Category: Uncategorized

NEWS RELEASE

First net job loss over calendar year since Great Recession

IOWA CITY, Iowa (March 16, 2020) — Iowa payroll jobs dropped in January for the third straight month, the latest official numbers confirming a net job loss for 2019.

The nonpartisan Iowa Policy Project released this statement from executive director Mike Owen about the preliminary January numbers reported Monday by Iowa Workforce Development. February numbers are expected later this month.

“Today’s report does not bode well for Iowa jobs or the Iowa economy as we face the two-pronged challenge of public health threats and economic uncertainty with the spread of the coronavirus.

“Iowa had not experienced a full-year job loss since the last recession, and January did not improve that outlook. While the one-month job loss of 900 appears small, the longer look shows it to be part of a decline of 6,400 from January to January.

“For the calendar-year 2019, the total job loss was1,300. We had not seen a net job loss over a calendar year in Iowa since the Great Recession in 2008-09.

“Since January, the Reynolds administration has pushed a tax-cut proposal. The latest job news might change that strategy as this is no time to be reducing revenues. The state must use the funds we have to invest in supports for working families whom we can expect to struggle in the near term.

“Boosting access to health care, food assistance, unemployment benefits and paid sick leave are important components of a plan to invest in those who will determine the quality of Iowa’s future.”

Key Numbers for January 2020

— Nonfarm jobs dropped by 900 to 1,584,500, the third straight monthly drop and fifth in six months.
— Iowa’s unemployment rate held at the revised level of 2.8 percent, previously reported at 2.7 percent for December. That compares with 2.7 percent in January 2019.
— Four of the 11 major job categories showed gains in January, and six showed declines, with no sector showing a change of 1,000 or more. Government showed the biggest gain, only 900, with construction at 800.
— Manufacturing was down 800, as was trade and transportation.

Key Trends

— Iowa lost a net 6,400 jobs from January 2019 to January 2020.

— For the calendar year 2019, nonfarm jobs averaged a 100-job monthly decline. In 2018, jobs declined in only four of the 12 months; in 2019, they increased in only four of the 12 months.

— The year was the first since 2009 with a net drop in payroll or nonfarm jobs. Jobs dropped by 15,600 in 2008 and 47,800 in 2009. For calendar 2019, Iowa lost 1,300 jobs.

— From January 2019 to January 2020, the “other services” category led gains at 2,200, followed by leisure and hospitality at 1,800 and government at 1,300. Trade and transportation led declines at 4,800, followed by professional and business services at 2,500, manufacturing at 1,300, information at 1,100, and education and health services, also 1,100.

The Iowa Policy Project (IPP) is a nonpartisan, nonprofit public policy research and analysis organization based in Iowa City. IPP has been tracking Iowa job trends since its founding in 2001 and has regularly provided reflections on official monthly job reports since 2003.

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Mocking transparency for voters, taxpayers

In the wee hours of Thursday morning, while most Iowans slept, the Iowa House enacted a sweeping change to the way city and county governments fund public services, approving a bill that had passed the Senate just the evening before. In this one bill, the Legislature managed to enshrine minority rule, punish public-sector workers (yet again), penalize economic growth, and hamstring cities recovering from a natural disaster. With no apparent sense of irony or hypocrisy, the bill’s supporters argued the purpose was to increase transparency for voters.

Removing democracy in local decisions

The bill would limit the growth of property taxes levied by cities and counties to 2 percent each year. If local officials, elected to set budgets and decide how to finance them, find that the services their constituents are demanding require that revenues exceed that 2 percent, they cannot do so unless two-thirds of the council or board agree. So much for majority rule and local democracy.

Eroding employee benefits and security

How does this bill hurt city and county employees? Under current law, tax rates for the city and county general funds, and the county rural services fund, are limited. But the law recognizes that increases in employee benefits are to a large degree outside the control of local elected officials. The state sets the employer contributions required each year to maintain the solvency of public employee pension funds, while increases in premiums for health insurance are set by the insurance companies.

Both costs have been increasing more than 2 percent annually, often much more.[1] Under current law, a separate property tax levy for employee benefits can be increased to the rate needed to fund those benefits.

