IPP Statement: IPERS is strong

Governor Branstad and Lieutenant Governor Reynolds are discussing a potential task force to examine whether to replace the IPERS defined benefit pension plan with a defined contribution plan, like 401(k) plans.

The Iowa Policy Project, which has researched this issue already, today released this statement:

The governor’s proposed task force on public pensions is unnecessary. The evidence is clear that a defined contribution plan is inferior to a defined benefit plan in the fundamental purpose of a pension: to assure a secure retirement for an employee. The IPERS law also clearly states its purpose of reducing turnover and attracting high-quality public workers.

Therefore, any task force should be charged with those two fundamental tasks: (1) assuring a secure retirement for public employees, and (2) enhancing the ability of the state to attract and maintain good workers. Public employment should not be reduced to temp work.

It is noteworthy that the assurances offered current employees — which include the Governor, Lieutenant Governor and state legislators — pit current employees against future employees. It would replace a secure retirement with one at the mercy of the ups and downs of the stock market.

IPERS is strong — stronger than most such systems and stronger than it was after ill-advised underfunding and a recession. As long as legislators do not take the easy way out and choose to underfund this fundamental responsibility again, there is no reason to consider a change. A fair task force will discover this.

The effort to change this stable and secure pension plan for public employees is driven by political arguments — not economic or fiscal arguments. To better understand the issues and the political spin that is clouding them, see also these newspaper guest opinion pieces:

Alarmist rhetoric sells Iowa pension plan short,” by David Osterberg in the Cedar Rapids Gazette, December 2013

Strengthen, don’t break, Iowa pension plans,” by Peter Fisher in the Iowa City Press-Citizen, March 2014

 

owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

Contact: mikeowen@iowapolicyproject.org

Ten years and counting: Iowa’s inaction on the minimum wage

170118_capitol_170603-4x4It was the first bill Chet Culver signed into law as Governor of Iowa: an increase in the minimum wage, from $5.15 to $7.25 in two steps, to be fully in force Jan. 1, 2008.

“This is a historic occasion,” Culver said, Todd Dorman reported in the Waterloo Courier.

A historic occasion, and falling fast into history. Wednesday, Jan. 25, 2017, marks the 10th anniversary of that day. Low-wage workers have waited for an increase, through five state legislative campaigns and two gubernatorial elections.

They’ve heard promises and spin, facts and nonsense, and it all comes out the same: Iowa’s official policy is that businesses can get away with paying hard-working people, sometimes in unpleasant working circumstances, a measly $7.25 an  hour.

And the facts remain the same: Hundreds of thousands of Iowa workers would benefit from a minimum wage increase — over 300,000 from an increase to $10.10, over 400,000 from an increase to $12 — and there is no guarantee that they will even see a vote this year.

Perhaps the only reason they might is that four counties had the courage to take on the issue. The wage is now $10.10 in Johnson County, with Linn, Wapello and Polk counties following Johnson by approving increases that when implemented will set minimums from $10.10 to $10.75.

That is, if the Legislature permits them to stand. Governor Terry Branstad and the business lobby want a uniform wage — with no real indication whether that means an increase — and this could result in repeal of the local increases.

Understand: We do not have a monolithic statewide labor market. It makes perfect sense for local officials to respond as best suits their communities. And it is nonsense that seeing different requirements in different counties is a problem for businesses — other than the fact that they might not want to pay more.

Someday, we may see a statewide minimum wage set at a meaningful level, and indexed to inflation. There is no guarantee from this Legislature or this Governor — in fact, history shows it is unlikely.

So, as we mark the 10th anniversary of the signing of our piddling minimum wage, one that leaves Iowa behind 29 states and a growing number of cities and counties around the nation, we might want to consider how long we want Culver’s action in 2007 to be the historic one.

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

Contact: mikeowen@iowapolicyproject.org

Welcome silence on tax cuts; too much silence elsewhere

It is reassuring that the Governor chose not to grab the tax-cut mantle so strongly.

Against a backdrop of calls for new tax cuts, Governor Branstad in his silence sounded a note of caution.

In fact, the Governor’s apparently final Condition of the State message was notable for several issues that he chose not to address or promote.

Iowans who are vulnerable economically are looking for answers, yet there was no discussion of an increase in the minimum wage, now stagnant for nine years at $7.25, or of protecting local minimums above it.

The Governor offered no guidance for the Legislature and the public for what could happen with health coverage if Congress repeals the Affordable Care Act or imposes new restrictions on Medicaid. These issues could quickly become the most pressing in our state as the Governor prepares to leave office for his ambassadorship to China.

At the same time he encouraged Iowans “to ask the tough questions that challenge the status quo” about services and state commissions, he declined to make the same charge regarding Iowa spending on tax breaks — even though General Fund tax credits have more than doubled in just 10 years, with reforms long past due.

At the same time he set a goal for 70 percent of the workforce to have post-high school education or training by 2025, he was promoting $34 million in cuts in higher education from the current year budget.

