Will Iowa ever put taxpayers’ dollars where their voices are?

The only thing that is self-evident is that Iowa lawmakers are not putting taxpayers’ money where their voices are: toward more and better water-quality initiatives.

Mike Owen
Mike Owen

The Des Moines Register editorial staff has produced some excellent perspectives about budgets in recent days, about budget cutting run amok, and budget cuts affecting the courts and human services (including accountability and oversight). Noted The Register:

It’s unlikely you will hear a politician say state government is too small. But at some point, it is.

You could certainly make the same case about environmental quality programs, particularly in water quality, as we showed in a report last week. In Drops in the Bucket: The Erosion of Iowa Water Quality Funding, IPP’s Will Hoyer, Brian McDonough and David Osterberg noted:

In a state with almost 90 percent of its land worked for agriculture, it should be of stark concern to Iowa policy makers that the water running through both our agricultural lands and urban landscapes contains excess nutrients, toxic chemicals, and sediments. These pollutants end up in Iowa’s rivers and streams. The impacts upon public health, fishing and other recreational activities, and cleanup and water treatment costs show up not just in Iowa, but all the way to the Gulf of Mexico. There, the nutrients from cornbelt farm fields are creating the area of hypoxic (low oxygen) conditions known as the “Dead Zone,” where sea life cannot live. …
 
Iowa voters demonstrated strongly that they favor additional efforts to protect Iowa waterways when 63 percent voted in 2010 to approve the Water and Land Legacy amendment, so one might expect the state to increase its commitment to protecting its water. While funding by itself is not an indicator of performance, it is a necessary ingredient in the fight to protect and improve Iowa’s water resources. This report looks at funding for several key state water programs over the last decade and finds that, from a fiscal perspective, the state’s commitment to water protection programs is woefully lacking. (emphasis added)

Among the IPP analysts’ findings is that for most of the period from FY2002-12, inflation-adjusted totals for 10 critical water programs hovered at just over $20 million, and that there were significant drops from those funding levels in FY03 and FY11, with little rebound from the latter in FY12. See the figure below (Figure 3 in our report).

Recent Drop in Water Quality Funding in Critical Programs
Figures in thousands
Table1

At the same time of these funding trends, we have learned that more and more waters in Iowa were impaired. One might expect greater awareness to produce greater attention to remediation, but clearly we are not seeing it. In fact, the Legislature would have to restore $5 million in state water-quality funding just to move to what it had been during the previous decade — as if those earlier levels were enough, something that is not self-evident.

The only thing that is self-evident is that Iowa lawmakers are not putting taxpayers’ money where their voices are: toward more and better water-quality initiatives.

Posted by Mike Owen, Assistant 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

Cities have development tools beyond TIF

The indefensible thing in the 2012 legislative session would be to make significant commercial property tax changes without fixing abuses of TIF.

Mike Owen
Mike Owen

The Business Record’s Kent Darr has an interesting story about Des Moines City Manager Rick Clark’s reaction to the commercial property tax issue, debated Tuesday in the Iowa House.

Clark expressed caution about unintended consequences that can result from tinkering with the property tax laws, which is a legitimate concern. But one of his own remarks demands caution as well. That is his concern about potential changes to tax-increment financing, or TIF, which are being considered separately this year. From Darr’s story:

“For cities in Iowa, it’s the only game in town,” Clark said. “It’s the only thing we have to encourage and promote economic activity; the other tools really don’t work. If we take away TIF or make it less effective than it is today, we’re really in a world of hurt.”

This argument is often raised and it’s just not necessarily so. First, cities do have other tools available, such as abatements. TIF is a tool that simply provides an extra revenue stream to fund those tools; in some cases, it may make sense to pool funds of various local government entities for a given project, but in others, possibly not.

Peter Fisher
Peter Fisher

IPP Research Director Peter Fisher addressed this in his recent report for the Iowa Fiscal Partnership examining TIF use in Johnson County:

It is important to understand that TIF is not synonymous with economic development incentives. TIF is merely a financing mechanism. Cities can and do promote economic redevelopment and job creation in a variety of ways; cities can build facilities to accommodate private projects, they can provide tax abatements for both residential and non‐residential property, and they can issue bonds to finance infrastructure, all without TIF. But TIF has become the mechanism of choice to finance economic development incentives in part because TIF creates the illusion that such incentives are costless, and in part because TIF in actuality shifts costs to other taxpayers.

