Closing the books — why real math matters

Now that ​Governor Branstad has left office, the latest (and preliminary) job numbers are in, and they effectively close the books on the goal. We did not come close. Through six years and four months, Iowa jobs stood little over halfway to the five-year goal.

Or: How Governor Branstad claimed to reach his jobs goal but did not come close

As it all turned out, the job-growth goal set by former Governor Terry Branstad was at best ambitious, and never realistic.

With four previous terms behind him, and 12 years out of office, Branstad came back in 2010 with a goal of 200,000 new jobs in five years.



Nothing wrong with setting lofty goals. The biggest problem with this one was the way the longtime Governor decided to measure progress toward it. If the goal was never realistic, the counting method was never math.

Iowa’s economy produced 106,900 new jobs — the net job increase — through the Governor’s second round in office.
As late as April, the last jobs report released in Governor Branstad’s tenure, the official report from Iowa Workforce Development bore an extra line, ordered by someone, for “Gross Over-the-month Employment Gains,” from January 2011. And that line would, magically, put the state over the 200,000 mark — a year late, but more on that later.

There was no explanation with the report on how this special line was computed, but analysis showed the administration cherry-picked job gains to come up with the “gross” figure. Job categories that showed a loss in a given month were simply ignored.

It was as if a business reported its sales but not its expenses, or a football team counted its own touchdowns but not those it gave up. The number, then, was literally meaningless as an indicator of anything happening in the economy.
 
Last week, IWD released its first report on monthly job numbers since Governor Kim Reynolds took office, and the “gross” gains line was gone from the official spreadsheet.

So, for the sake at least of history, a little context:
— Through the five years of the Governor’s goal, Iowa produced 92,100 new jobs.
— Through the end of the Governor’s tenure, Iowa produced 106,900 new jobs.

In fact, we didn’t reach 200,000 under even the Governor’s counting gimmick until January of this year, a year late. Meeting the goal would have required 60 months averaging over 3,300 net new jobs a month. Instead, we have seen far less:



The slow pace of recovery should not have been a surprise to anyone. Iowa and the nation had just come out of a shorter and less severe recession in 2001. The pace of that recovery — up until the Great Recession hit — was quite similar to what we have seen over the past six years before even the latest pace slowed down.

The actual job numbers and what they may illustrate remain more important than Governor Branstad’s spin on them. It would be a mistake to devote undue further attention to the fake numbers.
Likewise, it would be a mistake to attribute any general job trends — positive or negative, even legitimately derived with actual math — principally to state efforts. Much larger forces are at work. Plus, overselling the state role feeds poor policy choices, namely to sell expensive and unaccountable tax breaks, supposedly to create jobs, at the expense of the public services that make a strong business environment possible and make our state one where people want to raise families.
Iowa needs more jobs and better jobs. To understand whether we’re getting them
requires responsible treatment of data, and honest debate with it.
owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

Rosy forecasts bring thorny budgets

Odd that Governor Branstad, burned so early in his tenure by overly rosy revenue estimates, would let this happen to his very own lieutenant governor as she took office.

Capitol-DSC_0119-7inA memo from the Legislative Services Agency (LSA) indicates a higher-than-anticipated cost of a special-interest sales-tax break primarily for manufacturers.

We could not afford it when Governor Terry Branstad attempted to implement it by rule in 2015, or when a scaled-back version passed in 2016, and we cannot afford it now.

But it appears likely that the new break is at least part of the reason sales-and-use taxes are flattening out, putting fresh pressure on the budget even after FY2017 cuts and continued reliance of state policy makers to push tax breaks that divert millions from critical services such as education.

There is great irony in this report coming as Governor Branstad was turning over the keys to Kim Reynolds, especially given this comment in the LSA piece by senior fiscal legislative analyst Jeff Robinson:

One potential explanation for the recent sales/use tax downturn is an underestimated fiscal impact of the sales/use tax exemption for manufacturing supplies and replacement parts. For proposed legislation in previous years, estimates of the impact of exempting manufacturing supplies and replacement parts from the State sales/use tax had been much higher.