At the same time he promoted a House-passed plan to divert General Fund revenues to fund water-quality efforts, he again rejected a long-term, dedicated and growing source of revenue — a three-eighths-cent sales tax as authorized by voters in 2010 — that would not compete with existing needs.
There will be much for Iowans to review in the budget proposals as they make their way through the legislative process, along with issues including public-sector collective bargaining and other big issues affecting working families in the coming weeks and months.

It is reassuring that the Governor chose not to grab the tax-cut mantle so strongly on his way out the door. But he is missing an opportunity to rein in or even reverse Iowa’s runaway spending on tax credits, which has contributed to unmet needs in our state.

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

Iceberg ahead — but how big?

When the decisions come to cut health care to Iowans, Governor Branstad won’t be around to make the tough choices. Is that what state legislators signed up for?

060426-capitol-swwThe Des Moines Register disclosed Wednesday afternoon in a copyright story that the private, for-profit companies now running Iowa’s Medicaid program are finding big problems in the first year.

With big policy decisions ahead on the future of Medicaid, not only in Iowa but in Washington with a new administration, it is reasonable to wonder if Governor Terry Branstad’s go-it-alone Medicaid privatization is only the tip of the iceberg — and how big the iceberg may be.

Besides the great uncertainty for health-insurance coverage for millions if Congress repeals the Affordable Care Act (ACA) without a replacement, there is the idea that Congress might block-grant Medicaid. The goal would be to save the federal government money — not to assure health care for the most vulnerable as Medicaid now provides.

A block-grant approach means states would be allotted a share of funds for Medicaid, and when it is gone, that’s it — services would be cut. In that scenario, the decisions would be made in the states. As noted by Edwin Park of the Center on Budget and Policy Priorities:

Such a block grant would push states to cut their Medicaid programs deeply.  To compensate for the federal Medicaid funding cuts a block grant would institute, states would either have to contribute much more of their own funding or, as is far more likely, use the greater flexibility the block grant would give them to make draconian cuts to eligibility, benefits, and provider payments.

Maybe someone can provide the campaign literature from the 2016 legislative races that illustrates successful candidates’ thoughts on whose coverage would be the first to go. Who gets cut off? Someone will have to decide that if we go to a block-grant program.

It probably won’t be Governor Branstad making that tough decision, by the way. The new ambassador-to-be will be off doing diplomatic stuff in China when these hard decisions are made.

Is that what these new legislators signed up to do when they put their names on the ballot? But they could check in with Senator Grassley and Senator Ernst to find out if Iowa Statehouse job descriptions might change in the months ahead.

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

Oversight on the overseers of tax credits

These interim legislative meetings put a spotlight on spending choices being made outside the budget process.

You might have heard about a big meeting at the State Capitol today.

No, not that one, about whose portrait will hang in the Iowa House and Senate behind the presiding officer.

The meetings where there’s always some mystery are the annual reviews of selected tax credits. Only a few credits are reviewed each year by a panel of legislators. One meeting was in November; the other is today.

One tax giveaway — er, tax credit — on the agenda for today is the Research Activities Credit, or RAC.
No such review since these sessions started has produced meaningful reform, but the exercise does put information on the table and does put a spotlight on spending choices being made outside the budget process.

What we already know from previous evaluations and annual reports about the RAC is that it is costly — over $50 million a year — and that routinely at least two-thirds of the cost (and usually over four-fifths) goes to companies as so-called “refunds.” These are not refunds of taxes owed, but of tax credits the companies didn’t need because they owe so little, or no, corporate income tax.

Remember that when you hear the Iowa Taxpayers Association and others bleating about Iowa’s corporate taxes, which are actually low.
For perspective on the RAC, the $42 million given away in tax credit refunds under this program in 2015 would have paid for about 1 percent more in school aid, at the same time schools were told we didn’t have the money for it. Of course we did. Our legislators just chose to give it away, mainly to huge, profitable corporations.
In Room 103 of the State Capitol, 1:15 p.m., the public and legislators can hear from the Department of Revenue about the Research Activities Credit. And the session that follows at 2:15 on the Earned Income Tax Credit may be worth listening to as well, for contrast, as the EITC is a demonstrated boost to the economy while the RAC has never been demonstrated to be more than a drain on revenue.

You never know what legislators at the table will have to say about these issues, but we may get some insights.
As for that other meeting, we all now how it will come out.
owen-2013-57Posted by Mike Owen
Executive Director of the Iowa Policy Project
Project Director of the Iowa Fiscal Partnership
mikeowen@iowapolicyproject.org

Spin and ideology are no substitute for good policy

The tax-cutters have a big microphone now but amplified volume does not substitute for good content.

Basic RGBBrace yourselves for public policy backed by nothing but spin and ideology in Iowa. A good example: tax policy.