Second, it should not be assumed that subsidies are effective. Does the subsidy cause the economic activity, or does the activity cause the subsidy? Sometimes it’s hard to say.

Again, Fisher:

Furthermore, much (perhaps the majority) of TIF revenue is not used to incentivize development at all, but rather to finance routine city infrastructure spending that otherwise could be financed with city bonds, retired entirely by city taxpayers, or charged to developers.

Sensible reforms would not render TIF “less effective” for its intended purposes to the extent subsidies are effective now. Fisher’s recent op-ed in The Des Moines Register outlined five common-sense reforms that would improve TIF. They would stop what would have to be acknowledged as abuses — for example, stopping cities from using TIF to fund a project in one school district from the tax base of another.

The indefensible thing in the 2012 legislative session would be to make significant commercial property tax changes — big cuts for businesses at the expense of homeowners or critical public services — without fixing abuses of TIF. Politicians frequently ignore TIF and other preferences when they start ranting about property taxes on business.

Posted by Mike Owen, Assistant Director

The need for TIF reform

Economic development types have become addicted to the idea that they can use TIF to do many things without regard to the impacts on neighbors or even the real purpose of TIF.

Peter Fisher speaks at TIF forum
IPP Research Director Peter Fisher speaks at a forum on tax-increment financing as Sen. Joe Bolkcom, D-Iowa City, and Rep. Tom Sands, R-Wapello, look on.

Peter Fisher’s report for the Iowa Fiscal Partnership about the use of tax-increment financing (TIF) painted a picture of a program that has become a monster. I encourage all to find the report on our website, or to view the forum in Coralville hosted by the bipartisan team of Sen. Joe Bolkcom, D-Iowa City, and Rep. Tom Sands, R-Wapello.

It takes some folks out of their comfort zone — apparently former Iowa City Council Member Bob Elliott among them in today’s Iowa City Press-Citizen — to see what an otherwise well-intentioned and potentially valuable tool has become due to lax state law. Cities across Iowa have shown an inability to handle the responsibility that goes with the permission to divert other jurisdictions’ tax revenues with TIF. Such projects that are supposed to benefit all whose revenues are being used. Unfortunately, it frequently does not work that way.

The report offers several ideas for reform to rein in abuses; it does not call for elimination of TIF, but for regulation. Perhaps Mr. Elliott missed that, as he states, “For me, an appropriate analogy to the TIF situation would be medical drugs, which can provide great benefit or be dangerously abused. In situations like that, you don’t eliminate it, you regulate against misuse and retain the capacity for beneficial use.” Agreed.

Indeed, the drug analogy is appropriate. Economic development types have become addicted to the idea that they can use TIF to do many things without regard to the impacts on neighbors or even the real purpose of TIF. Fisher’s report offers examples from Johnson County — notably Coralville’s use of property-tax dollars from one school district to create new property-tax base in another, in a project that effectively lured a major department store from Iowa City next door.

If state lawmakers ignore such examples, they will be repeated — in fact, it would give cities tacit approval to consider these practices appropriate. Take that, Clear Creek-Amana school district. Take that, Iowa City.

Fisher’s report is a wonderful example of how a nonpartisan organization that is focused wholly on issues, and not partisan politics, can help people of any political stripe to understand those issues. Iowans use our work and contribute to it because they know they can count on IPP to provide fact-based analysis and relevant research that holds the political spinners accountable. And yes, contributions to our work are welcome. Click here.

Posted by Mike Owen, Assistant Director

Iowa is not an island; jobless vote carries important impacts

Jobs are at stake, right here in Iowa, with the vote in the House today.


When your state is not showing the heavy impact of joblessness in the United States, it can be easy to miss the impact.

Iowa’s jobless rate is 6 percent, two-thirds that of the nation as a whole, but nevertheless high for what we’re used to and representative of the fact that our payroll jobs are significantly below where they were before the recession started hitting Iowa. In our state, jobs are about 44,000 below where they stood in May 2008.