As Robinson suggests, there was ample reason to think the cost would be “much higher” and that should have been taken into account in revenue estimates and crafting the FY17 budget.

Likewise, the four of us were present in the Iowa House chamber in 1983 when new Governor Branstad proposed a sales-tax increase, just a few months after bludgeoning his election opponent, Roxanne Conlin, with a “tax and spend” refrain. The new Governor inherited a budget shortfall right out of the gate, a product of overly rosy revenue projections by the Ray administration.

To be fair to Governor Ray, the farm crisis was unfolding back then, and the landscape was not necessarily as clear.

This time, the continuing revenue problem is due principally to out-of-control tax giveaways, which have accelerated long since Governor Ray left office. Just this one perk for manufacturing was expected to cost $21.3 million from the state budget.* However, the latest LSA analysis suggests, the cost to the state may be two or three times what was expected.

Odd that Governor Branstad, burned so early in his tenure by optimistic revenue estimates, would let this happen to his very own successor as she took office. Maybe he just forgot.

We did not forget.

 

* That cost figure grows to $25.6 million when including the dedicated revenue for local school infrastructure, and $29.2 million when including lost local-option tax revenue.

Posted by IPP Executive Director Mike Owen, IPP Founder David Osterberg, IPP Board President Janet Carl, and IPP Board Member Lyle Krewson. Owen was the Statehouse correspondent for the Quad-City Times and Osterberg, Carl and Krewson were state representatives from Mount Vernon, Grinnell and Urbandale, respectively — in 1983.

Sales-tax break didn’t add jobs

Whatever can be said about the expensive new sales-tax break for business, creating jobs in manufacturing is not one of them.

Pushes for lower taxes on business routinely come with promises for more jobs. On that score, the more-costly-than-expected manufacturing sales-tax break has not produced for Iowans.

Since the start of the current fiscal year, when the new law took effect, Iowa manufacturing jobs are even lower than where they started. Clearly the new break did not cause the drop — a decline in manufacturing jobs started over two years ago after some recovery from the 2007-09 Great Recession. Iowa lost more than 30,000 manufacturing jobs from the peak in those years and never fully recovered. Manufacturing jobs dipped below 211,000 in April for the third time in six months, to nearly their lowest level in five years.

Thus, whatever can be said about the expensive new sales-tax break for business, creating jobs in manufacturing is not one of them.

It does appear the break is more costly than had been expected. An April memo from the Legislative Services Agency (LSA) has received significant attention in recent days, as sales-tax revenues are on pace to be down about $100 million from what was expected for the fiscal year ending June 30. The cost of the sales-tax break for an expanded list of items used in manufacturing had been projected at $21.3 million for the state.

The LSA analysis suggests that at least part of the unexpected revenue loss might be due to underestimated costs of that special sales-tax break.

It is true that the manufacturing sales-tax break was promoted on larger grounds than just job growth. In a break from its usual promotion of a hodgepodge of inequitable breaks creating a severely unbalanced playing field, the business lobby had promoted this as a fairness issue for businesses. That political strategy worked.

But increasing jobs was the steady drumbeat from Governor Branstad for his economic policies throughout the six years of his return to office in 2011, so it is reasonable to look for any job impacts.

In this case, none are immediately apparent. What we can see is that without the change, and with more careful budget projections, new Governor Kim Reynolds quite likely would not be facing the added revenue challenges she has before her.

owen-2013-57Posted by IPP Executive Director Mike Owen

mikeowen@iowapolicyproject.org

Osterberg to the Climate Marchers: State action works

State government can work to improve the economy of Iowa and at the same time reduce the effects of climate change.

David Osterberg — People’s Climate March Iowa 2017
David Osterberg
David Osterberg

I’m pleased to be the Master of Ceremonies at the People’s Climate March in Des Moines on April 29. The event begins at 1 p.m.

I plan to make the point that state government can work to improve the economy of Iowa and at the same time reduce the effects of climate change.

Way back in 1983, Democrats and Republicans together passed a law — signed by Governor Terry Branstad — that required the state’s investor-owned electric utilities to try renewable energy.

