Enriching the minimum wage discussion

History shows the minimum wage was meant to be a meaningful policy tool to help working families, not limited to “entry level” work or teens. In fact, efforts to establish the wage came as policy makers were trying to remove young teenagers from the workforce.

The spin against any minimum wage increase — or even having a minimum wage — has become predictable. This should surprise no one. Policy makers since President Franklin D. Roosevelt have battled the same stuff.

A little relevant history might be just what is needed as Iowans consider the arguments for a national, state or even local increase, which passed in Johnson County.

History shows the minimum wage was meant to be a meaningful policy tool to help working families, not limited to “entry level” work or teen wages. In fact, efforts to establish the wage came at the same time policy makers were trying to remove young teenagers from the workforce.

The U.S. Department of Labor website has an interesting paper published almost 40 years ago by a DOL historian, Jonathan Grossman: Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage In it, Grossman relates a story about a young girl’s note to Roosevelt, telling of pay being cut from $11 a week to between $4 and $6 a week. 

To a reporter’s question, the President replied, “Something has to be done about the elimination of child labor and long hours and starvation wages.”

“Starvation wages” are your concern if you expect the wage to be meaningful to a household budget.

Interestingly, Iowa Policy Project research shows what is needed for a household budget. In Linn County, where a very low $8.25 has been suggested by a split task force, a single parent needs to make between $21 and $25 an hour to support a household on a bare-bones, basic-needs budget without public supports. In Polk County, it takes between $22 and $27 for a parent in similar circumstances.

IPP and Economic Policy Institute analysis also show this issue is scarcely about teens. Statewide, more than 4 out of 5 workers affected by an increase to $12 are 20 years old or older. A quarter of them have children. Over half of them work full time. On average, they account for over half of their family’s total income.

County supervisors in Johnson County have taken the baton across generations from FDR, to assure families have a chance. They acted last year to raise the local wage in three steps to $10.10 by next January 1, and they have already taken two steps, to $9.15.

Discussions are moving ahead in Polk County, Linn County and Lee County. Passing a local wage is a significant signal to state leaders that they are through waiting for action. Any county must consider whether the content of its action is significant as well — however bold it may seem to pass local law on this issue, the amount does matter.

And for those who say, “Let the market handle it,” just wake up. Clearly, it does not. As FDR stated in 1937:

The truth of the matter, of course, is that the exponents of the theory of private initiative as the cure for deep-seated national ills want in most cases to improve the lot of mankind. But, well intentioned as they may be, they fail…. (T)hey have no power to bind the inevitable minority of chiselers within their own ranks.

Though we may go far in admitting the innate decency of this small minority, the whole story of our Nation proves that social progress has too often been fought by them. In actual practice it has been effectively advanced only by the passage of laws by state legislatures or the National Congress. [1]

Do we value history? Do we value work? Do we value families? Do we value practical solutions through public policy? We are about to see.

[1] Franklin D. Roosevelt: “Message to Congress on Establishing Minimum Wages and Maximum Hours.,” May 24, 1937. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=15405.

owen-2013-57By Mike Owen, Executive Director of the Iowa Policy Project.

Contact: mikeowen@iowapolicyproject.org

Ignore ideologues — IPERS sound, stronger

Time seems to be running out on those who do not want a stable, secure and sustainable retirement program for public employees. IPERS, the Iowa Public Employment Retirement System, is well on the way to recovery before its opponents can kill it. But they’re still trying.

The criticism this time comes in a Des Moines Register opinion piece, from a familiar source, the Public Interest Institute (PII) in Mount Pleasant.

In its latest ideological attack on IPERS, PII offers no data — not a single financial indicator — to demonstrate a problem. In fact, IPERS is rebounding from troubles brought on by the Great Recession and inadequate state contributions in the latter half of the last decade.

According to the latest IPERS annual report, IPERS’s ratio of funded actuarial assets to liabilities — which had dropped from 89.1 percent in FY2008 to a low of 79.9 percent in FY2011 — has continued to rebound, rising in FY2015 from 82.7 percent to 83.7 percent.

In an Iowa Policy Project report in late 2013, Imran Farooqi, Peter Fisher and David Osterberg showed that contrary to high-profile examples of public pension problems with the city of Detroit and the state of Illinois, the public employee pension systems in Iowa and most states were generally healthy and well-managed for the long term.

“Iowa’s public pension plans have sufficient assets to pay benefits now and well into the future. And recent improvement in the plans’ designs have already enabled them to begin recouping losses incurred during the recessionary stock market decline,” they wrote. Now, 2 1/2 years later, there is no indication of a change in that positive trend.

That report did recommend ways to strengthen IPERS and other public employee retirement plans in Iowa, such as increasing contributions and meeting actuarial recommendations for those contributions.

What we need to remember is that the purpose of IPERS is not to see how little we can pay public employees, but to attract good employees partly with a promise of a secure retirement. It is to “improve public employment within the state, reduce excessive personnel turnover, and offer suitable attraction to high-grade men and women to enter public service in the state.” This is the stated purpose of the law, Chapter 97B.2.

