Improve water quality funding equitably

Expand existing state programs to improve waters and overall balance in Iowa tax system.

Iowa has an opportunity to advance equity while improving water quality. The constitutional amendment voters overwhelmingly passed in 2010 gave us the option to fund water quality programs with the sales tax, but it’s only a starting place, and we need to explore more equitable funding solutions.

The sales-tax option needs to be paired with options that enhance equity in the way we fund all public services. A comprehensive approach adds other sources — even as we recognize that Iowa policy makers have refused the voters’ clearly stated desire for action.

A new IPP report offers policy options to improve water quality in an equitable way. Iowa voters, in a 2010 statewide referendum, showed their willingness to raise the sales tax in order to fund water quality efforts. The trust fund they authorized remains empty today, nine years later.

As we noted in an April 2019 report, Iowa water quality funding is inadequate.[1] Some will claim new water-quality funding passed in 2018, but it was at best window dressing. New programs had no new revenue source and added little to the mainly federal nutrient reduction funding that exists now.

The sales-tax option remains on the table and is promoted by serious advocates for action. The challenge is to find a way to offset the impact of a sales-tax increase on lower- and moderate-income households. Already, those lower-income families pay the most of any income group, as a percentage of their income, on sales tax. This drives the overall regressive nature of Iowa’s state and local tax system.[2] Analysis from the Institute on Taxation and Economic Policy (ITEP) shows why a tax on purchases hits lower income families harder (see graph). Lower-income families spend most of what they earn, and they spend a large share of it on goods and services that are subject to the state sales tax. This is less the case the higher you go on the income scale.

Basic RGB

 

How to fix it? We see two immediate options using existing programs: Boost the Earned Income Tax Credit (EITC) to help working families, and expand Disabled and Senior Citizen Property Tax Credit and Rent Reimbursement Program.

How to pay for it? Use at least part of the revenue from a 1-cent sales tax increase. The constitutional amendment directs three-eights of the first cent to the clean water and recreation trust fund. The key is what happens with the other five-eighths.

According to ITEP data, increasing the state EITC to 20.5 percent of the federal credit (from the current 15 percent) would fully offset that average $124 yearly sales-tax increase for a working family eligible for the EITC. The Rent Reimbursement program can contribute for other low-income families. Those two steps — EITC and Rent Reimbursement — would cost an estimated $30 million,[3] only a small share of the “extra” sales-tax revenue from a 1-cent increase

Taxing the polluter is another policy option for addressing a broader equity concern. Fertilizer used in the agricultural sector is the source of the contamination, yet it is exempt from the general Iowa sales tax. Removing the fertilizer exemption would bring a substantial source of water quality funding: about $110 million annually.[4]

In an already tax system favoring the highest earners, raising the sales tax is not a preferred option. But it can be improved and turned into an opportunity to both improve services and the overall balance in Iowa’s tax system. Those interested in both equity and clean water could embrace that opportunity.

[1] David Osterberg and Natalie Veldhouse, “Lip Service: Iowa’s Inadequate Commitment to Clean Water.” April 2019. Iowa Policy Project. http://iowapolicyproject.org/2019docs/190424-WQfunding.pdf

[2] Institute on Taxation and Economic Policy, “Iowa: Who Pays? 6th Edition.” October 2018. https://itep.org/whopays/iowa/

[3] EITC: $124 for each of the 209,000 taxpayers who receive this credit equals $25,916,000. Renters’ credit: $124 for each of the 32,000 who receive the credit equals $3,968,000. Total about $30 million for the two programs.

[4] $1,845,469,000 X 6 % = $ 110,728,140. The total in the 2017 Census of Agriculture was much smaller than the 2012 figure $2,587,059,000.

 

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Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

Water funding exposes shallow commitment

Recent initiative fails to meet needs to improve Iowa water quality

Voters have indicated their support for increasing funding to improve water quality in Iowa, earmarking part of the next sales tax increase for clean water. So far, the protected trust fund for outdoor recreation and water quality remains empty.

Our latest water quality report addresses these issues:

  • What has been the state’s spending commitment to water quality over the past 15 years?
  • How much of state and federal dollars goes to reduce nutrient pollution in Iowa?
  • How much spending is needed to make meaningful water quality progress?
  • How can the state raise adequate revenue to make an impact?

We identified 16 primarily state-level programs that fund water quality improvements. Funding in the most recent year hasn’t even reached 2008 to 2009 levels.

The Nutrient Reduction Strategy (NRS), implemented in 2013, was created to reduce nutrient pollution that creates a hypoxic dead zone in the Gulf of Mexico. The strategy was advertised as a new commitment by the state to reduce Iowa’s pollution of our own rivers and the Gulf of Mexico. Even with the NRS, we find that state water quality spending has dropped off and struggled to return to pre-2008 recession levels.