Utilities hated the idea and fought complying with the law for years. Yet now, 35 percent of the electricity generated in the state comes from wind power. Once we changed the direction that utility executives were looking, they found that renewables would work. They found that those who said that the intermittent nature of solar and wind could not be easily integrated into a production system. They were wrong.

The paper the Iowa Policy Project released March 30 shows that even though more than one-third of Iowa electricity comes from wind, our overall electric rates were lower in 2015 (latest data) than when the wind industry really got started in 1998.

 

 

 

 

 

 

 

 

IPP Co-founder David Osterberg was a member of the Iowa House of Representatives from 1983-94. Contact: dosterberg@iowapolicyproject.org

Health care ‘reform’ just keeps getting worse

The bottom line: worse health care coverage at higher cost to millions, loss of coverage entirely to millions more, in order to finance tax cuts for corporations.

The House Republican plan to replace Obamacare (the Affordable Care Act) with the American Health Care Act (AHCA), which a few weeks ago failed to even come to a vote, has been reincarnated. The new version of the AHCA has apparently won the support of the Freedom Caucus in the House, but in so doing has become significantly worse for millions of Americans.

Here are the key points about this new attempt to “repeal and replace” Obamacare:

  • Despite repeated promises to keep the most popular part of Obamacare, the provision prohibiting insurance companies from refusing to cover those with pre-existing conditions, the new version returns us to the bad old days. While a particular state may choose to keep the prohibition, there is no longer any nationwide requirement that insurance companies issue affordable policies regardless of pre-existing conditions.
  • Nationwide standards for health insurance policies will be rolled back; plans will no longer be required to cover services such as mental health, maternity care, or substance abuse treatment.
  • The nationwide prohibition on lifetime and annual limits on benefits will be gone, meaning the possibility of medical bankruptcy will loom once again for many.
  • The modified version of the bill still effectively ends the Medicaid expansion; about 150,000 Iowans now covered under that provision could lose insurance altogether.
  • The bill still cuts $840 billion from Medicaid over 10 years, most of the savings going to wealthy individuals, drug companies, insurance companies, and other corporations.
  • Premiums and deductibles will still rise for large numbers of persons buying insurance on the exchanges, especially for the elderly, those with lower incomes, and those in high-cost states or areas, such as most of rural Iowa.
  • Under the bill, there would be no limit on the premium an insurance company can charge based on medical history; thus someone with pre-existing conditions could in theory be offered coverage, but at a cost that is simply unaffordable. There is little difference between this situation and straight denial of coverage. A state could choose to prohibit this practice (i.e., to keep the Obamacare provision in place), but few states chose to do so before Obamacare.

While the proponents of this revised plan may argue that it keeps the prohibition on gender discrimination, a woman would pay substantially more for a plan that included maternity coverage. Such coverage would not be a required part of all plans, but instead would be an expensive option.

Just how this revised bill would affect overall coverage rates, premiums, and out-of-pocket costs, awaits a new analysis by the Congressional Budget Office. But it is quite possible that the bill will be voted on in the house without the benefit of that analysis. Part of the pressure to pass the bill now comes from the desire on the part of the Trump administration to come up with large savings to the federal government that can then be used to finance cuts to corporate and individual income taxes.

The bottom line: worse health care coverage at higher cost to millions, loss of coverage entirely to millions more, in order to finance tax cuts for corporations (and probably millionaires as well).

Posted by Peter Fisher, research director of the nonpartisan Iowa Policy Project. pfisher@iowapolicyproject.org

Also see Fisher’s March 2017 policy brief for the Iowa Fiscal Partnership: “Replacing ACA: What you need to know about the AHCA.”

Lost legacy of science and research?

You drink the water. You breathe the air. Concerned Iowans may yet save the Leopold Center, but the clock is ticking.

Editor’s Note: The Cedar Rapids Gazette published a version of this piece online Tuesday, April 18, 2017.

While Iowans and others celebrate Earth Day on Saturday with a March for Science, many legislators have already tripped over their own votes.

Besides several cuts to higher education Iowa legislators have taken aim at particular scientific centers at the University of Iowa and Iowa State University.

