emergency Contingency funds to support education and training for a greater number of TANF participants.

■ Modify Iowa’s WIA plan to enhance training provisions, by

  • setting local funds for training at minimum level required for eligibility to additional discretionary funds;
  • using discretionary funds to advance postsecondary educational opportunities.

Expanding access to education and training for low-wage workers is particularly important when economic prospects are dim. An investment in workforce skills would prepare Iowans for the future and contribute to rebuilding our economy.

Posted by Lily French, Research Associate/Outreach Coordinator

Excerpted from Lily’s written testimony to the Iowa legislative Job Training Needs Study Committee, Nov. 3, 2009. Also see the IPP backgrounder.

Don’t lose focus during film-credit probe

Hopefully the coming attractions will hold the attention of Iowa policymakers and the public as much as the feature now playing.

As the Iowa Fiscal Partnership (IFP) notes in a statement today, Iowans must follow more than the investigation of the state’s film-credit program and a report from a consultant about its operation over about six weeks.

Iowa’s entire tax-credit buffet for businesses demands scrutiny — especially when the Governor is anticipating budget cuts. Any considertion of spending cuts must put all spending on the table, including spending through the tax code. According to IFP:

These are terribly difficult budget times for the state of Iowa. Everything needs to be on the table, including indirect spending through the tax code. The film credit program needs every bit as much scrutiny as other spending, but so do all tax preferences to businesses. We have been heartened by the call of Governor Culver and others, including some of the state’s leading newspapers to seek a full review of more than just the film tax credit. The governor and state legislators must follow through to assure taxpayers are getting a good deal when we tell some firms that they need not pay taxes.

Iowa policy makers must recognize the problems with accountability that this investigation has exposed. We just don’t know enough about what state tax money is being used for, and that’s a problem with more than the film credit. As we have shown, and as Department of Revenue research has confirmed, Iowa hands millions of dollars every year to big corporations through the research activities credit. But the recipients, and the use of the money, have not received scrutiny from the legislators who have allowed this to happen.

We must not miss the overarching policy questions by limiting new oversight only to the film credit. All Iowa tax credits should be on the table with other spending choices, not just the film credit program.


“Follow-through” is the operative concept in the IFP statement. The Governor and the General Assembly took two important steps at the end of the last legislative session to promote better transparency and accountability for tax credits. They approved legislation to (1) cap a package of certain tax credits managed by the Department of Economic Development, including the film credit, at $185 million; and (2) to assure a public report on recipients of Research Activities Credit subsidies of more than $500,000, and amounts, to provide scrutiny while not hindering competitiveness for those recipients.

Taxpayers deserve to know how public money is being spent. Plans for a full review of tax credits is essential for sound fiscal decisionmaking.

Posted by Mike Owen, Assistant Director

Iowa Fiscal Partnership supports suspension, investigation of film credit program

A critical problem with Iowa tax credits is a lack of transparency.

Governor Culver acted responsibly Friday by ordering a suspension of the state’s film tax-credit program pending further investigation of irregularities in the management of the program.

A critical problem with the film credit and many other economic development tax advantages offered to industry by the state of Iowa is a lack of transparency. State lawmakers and the public for the most part have no idea whether current tax breaks — which are typically granted as corporate entitlements — are actually performing as intended.

The initial investigation has exposed the film credits, as currently in place, as a boondoggle that is draining our state treasury. Further, this is coming at a time when our state leaders are anticipating budget cuts. All spending — including spending through the tax code — needs to be on the table when considering cuts to the budget.

Those taking advantage of apparent lax management of the film-credits program may indeed be ruining it for other filmmakers who have not done so. Nevertheless, there is no justification for continuing this program while all the problems with it are being sorted out, and while education and fundamental human services are threatened with budget cuts.

[The Iowa Fiscal Partnership is a joint budget and tax policy analysis initiative of two Iowa-based nonprofit, nonpartisan organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines.]

A view of IPP research, from a researcher

Molly Fleming
Molly Fleming

As I begin my final year at the University of Iowa’s graduate program for Urban and Regional Planning, I have been fortunate to join the Iowa Policy Project as a part-time research assistant. This opportunity allows me to integrate my interest and experience in public policy with fact-based research and analysis. Given public confusion and misperception regarding such critical issues as health care, taxes and the environment, objective research is vital to ensure government accountability and citizen engagement. I am very pleased to be able to assist in this important work.

As a volunteer at the Iowa Policy Project last spring, I helped former research associate Beth Pearson to determine the benefits of home weatherization for low-income Iowans. Additionally, I helped to compare how alternative versions of climate change legislation could promote or harm public welfare. The research skills I gained from this experience have been invaluable, and I hope to build upon them throughout the coming year.

Under the guidance of Peter Fisher and other members of the wonderful IPP staff, I will look at the effects of the American Recovery and Reinvestment Act on Iowa’s economy. I also plan to take a hard look at Iowa’s budget allocations throughout the year and the rising cost of living within our state. It is my hope that this research will help to spark good ideas and influence important public policy. As the challenges and prospects facing Iowans evolve during this time of economic uncertainty, the Iowa Policy Project’s work is more important than ever. I am both honored and excited to be a part of the IPP at such an exciting time, and I look forward to my year here.

Posted by Molly Fleming, Research Assistant

Everything on the table? Really?