190424-WQ-Fig1

The Water Resources Coordinating Council is tasked with overseeing NRS progress, and measures the financial resources dedicated to reducing nutrient pollution from the state of Iowa to the Mississippi River system. The most recent NRS report shows $512 million was spent in state and federal dollars on Iowa nutrient reduction in 2017.[1] However, the state is largely riding the wave here; the real money comes from federal funding.

While it was assumed that adopting the NRS would increase Iowa’s commitment to water quality, it did not — though at the same time pollution has increased. Recent research indicates Iowa’s share of nutrient loading into the Mississippi and Missouri river watersheds actually increased between 2000 and 2016.[2]

In 2018, Governor Kim Reynolds signed a bill that appropriates $282 million to water quality efforts over the next 12 years.[3] This gesture compares poorly even to existing — and lacking — government water quality spending. Iowa is nowhere near to what is needed.

How much money does it really take to make a meaningful impact on Iowa water quality? The NRS document, written mainly by Iowa State University, estimated the cost of reducing nonpoint contamination under three scenarios. All were in the billions of dollars.

The Iowa Soybean Association estimates for nutrient reduction costs in just one river basin, the Lime Creek Watershed,[4] implies a statewide need of $1.4 billion a year for about 15 years. These estimates demonstrate the inadequacy of the 2018 spending bill.

Current investments are not resulting in discernible improvements in Iowa’s water quality. Two options available for generating the amount of revenue needed include removing the exemption of fertilizer used in agriculture and taxing it like other commodities.

A second option is fully funding the environmental trust that voters approved in a statewide referendum in 2010. Estimated revenue from either of these sources would bring more than $100 million per year. We need to tap new sources to make our state commitment to water quality equal to the task. Until then, we are only paying lip service to the problem.

[1] Iowa Water Resources Coordinating Council, “Iowa Nutrient Reduction Strategy 2017-2018 Annual Progress Report. Page 9.

http://www.nutrientstrategy.iastate.edu/sites/default/files/documents/NRS2018AnnualReportDocs/INRS_2018_AnnualReport_PartOne_Final_R20190304_WithSummary.pdf

[2] Christopher Jones, Jacob Nielsen, Keith Schilling, & Larry Weber, “Iowa stream nitrate in the Gulf of Mexico.” April 2018. PLOS. https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0195930&type=printable

[3] Brianne Pfannenstiel, “Reynolds signs water quality bill, her first as governor.” January 2018. https://www.desmoinesregister.com/story/news/politics/2018/01/31/reynolds-signs-water-quality-bill-her-first-governor/1082084001/

[4] Iowa Soybean Association Environmental Programs & Services, “Lime Creek Watershed Improvement Plan: A roadmap for improved water quality, sustained agricultural productivity & reduced flood risk. N.D. https://www.iasoybeans.com/search/?q=lime+creek

 

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Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

Long way to King’s goal

Persistent segregation, plus deindustrialization and declining in job quality across the region, has created stark and sustained obstacles to equal opportunity and equal outcomes.

As we mark Martin Luther King Day, it is also worth underscoring just how far we need to travel — in Iowa and in the nation — to achieve Dr. King’s aspirations of true and substantive racial equality.

Nationally, the last half-century has seen some progress in African-American educational attainment, wages, and incomes. But gains on other fronts — including home ownership, wealth, unemployment, and incarceration — have been elusive.

Regrettably, Iowa (and its upper Midwestern neighbors) remain among the starkest settings for racial inequality across a number of dimensions. Historically, Midwestern and rustbelt metropolitan areas have always been among the segregated places to live. Indeed black-white segregation in Iowa’s metro areas has persisted across the last generation and — in the Iowa City metro — has actually worsened since 1990. This, coupled, with the sustained impact of deindustrialization and declining in job quality across the region, has created stark and sustained obstacles to equal opportunity and equal outcomes.

The result is a jarring juxtaposition: While Midwestern metros (Des Moines, Madison, Minneapolis) typically crowd the “best places to live” lists, they are also among the very worst places to live for African-Americans. In one recent analysis, ranking the states by an index of racial inequality, Iowa and its immediate neighbors (Wisconsin, Minnesota, South Dakota, and Illinois) were the top (worst) five states.

Below, I have calculated Iowa’s position (rank among the states) across five key dimensions. For poverty, income, unemployment, and homeowners I used the Census Bureau’s 2013-2017 American Community Survey (pooling five years of data, given the size of the African-American sample in Iowa, provides a more reliable estimate); for rates of incarceration, I rely on the ongoing work of the Sentencing Project.