No longer. Under the bill just passed, employee benefits must now be financed along with all other public services, under the 2 percent cap. When pension contributions and health insurance premiums increase more than 2 percent, the cost of providing services goes up but the city or county may be unable to accommodate the cost increases without cutting services which means laying off the workers who provide them to keep overall spending growth under the cap. The bill pits taxpayers against the people who plow their streets, protect their homes, build roads, or maintain parks and libraries. When services are cut, public employees can be portrayed as the scapegoats.

Imposing a penalty on economic growth

The new bill also penalizes local governments for pursuing growth. There were earlier House and Senate bills that sought to limit property taxes, and the fiscal notes explaining those bills and their impact were just released on Tuesday. Both of those bills would have repealed the tax rate limits under current law, replacing them with the revenue growth caps, and would have applied the growth caps only to taxes from the revaluation of existing properties. New construction for a given year, which generates new property tax base that pays for the additional services needed to accommodate growth, would not count against a city’s new limit on property tax revenue. Under those earlier proposals, the taxes generated by new construction would not be part of the revenue increase that is limited.

But on Wednesday evening, the Senate replaced the existing bill with a new one, and then passed it and sent it on to the House. The new version keeps the rate limits in place, in addition to imposing the growth limit, and it does not exempt new construction from the limit. The effect is to severely penalize cities and counties that experience economic growth.

Under the previous versions, a city experiencing annual growth through the revaluation of existing properties at 2 percent or less would not be constrained by the law if they keep the property tax rate the same from year to year, regardless of how fast they grow. But under the new version that passed, a city levying at the maximum $8.10 levy rate and experiencing 2 percent increases in the value of existing properties, but growing from new construction at the rate of 3 percent as well, would see revenues decline by 13 percent within five years compared to current law, or the previous bills. Increase that growth rate to 4 percent, and the penalty becomes 17 percent in five years.

Will cities and counties even want to grow, knowing that they are not going to be allowed to raise the revenue needed to service the new business and new population? Did legislators even recognize that the new bill contained this growth penalty when they voted for it? Or was that the idea — to penalize the growing areas, which are predominantly urban?

Imposing a penalty on economic disaster

At the same time, the bill would hamstring cities trying to recover from a natural disaster, or from a loss in taxable value due to an economic downturn or from the vagaries of Iowa’s assessment rollbacks. Cities and counties now would face two caps: the existing rate cap, and the revenue growth cap. The combination could be devastating. When taxable value declines, say to a loss of property value after a major flood or recession, the rate cap ensures that revenues will decline with the loss in tax base, for any city or county at or near the rate limit. But as the recession ends or the city rebuilds, the new 2 percent revenue cap could now undermine recovery. The reduced revenue becomes the new starting point, so as taxable value increases again, they may be unable to restore revenues even to the previous level because they are constrained to 2 percent increases per year. And this just at a time when extraordinary measures are needed to help the recovery.

[1] The average premium for group health insurance provided by governmental bodies in the Midwest has increased on average 3.5 percent per year for the past three years, according to a survey by the Kaiser Family Foundation.

Peter Fisher is research director of the nonpartisan Iowa Policy Project in Iowa City. pfisher@iowapolicyproject.org

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.

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.

Colin Gordon is Senior Research Consultant for the Iowa Policy Project.

cgordonipp@gmail.com

Change the mascot from a hawk to a chicken. Bleach the black and gold out of that flag before cheerleaders run it past 70,000 people in the football stadium.

Iowa faces the greatest challenges perhaps in our lifetimes to higher education and lifelong learning opportunities. These challenges are fomented by a band of political opportunists who are driving down our public investments where they are most needed. In the face of these attacks, administrators at the University of Iowa quake in their otherwise comfortable chairs and do the bidding of those who would diminish or even destroy higher education.

Already weak pushing back against funding challenges that the Board of Regents blame for raising tuition, the UI this week announced plans to shut down seven educational centers and make reductions in 3 to 6 more. It was a unilateral decision and one done behind closed doors, with no input from those most affected — much as the Legislature and Governor have done in the last year and a half on a range of issues from workers’ rights to tax policy to local government authority.