Senator Bill Dix, who will be the new majority leader in the Iowa Senate with a comfortable nine or potentially 10-vote edge, offers a strident approach for the coming legislative session in this story by veteran Statehouse reporter Rod Boshart:

“The states that are growing the fastest today are the ones that have recognized that economic policy and tax policy makes a big difference,” he said. “High income tax punishes people who want to work, save and make investments in our state. We need to recognize that. States that have grown the fastest the last couple of decades across our country today are the ones that have either lowered their rates, broadened their base and kept things simple or moved to no income tax at all.”

The tax cutters have a big microphone now but amplified volume does not substitute for good content. Research is clear. So are the facts, and Senator Dix is missing them.

On IPP’s GradingStates.org website, Peter Fisher sorts out the fact from fiction with so-called “business climate” rankings that are certifiably unreliable. But they get a lot of attention from legislators who want something to back their ideological approach to policy.

Senator Dix is one of three Iowa state chairs for the American Legislative Exchange Council, or ALEC, which peddles much of the nonsense about tax cuts promoting economic growth.

Notes Fisher about the ALEC analysis, “when we can compare states ranked the best by ALEC with states ranked the worst, it turns out that ALEC’s 20 ‘best’ states have lower per capita income, lower median family income, and a lower median annual wage than the 20 ‘worst’ states. ALEC’s ‘best’ states also have higher poverty rates: 15.4 percent on average from 2007 through 2014, vs. 13.8 percent in the ‘worst’ states. The states favored by ALEC include the likes of Utah, North Dakota, and North Carolina, whereas ALEC’s ‘worst’ states include New York, California, and Vermont.”

Even if the prescriptions for lower taxes, etc. were right, they would not apply in Iowa. Our state has repeatedly been shown to be average or below average by any measure on taxes paid. In fact, few states can get below Iowa on corporate taxes, something the business lobby will not admit. So we start the legislative session with competitiveness not an issue for Iowa except in the minds of well-placed lobbyists and certain legislators.

And another angle not on their agenda: accountability on the large number of tax breaks already in Iowa law — something the Cedar Rapids Gazette noted today in an excellent editorial:

Over the years, lawmakers from both parties have given away tax exemptions, deductions and credits to an array of special interests lobbying for a break. Individually, the cuts look small. Added together, they have a significant budgetary impact.

They’re sold as an economic boost, but there’s rarely any follow up to find out if the tax cuts actually delivered on those promises.

And the real path to growth — the path lined with investments in human capital and public infrastructure? We’ll see how many of those demonstrated, positive approaches to prosperity even get a hearing in 2017.

owen-2013-57Posted by Mike Owen, Executive Director, Iowa Policy Project

Contact: mikeowen@iowapolicyproject.org

Recruiting minimum-wage jobs?

These folks really need to get their stories straight. Do they want to recruit low-wage employers?

For some time, we’ve seen Iowa House Speaker Linda Upmeyer defend inaction on a state minimum wage increase with the excuse that they’re focused on better paying jobs.

Now, many lawmakers and the business promotion groups of the Iowa Chamber Alliance are zeroed in on making sure no county or city officials should act locally to correct an indefensibly low state minimum wage of $7.25.

These folks really need to get their stories straight. It appears their real interest may be in recruiting low-wage employers.

In Saturday’s Cedar Rapids Gazette, Cedar Rapids Metro Economic Alliance policy strategist Barbra Solberg says “it’s hard for recruiting purposes to tell a company that we have 65 different minimum wages throughout the state.”

Well, which is it? Are we focused on high-paying or at least living-wage jobs, or are we actively recruiting companies that will pay the minimum wage? And how much is the Alliance hoping to give away to those companies with the “full funding” it wants for tax breaks? How much will Iowans pay for low-wage jobs?

While we’re at it, what is this nonsense about “65 different” minimums?

Four counties — not 65 — have embraced the demands of leadership and acted to raise local minimums, phasing in increases to between $10.10 and $10.75 from Iowa’s 9-year-old minimum wage of $7.25.

The Alliance does not even suggest an increase — only keeping it the same statewide “regardless of what it would be,” Solberg says. While the wage has remained stagnant, business tax credits have roughly tripled over that time.

Iowa needs a more responsible statewide wage, but local wage markets can easily justify setting that higher — as elected officials in four counties have determined is necessary to promote their local prosperity.

If uniformity is such a concern, is the Quad Cities Chamber pushing for the state of Iowa to raise the wage to Illinois’ level — $8.25 — or to Nebraska’s $9, since a statewide uniform wage is the Iowa chambers’ goal? Or are the Iowa chambers just happy to compete for the lowest wage jobs and to let Illinois and Nebraska and South Dakota ($8.55) and Minnesota ($9.50) get the better paying ones?

For an illustration of real-world ingredients of prosperity, see the analysis here by Peter Fisher of the Iowa Policy Project: http://www.gradingstates.org/the-real-path-to-state-prosperity/

A smart, high-road approach would start there, and get Iowa off the race to the bottom. Our track is already paved with excessive, costly and unaccountable tax breaks, weak services and increased poverty. We don’t need more of any of that.
owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
Contact: mikeowen@iowapolicyproject.org