The biggest problem for PII is that IPERS may fully recover before PII gets the law changed to a less secure “defined contribution” system. A defined benefit system provides financial security by pooling risk in the group — more efficient than having everyone on their own based on defined contributions that they might outlive.

So let’s be clear: Shifting from a defined benefit plan like IPERS to a defined contribution plan, such as a 401(k), is a way to cut benefits and reduce retirement security.

We can spend our time better addressing real concerns to assure our public employees can deliver on public education, overseeing human services, policing our streets and guarding prisoners — and making sure they can retire securely when they are done working for us.

owen-2013-57Posted by Mike Owen, Executive Director of the nonpartisan Iowa Policy Project
mikeowen@iowapolicyproject.org

Minimum wage: When leaders won’t wait

When state lawmakers won’t act, local officials may well take matters into their own hands.

The Iowa Legislature adjourned the 2016 session 10 days past its target, but the timing could not have been much better.

Two days after adjournment — with no action on the state’s long-outdated $7.25 minimum wage — the second step of Johnson County’s local minimum-wage increase took effect Sunday.

The minimum wage in Johnson County moved from $8.20 to $9.15, with the final step to $10.10 scheduled for Jan. 1, 2017.

Johnson County supervisors acted last year because the state Legislature and U.S. Congress had not. Other counties in Iowa may see a need to follow suit if the state cannot move off the $7.25 level established on Jan. 1, 2008.

Working Iowans are trying to support families on minimum wage or slightly above because employers can get away with paying that below-poverty amount. Someone has to look out for low-wage workers when their employers refuse to do so.

Those employers benefit immensely from taxpayer support of education, law enforcement, roads and other public structures, not to mention direct subsidies or tax breaks.

The minimum wage is one way to establish accountability — and not just for business but for our political leadership as well. When state lawmakers won’t act, local officials may well take matters into their own hands.

Owen-2013-57Posted by Mike Owen, Executive Director of the nonpartisan Iowa Policy Project
mikeowen@iowapolicyproject.org

A squeaky wheel is heard — but not fixed​

The weak House attempt to satisfy Davenport on school funding inequities is a sign that a squeaky wheel is being heard. But the whole statewide axle is rusty.

Davenport has been the squeaky wheel on school funding inequity in Iowa, and the Iowa House this week tried to apply a drop of oil. Problem is, the whole axle is rusty, and cracked.

By law, 164 school districts — about half of Iowa’s 330 districts — are held $175 below the maximum per-pupil spending amount used to set local school budgets. In fact, almost 84 percent of school districts in the state are $100 or more below the maximum (graph below).

Basic RGB

On Tuesday, the House passed an amendment, H8291, that dealt only with the squeakiest wheel — Davenport — and only for a one-year fix.

Davenport is not buying. In a Quad-City Times story, Davenport lawmakers were not happy. Their school superintendent, Art Tate, called it “no help at all,” and for good measure, put the focus where it needs to be.

Wrote Tate in an email to the Times: “It does not address the moral imperative to make every student worth the same in Iowa.”

The larger question, given that moral imperative, is why more districts aren’t more active on this issue. One reason could be that Iowa’s inequities, while real, do not rise to the level of what might be found in other states.

Another reason might be that just fighting for basic school funding is hard enough, when the Legislature is setting a seven-year pace of funding growth below 2 percent despite faster growth in district costs, strong state revenues and approval of more business tax breaks.

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We’re in the closing days, perhaps the closing hours, of the 2016 legislative session, with exceedingly few successes for education and working families. It’s too late in this session to expect real reform of the school funding system, pleas for which have come for many years — and focus on more than the per-pupil cost. There are other equity problems, the largest of which is in funding transportation services.

The weak House attempt at a one-year fix for Davenport, however, is a sign that the squeaky wheel is being heard. Think of what might happen if more wheels squeaked.

Owen-2013-57Posted by Mike Owen, Executive Director of the nonpartisan Iowa Policy Project.
mikeowen@iowapolicyproject.org

Sensible context on school aid growth

If the Legislature were to curtail business tax credits even slightly, plenty of money would be available to properly fund education and other actual public priorities that are the traditional and best-focused business of state government.

There are many ways to measure Iowa’s lagging commitment to public schools. One is a comparison of growth in school aid to growth in state revenues.

As K-12 schools are a significant share of the state budget, it seems sensible that we would expect at least similar numbers of growth in one vs. the other.

Basic RGBThat is not the case.

While not a perfect comparison — there are moving parts with both figures — you can get an idea of the general trend in the accompanying graph. Net General Fund revenues have been coming in with average yearly increases around 4 percent,* while the key school-aid number, for Supplemental State Aid, has averaged about half that.**

The numbers below are taken from the latest Revenue Estimating Conference report, available here: https://dom.iowa.gov/sites/default/files/documents/2016/03/rec-projections-2016-03-16.pdf

  • The actual ending balance for FY2015 (the budget year ending last June 1) showed a net over-the-year revenue change from FY2014 of 5.1 percent. For that same period, schools had 4 percent Supplemental State Aid — the only year that high since FY2010.
  • For the current year, the most recent official revenue estimate is for a 3.3 percent state revenue increase, while schools are operating on budgets reflecting 1.25 percent per-pupil growth.
  • For FY2017, the estimate is for a 4.4 percent state revenue increase, and the deal just hatched at the Statehouse — 13 months late — is for schools to see 2.25 percent per-pupil growth.
  • For FY2018, for budgets to be approved a year from now, the state is expecting 4.1 percent revenue growth. The school aid number for FY2018 by law was to have been set a month ago so school districts could properly plan their budgets when enrollment counts are set this fall, and to negotiate staff contracts without big uncertainties. That number has not been set and apparently will not be during this legislative session, as neither the House nor the Governor is interested.

