Why the federal budget debate matters in the states

Want clean water? Good and safe schools and bridges? You get what you pay for.

There’s doggone near nobody who isn’t concerned about dealing with the nation’s long-term budget challenges of deficit and debt.

What not enough people will recognize, however, is the danger of diving headlong into a deficit-cutting approach that just digs a deeper hole, both for the economy and for the critical services that federal, state and local government spending supports.

Ryan budget impacts
Center on Budget and Policy Priorities

And that’s the problem with the so-called “Ryan Budget,” named for Congressman Paul Ryan. That approach, passed by the House, makes cuts to funding for state and local services that are far deeper than the cuts many expect to happen with sequestration, the automatic cut process demanded by last year’s Budget Control Act compromise.

A new report from the Center on Budget and Policy Priorities outlines the challenge for states generally with the Ryan approach:

  • Federal cuts of 34 percent by 2022 to Medicaid compared to current law, and by steadily larger amounts after that.
  • Federal cuts of 22 percent in 2014 and in later years to non-defense “discretionary” spending — which leaves Medicare and Social Security alone but hits local and state services in education, infrastructure such as roads and bridges, and public health and safety including law enforcement.

For Iowa, the non-defense “discretionary” cuts are projected at $237 million in 2014 alone, and $2.1 billion from 2013 through 2021.

Want clean water? If you live in Iowa, where the state routinely shortchanges environmental enforcement, how bad do you think things might get when the federal funds are cut as well? Concerned about the quality of your food? Or your kids’ schools? Maybe the safety of the bridge you’re approaching on the way to work?

Well, folks, you get what you pay for.

Posted by Mike Owen, Assistant Director

Policy and pollution: We have options

“It’s not like we don’t have options. We do. Public policy can make a difference in protecting the environment.”

Iowa’s deteriorating water quality is a lingering problem that never seems to make it to the front burner of political campaigns or elected leaders’ agendas in the State Capitol. The Des Moines Register’s editorial today asks — and answers — the fundamental questions:

Why is our water so dirty? The state’s agricultural businesses, including 7,000 animal feeding operations, is a significant reason. Why do they do so much damage to the environment? Elected officials let them.

David Osterberg
David Osterberg

It’s not like we don’t have options. We do. Public policy can make a difference in protecting the environment, through tough and effective regulations that recognize the air and water belong to all of us, and by helping folks do a better job with targeted incentives.

Unfortunately, as the Register suggests, elected officials in Iowa have passed up opportunities in both the regulatory and incentive arenas to enhance Iowa’s water quality. The Iowa Policy Project through the years has noted many of the issues and presented constructive policy options. Here is a selection of those reports:

IPP also showed this year how environmental protection funding has waned in Iowa — even when voters specifically told lawmakers with a referendum in 2010 that environmental protection is an area where they want to see funding directed. As we found:

While legislators and other elected officials will always proclaim their commitment to clean water, they have not over the past decade demonstrated that commitment through the state budget. In fact, once inflation is taken into account, funding for many programs the state relies upon to monitor, protect and improve waterways has dropped by 25 percent or more. …

Over time, this slow erosion in the purchasing power of these programs is likely to contribute to deteriorating Iowa water quality, if it has not already done so. When funding is scaled to FY13 appropriations, the slow decline in spending on water programs becomes more evident.

Posted by David Osterberg, Executive Director

Tax-cutters’ unbalanced focus undermines self-government

What we have in Des Moines is a leadership problem and a governing problem.

David Osterberg
David Osterberg

Cut taxes, starve schools. Cut taxes, starve environmental protection. Cut taxes, … well, I think you’re getting the idea.

“The-tax-cuts-are-my-only-priority” legislators now have enough power to keep eroding our ability to meet our needs.

As I pointed out Sunday in a guest opinion in The Gazette in Cedar Rapids, this drive to underfund education is the root of recent decisions to close Polk Elementary School in Cedar Rapids and the Price Lab School at the University of Northern Iowa.

What we have in Des Moines is a leadership problem and a governing problem. Leaders find a way of matching revenues to our needs. The rejection of this kind of responsibility by a large enough number of our elected officials is the problem.

