High stakes for Iowa in Congress’ decisions

Understanding these benefits and the consequences of losing them needs to be paramount in congressional decisions about temporary, targeted extensions of ARRA funding.

Andrew Cannon, research associate
Andrew Cannon

Today’s New York Times discusses a problem faced by 30 states — including Iowa.

State budgets have been put together assuming the extension of an increased reimbursement for Medicaid, a smart move for economic recovery and a necessary move to help states deal with the increased demands in a severe economic recession.

For Iowa, the loss of those dollars would cause a Medicaid deficit of almost $120 million, according to the nonpartisan Legislative Services Agency.

When building the state’s 2011 fiscal year budget this spring, Iowa lawmakers assumed the federal government would extend a temporary increase in its share of Medicaid financing. The American Recovery and Reinvestment Act of 2009 (ARRA) temporarily increased the Federal Medical Assistance Percentages (FMAP), the portion of Medicaid financed by the federal government. That increase, however, expires in December 2010, right in the middle of Iowa’s fiscal year. Iowa and many other states expected this financing to continue as these needs have not subsided.

So far, however, Congress has not acted. Without an extension, Iowa faces a shortfall that at some point will need to be addressed, with cuts in services that could come both in and outside the Medicaid program. Either way, a cut would be bad for the economy, which has benefited from the infusion of federal dollars. Pennsylvania Governor Edward Rendell, in fact, warns in the New York Times story today that in his state, the cuts “would  actually kill everything the stimulus has done.” His concern is warranted.

Besides shoring up state revenues, as Iowa Fiscal Partnership reports have shown, ARRA has brought significant economic benefits to Iowa to enhance the prospects of a faster recovery. For the Medicaid match alone, IFP reported in Just What the Doctor Ordered:

Every federal dollar of economic stimulus invested in Medicaid yields about $1.68 in total output for the state of Iowa. Out of that dollar, 76 cents is returned to Iowa workers in the form of wages and salaries and incomes of small business owners.

ARRA — by providing dollars for Medicaid, unemployment insurance and food assistance — has come through with important resources for vulnerable Iowa families at a time they are most needed. At the same time, it has boosted the economy by increasing or maintaining spending by Iowans on goods and services, keeping people employed and spending their money in the economy.

Understanding these benefits and the consequences of losing them needs to be paramount in congressional decisions moving forward on temporary, targeted extensions of ARRA funding.

Posted by Andrew Cannon, Research Associate

Numbers, numbers, numbers … People!

It’s a familiar refrain in the office each month when we put together our analysis of Iowa’s latest job numbers: There sure are a lot of numbers!

That’s an understandable reaction. Too many numbers can obscure the message, something we consider in our analysis of public policy issues at the Iowa Policy Project.

So, we try to strike the right balance. How many numbers do we need to tell the story — accurately and in context?

Goodness knows these days, too many people out there will torture numbers to extremes if it helps their message. We prefer to review the numbers and then figure out what the message should be.

This month, as IPP Executive Director David Osterberg noted in his comments in our news release, “Good news is hard to find in these numbers.” There was only a 200-job loss in nonfarm jobs in August — but even that good news came with a major downward revision in the previous month’s numbers. July’s job loss, previously reported at 2,400, is now recorded at 4,400.

Iowa payroll jobs have dropped in 11 of the last 12 months
Iowa payroll jobs have dropped in 11 of the last 12 months

Furthermore, those numbers show Iowa:

  • has lost payroll jobs in 11 of the last 12 months. (See graph at right.)
  • has shown a net loss of 49,400 nonfarm jobs in that same period — 28,000 of them in manufacturing.
  • has seen its unemployment rate jump to 6.8 percent in August from 4.2 percent a year earlier (an increase of over 60 percent).

And we could go on, with lots more numbers. And as long as they help to tell the story, we will do that.

But they will only tell the story if we always keep in mind that those numbers represent people — Iowans, our friends and neighbors — and the places they can go to work and support their families.

We can’t wait until those numbers start looking better, month after month. That will make it a little easier when we look at our first draft and say, There sure are a lot of numbers!

Posted by Mike Owen, Assistant Director

Help economy, fix revenue problem

Today’s startling report from the Iowa Revenue Estimating Conference removes any doubt about the impact of the recession on top of routine tax-cutting: Iowa has a big revenue problem.

Now, more than ever, Iowa needs to put reality into the rhetoric that everything is on the table in this fiscal crisis, and that points to three immediate responses:

• Use stimulus money to restore funds already cut from the budget;

• Restore funding and avoid further cuts where possible to help the economic recovery and to keep services going at a critical time;

• Recognize that stimulus funds and tax reforms are necessary to bridge the revenue gap created by the recession.

Iowa needs to fight off the temptation to cut budgets further. Budget cuts can damage the Iowa economy, creating more layoffs, at the same time they deny needed public services when more Iowans are hurting.

REC projections today painted a more dire picture than the one that led the governor to slash spending across the board by 1.5 percent for this year and propose 6.5 percent cuts in many services for next budget year, beginning July 1.

The projections mean Iowa has a $130 million larger gap for this year, and a $270 million larger gap for fiscal year 2010. Besides addressing the current budget-year gap, the governor and legislators will have to put a fiscal 2010 budget in place assuming those REC projections.

Many Iowa Fiscal Partnership reports have detailed the revenue roots of Iowa’s current fiscal challenges. Of particular concern are the explosion in corporate tax expenditures, including many giveaways that provide no accountability to Iowa taxpayers that they money is being spent as intended, or that experience has validated that intent.

In the current situation, there can be no more excuses for ignoring the revenue side of Iowa’s budget problems. See IFP’s news release today.

Federal stimulus impacts on Iowa

Here is a look at some of the impacts of the American Recovery & Reinvestment Act in Iowa:

FMAP (Medicaid percentage increase) FY2009-11 — $550.0 million

State Fiscal Stabilization (Flexible block grant) — $ 86.0 million

Education/ Child Care:

State Fiscal Stabilization fund (education) FY2009-10$386.4 million

Title 1 (supplemental support) — $65.3 million

IDEA (special education state grants)—$120.9 million

Child Care & Development Block Grant FY2009-10 — $18.1 million

Child Support FY2009-10 — $27.2 million

Unemployment Insurance (UI):

UI Benefit Increase ($25/week) — 212,422 recipients

UI Emergency Extension to 12/09 — 27,600 new beneficiaries

Employment Services FY09:

Youth Services — $5.2 million

Dislocated Workers — $6.3 million

Adult Activities — $1.6 million

Making Work Pay Credit — 1,110,000 taxpayers

Food Stamps FY2009-13:

Benefit Increase — $161 million and 279,000 recipients

Administration — $2.7 million

Child Tax Credit (tax year 2009 — lowers threshold to make credit available to families at $3,000 earnings):

Number helped lowering $8,500 threshold — 133,000

Number helped lowering $12,550 threshold — 156,000

Emergency Shelter Grant Pgm FY091 Add’l Funds — $16.8 million and 4,500 households