Back in January, Governor Culver asked lawmakers to “agree that everything’s on the table with respect to balancing the budget and finding cost savings in state government.”

Today, on Ryan Schlader’s WMT-AM radio talk show, State Rep. Nick Wagner, responding to a question about state employee retirement benefits, opined that “I don’t think we should just write anything off the table.”

Both quotes sound good. Do they mean it?

The evidence may come during the next legislative session. Budget policy fell short of the concept in 2009. Otherwise, abuses of Iowa’s tax code would not have been allowed to continue when lawmakers were choosing among services to be cut as revenues declined.

This is not a partisan thing — or it should not be.

Can’t all Iowans agree that any spending by state and local government should (1) carry a demonstrable public benefit, and (2) be subject to regular scrutiny to allow legislators and the public to determine that it does have that benefit?

The Legislature took a small but important first step in 2009 by passing legislation toward the transparency that would allow scrutiny of one of Iowa’s most wasteful programs: the Research Activities Credit (RAC). The RAC is a virtually open-ended business entitlement that results in multimillion-dollar secret checks being sent to big companies that don’t pay any income tax in Iowa.

Ultimately, the law passed this year may begin that process toward better scrutiny.

That’s why the Big Business lobby in Iowa will continue to fight transparency and protect its sweetheart tax breaks while lawmakers make other budget choices that will cut teachers in classrooms, drive up tuitions in community colleges and state universities, and continue to shortchange public safety, environmental quality and recreational assets.

If everything is on the table, it has to include wasteful spending on special-interest tax breaks for companies that don’t pay income taxes.

By Mike Owen, Assistant Director

Pay Attention to Tax Breaks Behind Curtain

Taxpayers are protected by more transparency on tax-credit spending for businesses that don’t pay taxes.

Iowa took a couple of positive steps — small but important steps — in 2009 to assure greater accountability in economic development subsidies.

While it is important to note those steps, it also is important to note well-funded forces already are using baseless arguments to undermine them in hopes of overturning the strides made in 2009. Iowans not only should reject these efforts, but they should expect improvements in 2010 to build upon 2009.

What went right? Lawmakers at the end of the legislative session approved greater transparency on tax credits, specifically the research activities credit (RAC) that sends multimillion-dollar secret checks to companies that do not pay income tax in Iowa. Under legislation passed in the closing hours of the session, recipients of RAC benefits over $500,000 will be identified publicly so Iowans and their legislators can begin to evaluate whether these tax expenditures are benefiting the state.

In addition, legislators approved a cap of $185 million on certain tax credits, including a “supplemental” RAC program that allows a doubling of the regular RAC credit.

There is much more the Iowa Legislature and Governor Culver should do, but those two steps in 2009 may help show Iowa residents the value of future bigger steps. Part of that making that case involves vigilant attention to false claims, distortion and spin against the kind of transparency that taxpayers deserve.

Victor Elias of the Iowa Fiscal Partnership wrote a cogent summary knocking down the bogus claims in a letter to the editor published in the Des Moines Register.

Long and short: Despite contrary claims by business advocates, businesses will be able to keep all trade secrets private — but their taxpayer investors also will be protected by being let in on the secret of how much money they’re tapping from the Treasury. No information about the nature of research being conducted with public subsidies will be disclosed as a result of the new legislation.

As Elias writes:

The only secret made public by this legislation is finding out the largest corporate recipients of $43.8 million in research-activities credits granted in 2006, $34.1 million of which were checks from the state general fund to companies that paid no Iowa income tax that year.

There is no valid argument to keep that kind of information secret from those who are paying the bills, or from those who set our state’s spending priorities each year during the budget process.

Posted by Mike Owen, Assistant Director

Education pays in Iowa

Lily French
Lily French

Give people access to higher education and a myriad of benefits will surface for individuals and the state of Iowa.

Our new report on the return on investment of workforce education shows the benefits and potential benefits from such investments.

At each level of education beyond high school, Iowans work and earn more. For example, those with a bachelor’s degree earn on average $7.26 more an hour than those with only a high school diploma. Families headed by a parent with a college education are also much less likely to live in poverty — and better set to recover in hard times from a job loss.

So, whether you look at unemployment rates, wages, or poverty, it is undeniable that education pays for Iowans. It also pays for the state, because better-educated people on balance earn more, and pay more in taxes, which benefits the state budget.

Our analysis finds that investing in postsecondary education for low-income adults returns tax revenue more than double the state’s program costs. The return: $3.70 in increased tax revenue for every dollar invested in an associate’s degree for low-income adults, and $2.40 for every dollar invested in a bachelor’s degree.

Other strong reasons support investments now in workforce education:

  • First, the declinine in wages for less-educated workers means more Iowa families are struggling to cover basic living expenses;
  • Second, Iowa will face a labor shortage in the future due to our state’s slow population growth and the impending retirements of the baby boom generation; and
  • Third, employers in Iowa had already identified a shortage of a skilled workers as a problem before the recession, and the top 10 fasting growing occupations in our state all demand workers with postsecondary education.

To summarize, Iowa needs an increase in skilled workers to grow our economy after the recession ends and families in Iowa need higher wages to fully support themselves.

With forward-thinking policy moves now, Iowa can increase education and training opportunities for low-income adults, improving their futures and those of all Iowans who will benefit from a stronger economy.

Posted by Lily French, Research Associate