And the facts — as we have demonstrated in Iowa Policy Project reports — are clear. Most recently, we showed Iowa’s decline in support for the regents’ universities over the last 10 years. For the University of Iowa alone, it meant 40 percent less in actual spending power than the state provided in 2000, and a shift of costs to tuition-paying students and their parents.

A week before, we showed similar results with water-quality funding.

Even now, there is no greater cry than to cut commercial property taxes — even when most of the cuts would go to firms like WalMart and McDonald’s. It doesn’t matter. It’s a tax cut, period.

Ironically, even those who some elected officials are attempting to appeal to need the services they are cutting. Rockwell Collins needs trained engineers, and can better retain employees when rivers are clean and people have places to recreate.

Voters who want their kids educated and their rivers clean need to recognize that it doesn’t happen without state funding. More tax cuts don’t get us there.

Posted by David Osterberg, Executive Director

Unreasonable fear about ‘one-time’ money

Using stimulus funds bridged a gap in revenues and kept Iowa out of a race to the bottom.

Mike Owen
Mike Owen

You hear about it whenever some Iowa politicians get near a microphone to talk about the budget.

Heard above much wailing and gnashing of teeth is a common complaint that Iowa used “one-time money” to deal with recession-driven budget challenges.

Well, thank goodness for (1) that one-time money and (2) the willingness of state leaders at the time, including then-Governor Chet Culver, to spend it.

The Des Moines Register gets it, and isn’t afraid to say so in today’s editorial:

Yes, Iowa did it by shifting money set aside in savings accounts for other purposes, and it used one-time federal stimulus money. That was the right thing to do. The alternative would have been to lay off police officers, teachers and state workers, making the recession even worse in Iowa.

The state is in better shape financially now. It has the money to pay for essential services it has committed to provide to Iowans. The Legislature and the governor should pay to carry out those commitments.

The Iowa Fiscal Partnership (IFP) has pointed out that the American Recovery and Reinvestment Act, (ARRA), the economic stimulus program passed in 2009, was designed to provide targeted, timely and temporary assistance to Americans in the recession. As IPP’s Andrew Cannon noted in a recent IFP report, “Catching Up: Context for 2012 Budget Decisions in Iowa”:

Andrew Cannon
Andrew Cannon

While there is certainly merit in reducing the use of one-time money for the continuing expenses of the state, one-time-fund critics sometimes let strict adherence to that concept get the best of them. For instance, Recovery Act dollars were used precisely as intended: targeted, timely and temporary relief so that states could continue funding critical services, such as K-12 education and health services to individuals and families. State revenues declined precipitously during the worst of the recession; the Recovery Act bridged that drop-off in revenues until a time when revenues improved as the economy regained strength. The same can be said for use of $38.7 million from one of the rainy-day funds since high unemployment and reduced revenues during the year must constitute the rainy revenue day that the fund was designed to cover.

Had the Legislature and Governor Culver chosen not to use the ARRA funds, it is reasonable to assume that the holes created in recession would be left unfilled in better times. This is because one of the priority pieces of legislation passed in 2011 was the creation of a “Taxpayers Trust Fund” to pay for new tax breaks, the fund to be built from revenues coming in at a faster pace than expected. The priority was not to sustain or restore services, let alone enhance them, but to restrain use of new revenues.

Using the ARRA money when it came, for its intended purpose to bridge a revenue gap caused by recession, kept critical services in place when they were most needed, and kept us off the pace of a race to the bottom. Thank you to The Des Moines Register for reminding its readers of that smart public policy.

Posted by Mike Owen, Assistant Director

Budgeting in context

The budgeting decisions of last year ought to be viewed in context.

Andrew Cannon
Andrew Cannon

Following last year’s prolonged legislative session, legislators and the governor congratulated themselves for a budget that fully funded programs and reduced reliance on what they called “one-time funds.”

It is true that state services, systems and structures were funded to a large degree through a stable source, the General Fund (where income and sales taxes are pooled). And funding levels increased generally, especially in comparison to the recession-affected budgets of FY10 and FY11, when many state services and programs took severe cuts.

But the budgeting decisions of last year ought to be viewed in context, as we do in a new report.