Here are the results:

1.  Although Iowa’s unemployment rate is low, the white-black gap is persistent. At 7.2 percent, the African-American unemployment rate is more than double the rate (3.2 percent) for white Iowans (2013-17). We are one of 16 states to reach this dubious threshold; the ratio of white-to-black employment in Iowa is the eighth worst in the country.

2.  African-American household median income in Iowa ($30,505) is barely half white household income. On this measure, we rank seventh worst in the country.

3.  On poverty, the disparity is even starker. The African-American poverty rate in Iowa (34.1 percent) is more than triple the white poverty rate (10.0 percent). We rank sixth worst in the country.

4.  Almost three quarters (74.1 percent) of white Iowan heads of households own their homes, almost triple the rate (27 percent) for black heads of household. On this metric, Iowa has the seventh worst disparity in the country.

5.  One of every 17 black men in Iowa are in prison, a rate of incarceration that is the third worst (behind only Vermont and Oklahoma) in the country. The ratio of black-white incarceration in Iowa is 11.1: 1 (for every white adult in prison there are 11.1 black adults in prison), again ranking third worst (behind Wisconsin and New Jersey).

Colin Gordon is senior research consultant for the nonpartisan Iowa Policy Project. A professor of history at the University of Iowa, Gordon also has authored IPP’s State of Working Iowa reports. Contact: cgordonipp@gmail.com

Assuring opportunity for all Iowans

New Census data highlight the need for Iowa policymakers to ensure that all can fully contribute to Iowa’s economy

New Census data highlights a slight decline in Iowa’s overall poverty rate, though not all racial groups benefited from this advance. Stagnating household incomes and poverty rates among working Iowa families of color over the past 10 years mean that economic gains aren’t broadly shared among racial groups in Iowa.[i]

180915-MedianIncome_Race_IA

Ways that the Iowa Legislature could strengthen economic security for families of color include:

  • expanding the Earned Income Tax Credit (EITC);
  • ensuring that high-income Iowans and corporations pay their fair share of taxes;
  • raising the minimum wage; and
  • investing in preschool and K-12 education.[ii]

In recent days, the U.S. Census Bureau released new 2017 data covering poverty, income, and health insurance coverage.

Iowa showed a slight decrease in family and child poverty rates and an increase in household incomes. The outdated poverty guidelines fail to capture what it really takes to get by in Iowa.[iii] Our Cost of Living in Iowa research builds basic needs budgets for multiple family types across Iowa. Our 2018 analysis found that 30 percent of black working households and 28 percent of Latino households were unable to meet basic needs. This compares to 16 percent of white households.[iv]

The median household income for black Iowa families was about half of white family household incomes in 2017. White households are the only group who saw a statistically significant increase in household income over the past 10 years. Poverty rates declined for white and Latino Iowans between 2016 and 2017. However, poverty rates for black, Asian, Pacific Islander, and Native American Iowans have remained the same.[v]

Communities of color in Iowa continue to face barriers to economic prosperity. These include structural factors such as hiring discrimination and a lack access to quality jobs, great schools, and convenient transportation. Latino and Black families are disproportionately low-income. Further, they pay a larger portion of their income in sales and property taxes relative to more affluent Iowans.[vi]

Moving to a less regressive statewide tax system for families while closing corporate tax loopholes to assure stronger investments for all Iowans would work to dismantle some of the barriers to economic success for all Iowans and particularly families of color, who the latest data show are disproportionately impacted.

Expanding the EITC and raising the minimum wage would contribute to more broadly shared prosperity, as would restoring Iowa’s traditional commitment to education. Education funding in Iowa has lagged in K-12 and opportunities to advance in college are threatened by state cuts in support. Iowans and their leaders should be looking to solutions that improve equity and opportunity for a new generation of Iowans.[vii]

[i] U.S. Census Bureau, “Poverty Status in the Past 12 Months.” September 2018. American Community Survey 1-year estimates. factfinder.census.gov/

[ii] Erica Williams, “States Should Adopt Policies to Help Dismantle Racial Barriers to Broader Prosperity.” September 2018. The Center on Budget and Policy Priorities. https://www.cbpp.org/blog/states-should-adopt-policies-to-help-dismantle-racial-barriers-to-broader-prosperity

[iii] Ibid.

[iv] Peter Fisher and Natalie Veldhouse, “The Cost of Living in Iowa 2018 Edition Part 2: Many Iowa Households Struggle to Meet Basic Needs.” July 2018. Iowa Policy Project. http://iowapolicyproject.org/2018docs/180702-COL2018-Part2.pdf

[v] Ibid.

[vi] Ibid.

[vii] Ibid.

2018-NV-6w_3497(1)Natalie Veldhouse is a research associate at the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org