Not surprisingly, a center serving working families — the Labor Center — is one that stands out on the list of planned closings. This comes a year after the gutting of collective bargaining, workers’ compensation and minimum-wage laws, and amid plans to destabilize public employee pensions.

As if that were not enough, the process itself has been appalling and not one that well serves the reputation of the University of Iowa.

The Labor Center director was called in from her earned vacation last Friday to have the newbie Law School Dean tell her the center is being closed, and that the announcement would come today (Thursday). After people dared to speak up about it in hopes of having an impact — something a university that champions critical thinking skills would welcome — the administration went ahead and announced the closings two days early.

A state university should model good governance, transparency and public involvement, especially when our Legislature and Governor do not. And when it fails for whatever reason, we must ask where Iowans can turn when they are looking for answers about laws that supposedly protect them in the workplace.

The Labor Center is one of those places, and the UI administration is taking it away. Three directors of the Labor Center have served on the board of directors of our organization, and our own exceptional staff has worked many times with the equally qualified and professional staff of this respected university center.

In short, we know first-hand of the value of the Labor Center. Why, we wonder, does the university administration not recognize that value and trumpet its work better?

It is reasonable to ask if the leadership of the University of Iowa will ever fight back against the powerful and greedy forces that have undermined it. Why would President Bruce Harreld, or the regents, put up with this never-ending assault on a once-proud institution? Are they even curious about how many people would stand with them if they stood up?

Absent a demonstration of pride and leadership into what a state university can be, a white flag of surrender is appropriate above Old Capitol, or the UI Hospitals, or the College of Law, or the Writers’ Workshop, or Kinnick Stadium.

If it makes you feel any better, put a big “I” on it. Make that “I” pale — maybe light gray — we wouldn’t want to be too bold or speak too loudly. Go Hawks.

Mike Owen is executive director of the nonpartisan Iowa Policy Project in Iowa City. He is a 1980 University of Iowa graduate and a member of the Professional Advisory Board of the UI School of Journalism and Mass Communication. mikeowen@iowapolicyproject.org
See more about attacks on higher education in Iowa and impacts of funding choices:
David Osterberg: “Too far for a tax-cutter”
Brandon Borkovec: “Tuition rising — Is anyone surprised?”

Editor’s Note: As tax negotiations continue in Des Moines, the ultimate House plan has yet to emerge. This post is based on the latest House bill available.

The “middle class tax cut” proposed by the Iowa House is a mirage. For the vast majority of Iowans, much or most of the small reduction in income taxes is taken back by the increase in sales tax — the other part of the House bill.

Compared to what middle-income Iowans paid in state income taxes when they filed this month for 2017 — and what they would have paid in the future if federal taxes had not been cut — the income tax cut in House File 2489 amounts to about $100 on average. Those with income between $20,000 and $100,000 represent over half of Iowa taxpayers. But they will face higher sales tax payments averaging about $47 a year. The net savings will amount to about $4 a month — but that’s on average. For some, there will not be a savings at all.

Table 1. Top 1 percent would take over one-third of tax benefit
House Bill: Income Tax Reduction Compared to Pre-Federal Baseline*
Iowa residents, tax year 2023

*Reduction in taxes compared to projected tax payments in 2023 under Iowa law but without the effect of the Federal tax cut legislation.
Source: IFP analysis of Iowa Department of Revenue estimates

For those at the top — the 0.7 percent of Iowa resident tax filers with income over $500,000 — the story is different. The average tax cut is $6,852, offset by on average $224, or less, in sales taxes and leaving them with at least $6,600 in net savings.

And that small group of well-off taxpayers gets 36.4 percent of the total income tax cut.

While the top 1 percent gets a tax cut averaging 11 percent, the other 99 percent get an average cut of 4 percent. If sales taxes were taken into account, the results would be even more skewed.

Table 2. Effects of Sales Tax Provisions of the House Bill — Iowa residents

Source: Institute on Taxation and Economic Policy, April 2018

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org