First, the use of “one-time funds” proved to be the right choice at the time. Because of the recession, state revenues declined precipitously, which led to a 10 percent across-the-board budget cut. One-time funds now derided by some were used precisely as intended. State “rainy day” funds, reserved for economic emergencies, and the federal Recovery Act (ARRA) combined to fill budget gaps and save services. ARRA provided billions of dollars to Iowa to finance K-12 education, higher education, and health care programs for children, the elderly, Iowans with disabilities and low-income Iowans who had no other access to health insurance.

Second, consider how funding for state services and programs compares to pre-recession funding levels. Even as revenues have bounced back, and funding for many services has stabilized, it is unclear if present levels are adequate to met needs. For instance, state funding for community colleges in FY12 will reach about $164 million, up from FY10 and FY11 levels, but still remain below pre-recession levels. At the same time, community colleges are serving more Iowans than ever, with enrollment reaching 106,000 in FY11, up from 88,000 students in FY08.

Iowa’s other public higher education system, the Board of Regents, this year is working under a 3 percent reduction in funding from FY11. Even with the governor’s proposed FY13 increase, Regents funding would still be below recession levels, to say nothing of pre-recession levels. Students pay the price, with continually increasing tuition costs.

Other programs, such as the Early Childhood Iowa initiative, which provides preschool tuition subsidies and parental education; Child Care Assistance, which helps low-income working parents cover the cost of child care; and the Family Investment Program, which helps the lowest-income families meet basic needs and prepare for employment, all have seen large cuts in funding since before the recession. Even into economic recovery, some programs are still being reduced.

Improving upon last year or the year before is good, but the long-term question asks if we are adequately funding programs to meet Iowans’ needs and to adequately invest in Iowa’s future. Judicious use of public funds is not as simple as cutting services to bring down expenses, but taking a balanced approach that assures adequate funding for services that position Iowa for the future.

Posted by Andrew Cannon, Research Associate

The Tax Foundation’s indefensible mish-mash

What the “State Business Tax Climate Index” offers is, at its core, an indefensible mish-mash of “Stuff the Tax Foundation Doesn’t Like,” which should be the title.

Peter Fisher
Peter Fisher

The Tax Foundation’s 2012 State Business Tax Climate Index is out, and not much has changed — including the political talk about it.

What this annual release offers is, at its core, an indefensible mish-mash of “Stuff the Tax Foundation Doesn’t Like,” which should be the title. Instead, the group slaps the term “State Business Tax Climate Index” on it, adds its slick logo and pretends the whole thing has meaning. For an ideological message, it may, but for decisions on business locations and expansions, not so much.

Problems with the methodology of this “index” are outlined in my 2005 book, Grading Places, published by the Economic Policy Institute. Much of the latest Tax Foundation (TF) report reads verbatim from earlier versions.

The Tax Foundation rests on contradictory messages. First, it claims that taxes paid make a difference in business decisions or growth, selectively citing literature to back the claim, despite a preponderance of evidence that taxes matter little. Then, it produces an “index” that has little relation to what businesses actually pay. In some cases, lower taxes actually produce a worse score on the index.

Rather than measuring what businesses actually pay, TF instead focuses on selected characteristics of the tax code while ignoring significant features. Results differ wildly from a ranking based on what businesses pay in many cases. This is because of the TF emphasizes rates of tax, without considering the base to which those rates apply. This feature penalizes Iowa, which in fact is a low-tax state for business; according to Ernst & Young, only 18 states have lower overall state and local taxes on business.

In other words, if a state — like Iowa with its single-factor apportionment formula — holds down the base on which tax rates apply, the Tax Foundation ignores the impact on actual taxes paid because it doesn’t like the rate structure.

Ironically, the report penalizes states that offer tax credits, which TF views as harmful to the business climate, a defensible position because it creates an uneven playing field for competing businesses, and jeopardizes critical public services that benefit businesses and their employees. But tax credits have strong lobbies in the Legislature. When the anti-tax politicians crow about Iowa’s low ranking in this report, something tells me that is one part of it they will not mention.

Like the Tax Foundation, they will stick with anything that backs the message they want to share, rather than examine the real issue of effects on business.