Understand, the revenue growth number is held artificially low by the growing and incessant demand for business tax breaks that undermine revenues. So the net revenue number would be much higher if legislators wanted it. Instead, they continue to give away hundreds of millions of dollars before they even reach the state treasury.

If the Legislature were to curtail business tax credits even slightly, plenty of money would be available to properly fund education and other actual public priorities that are the traditional and best-focused business of state government.

Alas, that is not the political world in which we live.

*The average growth for general fund revenues includes both actual results for FY11 through FY15, as well as projections by the Revenue Estimating Conference for FY16 and FY17.
**Supplemental State Aid — which is a percentage for per-pupil cost growth that districts must use in building an enrollment-based budget — includes the recent deal approved by the Senate and House and expected to be signed by Governor Branstad.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org
Mike Owen is a former journalist in Iowa and Pennsylvania. He covered state government for the Quad-City Times from 1980-85 and was editor and co-publisher of the West Branch Times from 1993-2001. He is serving his third term on the West Branch Board of Education, and is a member of the Professional Advisory Board of the University of Iowa School of Journalism and Mass Communications.

Finding closure on the job count

Not only are the actual job increases about half of what the Governor had hoped — but even his own “gross” counting method leaves him short, at 184,000.

For years, we had to watch Governor Branstad’s bogus job count tracked on the official nonfarm jobs spreadsheets provided by Iowa Workforce Development.

Basic RGBYou might remember: The Governor set a goal for 200,000 new jobs in five years. We didn’t come close — 104,500 net new jobs from January 2011 through January 2016. Everyone wants new jobs, but it was clear for a long time the goal was unrealistic.

And it was a distraction for those of us who work with such data carefully, as we do each month in our Iowa JobWatch report.
Nevertheless, the Governor’s people concocted a way to count jobs that no elementary arithmetic teacher would sanction — leave out the job losses. So IWD added a line to the official sheet, for “Gross Over-the-month Employment Gains.” And that way, the Governor claimed, he made it with a couple of months to spare.

In fact, at IWD’s budget hearing in November, the Governor asked IWD Director Beth Townsend to back up her slideshow to bolster the claim with the media present.

A few months later, it looks like we should back up that slideshow once again. The jobs data have now gone through their regular annual review, and the numbers show something different.

Not only are the actual job increases about half of what the Governor had hoped — but even his own “gross” counting method leaves him short, at 184,000.

Yes, we all want more jobs in Iowa, better jobs, more sustained job growth. But we also want the facts treated properly. Is it too much to ask for the Governor or IWD to acknowledge publicly that the “mission accomplished” claims were wrong?

When we see the news release, we’ll be sure to pass it along.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

A good deal if you can get it

This is perfectly legal. In fiscal policy terms it’s a scandal, because it is legal.

But research credit refund checks are poor fiscal stewardship

The millions Iowa gives to companies that do not pay state income tax is about the same amount of 1 percent in state school aid.

That’s one takeaway from the latest annual report from the state on Iowa’s Research Activities Credit (RAC). That tax credit is used far less to ease taxes than to shovel subsidies to big corporations outside the budget process, whether they pay taxes or not.

The report shows that in 2015, 248 companies had $50.1 in claims from this tax credit. Because the credit is refundable, companies get the full benefit no matter how much they owe (or don’t owe) in taxes. And the report shows that of those claims, 75 percent, or $42.1 million, were paid as checks to 186 companies that paid no corporate income tax to the state.

As we note in a summary by the Iowa Fiscal Partnership, each percentage-point increase in Supplemental State Aid for schools costs about $41 million to $43 million (Iowa Association of School Boards estimate).

160216-RAC-chksVclmsVsupp2b-line

What’s more, the largest claimants — 20 corporations receiving over $500,000 from this credit — took the lion’s share of the benefit with $43.9 million overall (about 88 percent).

Many millions are spent this way every year, outside the budget process. These companies don’t have to compete for what are supposedly scarce public dollars needed for critical public services such as education, health care, environmental protection and public safety. The latter types of spending must compete in the budget process.

The Research Activities Credit is only an entitlement. And except for the occasional lawmaker willing to stand up to restore some accountability, there is silence from the General Assembly.

This is perfectly legal. In fiscal policy terms, however, it’s a scandal, because it is legal. Lawmakers refuse to even consider whether to take this spending off autopilot.

When they claim the state is too strapped for money to provide more for school aid or human services, lawmakers should admit they let corporations take what they want first.

Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
Contact: mikeowen@iowapolicyproject.org
For more information about the Research Activities Credit, visit www.iowafiscal.org