With the state’s second largest city and its largest university both almost recovered from massive flooding, they attacked the Flood Center at the UI, which may survive with a 20 percent cut to reward how its data and research have helped citizens of the state.

Certainly as troubling is the pending elimination of the Leopold Center for Sustainable Agriculture at ISU, and the farming out of duties at the Energy Center at ISU to the Iowa Economic Development Authority. So much for independent research.

One thing lost in these assaults is a sense of institutional memory. Those of us who started the Leopold Center some 30 years ago found agreement to assure Iowans a lasting resource independent of industry control and other research funding. And it has worked.

Much of the research on how to reduce agricultural damage to water quality has been started by the Leopold Center — more than 600 research projects, according to Leopold’s director, Professor Mark Rasmussen.

You drink the water. You breathe the air. Are you comfortable that Iowa’s premier research universities are being blocked from conducting research on topics including water quality, manure management, livestock grazing, cover crops, alternative conservation practices, biomass production, soil health and local food systems development?

In fact, as Rasmussen notes, many practices recommended in Iowa’s Nutrient Reduction Strategy to reduce agricultural pollution — including streamside buffers, erosion control measures, and bioreactors — “were first researched through Leopold Center funding.”

Now, the history of the Leopold Center is being reinvented by lawmakers attempting to erase a three-decade, bipartisan commitment to sustainable funding of independent research. They would eliminate the publicly directed mission and turn it over to businesses.

It is hard to know if these attacks are driven by politics or corporate interest. Maybe it is just Iowa’s version of an attack on science generally.

Either way, the bill eliminating the Leopold Center has passed the Senate and Iowans have only a short time to demand more from their elected officials in the House and the Governor. Voices rising helped to save the Flood Center with only a cut. Concerned Iowans may yet save the Leopold Center, but the clock is ticking.

 

David Osterberg, a state representative from Mount Vernon from 1983-1994, is co-founder and lead environmental researcher at the nonpartisan Iowa Policy Project. Osterberg and fellow legislators Ralph Rosenberg and Paul Johnson were co-authors of the law that created the Leopold Center at Iowa State University.

Look west, or to locals, for leadership

Iowans could take a lesson from leaders in Oregon, who had the courage to look at their residents’ economic challenges. Just repealing local minimums does not meet that test of leadership.

Those concerned about a “patchwork” or “hodgepodge” of minimum wage laws across Iowa might want to take a look west — far west — to Oregon.

In contrast to Iowa legislators’ calls for “uniformity” no matter how inadequate a uniform minimum wage may be, the Beaver State has embraced the idea of different minimum wages.

A 2016 law effectively sets three tiers of minimum wages — one for the Portland area (Metro), one for selected other urban areas (Standard), and one for more rural counties (Nonurban). Currently, the minimums are $9.50 in Nonurban areas, and $9.75 in the Standard and Metro areas. As of July 1, they will be $10, $10.25 and $11.25, respectively.

As the Oregon law moves forward, the three tiers will rise in steps each July 1, ultimately to between $12.50 and $14.75 by 2022. A formula will index those rates starting in 2023.

Quite a contrast from Iowa, where we still sit at $7.25 as a statewide minimum, with five counties (Lee County the latest, on Tuesday) choosing to set a higher minimum for their workers. State officials who have balked at raising Iowa’s statewide minimum have retaliated with legislation to repeal the raises and prohibit future such actions, the bill as of Wednesday morning still awaiting the Governor’s almost certain signature.

Oregon’s hybrid approach of a state policy setting a small range of local minimums may or may not be optimal, but it does recognize the value of a meaningful state minimum reaching to all corners of the state, and the fact that not all labor markets are the same — they differ by locality.

In Iowa, the local option exercised thus far by five counties under their home-rule authority is a middle ground that permits careful judgment when state edicts prevent it.

But Iowans could take a lesson from leaders in Oregon, who had the courage to look at the economic challenges faced by their residents, and to address those challenges in meaningful public policy. Just repealing local minimums does not meet that test of leadership.

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

mikeowen@iowapolicyproject.org