Posted by Peter S. Fisher, Research Director

Quality of life — the path to good jobs and schools

A whopping 63 percent of Iowans voted in 2010 for a constitutional amendment that would dedicate funding to improve Iowa’s waters and land. Now, that is a mandate.

Will Hoyer
Will Hoyer


Governor Branstad wants Iowans to focus “like a laser beam” on jobs and education. If we are to do so, he must get us to examine how we’re managing our precious land and water. He cannot expect to achieve his job goals without those important parts of the picture.

What happens when people don’t want the jobs that are available because the air is so dirty that people get sick? What happens when well-educated, highly qualified job candidates pass up Iowa for another state that demonstrates a commitment to clean water and air? A variety of aspects make Iowa a desirable place to bring a business or a family. Most focus on quality of life.

If our children are educated in world-class schools they will have job opportunities everywhere. Companies across the country and across the world will be clamoring to hire hard-working, well-educated Iowa kids and those kids will have choices. Will they want to live in a state that demonstrates a commitment to clean air and clean water? Will they want a place that invests in parks and recreational opportunities? Absolutely.

As The Des Moines Register has pointed out, Iowa consistently ranks near the bottom in per-capita spending on recreation and conservation.

Politicians often talk of a “mandate” when they win an election with 52 or 53 percent of the vote. Why, then, can they not look back on the November 2010 election and recognize that a whopping 63 percent of Iowans voted for an amendment that would dedicate funding to improve Iowa’s waters and land? Now, that is a mandate.

Nobody will argue against creating jobs or improving education. It is a mistake to assume we can do either without other things that attract new people to Iowa and keep them here.

We educate smart people. If a smart Iowa-educated college grad can choose between a job in an Iowa town where the smell of a large hog confinement or industrial grain processor pollutes the air, or where nobody feels safe getting in the river water that runs through downtown, and a comparable job outside Iowa where clean air and water are the norm, we know what the choice will be.

We must invest in children’s education here in this state but we also must invest in protecting the environment so those children grow up healthy. We must invest in creating good jobs where people can work eight hours a day but we must also invest in protecting the environment where those workers live 24 hours a day.

Posted by Will Hoyer, Research Associate

Expanding kids’ coverage pays dividends

Iowa is one of 23 states receiving a children’s health program bonus for its performance in 2011.

Andrew Cannon photo
Andrew Cannon

Iowa has made a huge effort in recent years to expand health insurance coverage to children. Those efforts are paying dividends to the newly covered children and their families, of course, but also to the state.

The 2009 Children’s Health Insurance Program Reauthorization Act (CHIPRA) gave states new tools to make insuring kids easier. Many of these tools meant a reduced workload for state enrollment officials, and made it easier for families to obtain coverage for their children. CHIPRA also provided cash bonuses to states that implemented the tools and excelled in enrolling children in public health insurance programs.

On Wednesday, the U.S. Department of Health and Human Services announced that Iowa is one of 23 states receiving a CHIPRA bonus for performance in 2011. Iowa is one of just five states to have implemented nearly all of the CHIPRA enrollment tools. Iowa’s $9.5 million bonus can be used to further improve enrollment and eligibility processes or to offset the cost of increased enrollment.

In addition to streamlining the  Medicaid and hawki (Healthy and Well Kids in Iowa — the state’s CHIP program) enrollment process, Iowa has also increased enrollment beyond a baseline level, further increasing the size of the bonus. In November 2011, more than 34,000 children were enrolled in hawk-i, with 248,000 enrolled in Medicaid, compared to 22,300 and 219,000, respectively, in July 2009, just months after CHIPRA passed.

Undoubtedly, the effect of thousands of Iowa parents losing their jobs and health insurance has contributed to enrollment increases. Nonetheless, the tools CHIPRA made available, as well as Iowa’s implementation of many of them, made the process of enrolling kids in public health insurance programs less onerous for many parents at a time they most needed assistance.

Posted by Andrew Cannon, Research Associate

Thanksgiving thoughts on hunger

As we discuss and debate our fiscal future, proposals should be weighed by their effects on people, not with how well the line up with some ideological ideal.

Andrew Cannon photo
Andrew Cannon

Hunger will probably be the last thing on our minds this Thursday, as we enjoy Thanksgiving feasts.

But for thousands of our neighbors, hunger an everyday reality.

Each year, the U.S. Department of Agriculture (USDA) measures food security in the United States. Food security is defined as having adequate food and nutrition at all times for a healthy and active lifestyle.

An average of 12 percent, or 340,000 Iowans lacked adequate food and nutrition, or was food insecure, over a three-year period ending in 2010.

This is certainly not a new problem, but it is one that is on the rise in recent years.

Thousands of Iowans lost jobs or saw income drop as a result of the most recent recession. Food insecurity rates subsequently rose. But that number has been on the rise for much longer than just the past several years. In the mid-’90s, about 8 percent of Iowans were food insecure. By 2003, that figure had risen to 9.5 percent. By 2005, nearly 11 percent of Iowans were food insecure.

Solutions for problems as complex as food insecurity are never obvious. One thing, however, is obvious: Cutting food assistance programs will not help.

There’s an epidemic of budget-cut fever right now. Lost in the fiscal austerity discussions, however, are the effects such cuts would have on those who have been hardest hit by the recent recession, continuously rising food and fuel costs, and stagnant wages.

While some food assistance programs like the Supplemental Food Assistance Program or SNAP (formerly Food Stamps) are safe — for now — from cuts, many others, including free and reduced-price school lunch, the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) and the Emergency Food Assistance Program (TEFAP), which distributes nutritious fruits, vegetables, meat and poultry and other foods to food banks and pantries, are at risk of severe cuts.

As we discuss and debate our fiscal future, proposals should be weighed by their effects on people, not with how well the line up with some ideological ideal.

I recognize that I have so much for which to be thankful. The adoption of that standard by lawmakers would only make me more grateful.

Posted by Andrew Cannon, Research Associate

New Census measure shows good policy reduces poverty

The new measure helps policymakers view the impact of public initiatives to alleviate poverty.

Andrew Cannon photo
Andrew Cannon

Working-family tax credits and food assistance are among ways public policy lifts millions of Americans out of poverty. At the same time, continued high unemployment rates and low wages have put more and more Americans into poverty.

Those are some of the inescapable conclusions from the Census Bureau’s latest information.

In order to better capture what poverty means and how public programs help (or fail) to alleviate it, the Census Bureau devised a new poverty measure.

The Supplemental Poverty Measure (SPM) does not replace the official poverty measure, which is used to determine eligibility for many public programs, but provides policymakers with another way of viewing the impact of public programs.

The SPM measures what it costs to maintain a minimal standard of living using average costs of necessities: food, rent, clothing, utilities, etc. In addition, SPM also accounts for the increase in overall well-being individuals experience as a result of public programs. Those include the Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps), the Earned Income Tax Credit (EITC) and the Low Income Heating and Energy Assistance Program (LIHEAP), among others. It also accounts for the decrease in overall well-being an individual experiences through out-of-pocket medical costs, child care, child support, and other expenses.

Using the SPM, 49 million Americans, or 16 percent experienced poverty in 2010. The official poverty measure shows about 46.6 million or 15.2 percent in poverty. Among seniors, the difference is even more drastic: The official measure found 3.5 million seniors, or 9 percent in poverty in 2010; the SPM found 6.2 million or 15.9 percent in poverty.

Not all the results of the SPM are so grim, however. The SPM finds a lower rate of poverty among children than the official measure, 18.2 percent vs. 22.5 percent. As noted above, this is because the SPM accounts for the increase in income and living standard individuals experience when they benefit from public support programs.

Additionally, the SPM illustrates the effect public programs have on reducing poverty. For instance, SNAP keeps 5.2 million people, including 973,000 children, out of poverty. The EITC prevents about 6 million people, more than 1.1 million of whom are kids, from living in poverty.

On the other hand, medical out-of-pocket expenses, meaning everything from co-pays and deductibles to paying for medical services with cash or through debt, added about 10.1 million, or 3.3 percentage points, to the number of Americans in poverty.

Successful problem-solving requires that first the problem be understood. The Supplemental Poverty Measure is an important new tool for policymakers in alleviating poverty.

Posted by Andrew Cannon, Research Associate