Today in the U.S. House, legislation is expected to come to a vote to cut unemployment benefits. It would cut up to 40 weeks of benefits next year — most from the states hardest hit by the recent recession. Our neighbors in Illinois, Missouri, Wisconsin and Kansas would see varying losses of weeks of benefits by next July. See the map below from the Center on Budget and Policy Priorities (CBPP). map of projected UI losses by state

As Chad Stone of CBPP notes in a recent blog post, cutting off benefits in the hardest-hit states “greatly raises the risk that unemployed workers will run out of UI benefits before they find another job, imposing even greater hardship on them and their families. It also reduces the amount of support that UI — one of our highest-bang-for-the-buck stimulus programs — can provide for the struggling recovery.”

But even Iowa would be affected, if not with the benefit cut the way other states would be hit, then in the indirect impact on the state’s economy.

The cuts would shut off a flow of funds into the U.S. economy, the impact of which we cannot avoid. Sooner or later, it will hit our own stores, factories and services.

In short: We don’t need our lack of beaches to show us that Iowa is not an island. Jobs are at stake, right here in Iowa, with the vote in the House today.

Posted by Mike Owen, Assistant Director

Stewardship, community and freedom

The assault on our public structures by convenient, slick, political messages of the day defies American values of stewardship and community.

Today America faces a daunting task: finding a way to reduce deficits and debt while not crashing the economy and still maintaining the critical services that are only, or best, provided by the public sector.

At the Iowa Policy Project, we have the opportunity to work with many similar state and national organizations — nonpartisan, nonprofit, issue-focused and fact-based analysis at the heart of their missions and their work. One of these colleagues, Michael Lipsky, distinguished senior fellow at Demos, recently wrote a column in The New York Times about a hiking trip in the Pasayten Wilderness in Washington state, near the Canadian border.

In his excellent piece, “A Well-Regulated Wilderness,” Lipsky wrote that, even there, he found himself thinking about government. “Not that there was much of it in sight,” he remarked. He continued:

There were no rangers to check our reservations, no posted rules telling us where and how to set up camp.

Michael Lipsky, distinguished senior fellow, Demos
Michael Lipsky, Demos

If anything, the Pasayten seemed to prove that we don’t need government, that humans can be self-regulating: per the unofficial rules of backpacking, most of our campsites had been reused repeatedly, to minimize damage to the environment, and litter was rare.

On reflection, however, this nursery of freedom spoke directly to the role of government in shaping our world. It was thanks to decades of effective lawmaking that we could enjoy four days in the open country, fixing meals, hiking and spending family time together. … Americans once feared the wilderness and sought to tame it. Now we seek it out as redemptive. …

In 1964 Congress passed the Wilderness Act, which set aside 9.1 million acres of public land as places where people would be visitors but not leave any marks; today some 108 million acres are protected under the act.

Mike Owen
Mike Owen

Michael Lipsky’s perspective is spot-on. Let’s look at it another way: Would Exxon have done this? Or Microsoft? Or Wal-mart? Would it even make sense for them, or their stockholders, to do so? To whose mission, then, do such responsibilities fall? Does it not make sense that this would fall to the federal government? Would you not say the same about basic economic safety-net programs? Infrastructure such as roads and bridges? Workplace safety? Clean water and clean air protection? Civil rights and education? National security?

The assault on our public structures by convenient, slick, political messages of the day not only disregards, but defies, what in our hearts and minds we know are the American values of stewardship and community that are the thrust of what government does.

We’re all concerned about deficits and debt and the impact on our children and grandchildren, but we also must be challenged to address the impact on those future generations of a failure to accept the mantle of responsibility of maintaining and nurturing the structures that have sustained us, when “self-regulation” is not enough. For if we do fail on that score, it will be every bit as much a debt as one of dollars.

Posted by Mike Owen, Assistant Director

The reality of Recovery Act funds: They helped!

More teachers will be on the job in Iowa in the coming month and class sizes will be more manageable because Recovery Act funding saved positions in recent years.

Mike Owen
Mike Owen

A new report offers one illustration of the value of funds provided to the states under the American Recovery and Reinvestment Act (ARRA) — also known as the “stimulus” bill.

Aside from political arguments about ARRA, one thing that is undeniable is that it helped Iowa lawmakers get funds to Iowa schools at a time state revenues were coming in short.

IPP Research Associate Andrew Cannon’s report on education in funding in Iowa, “World-Class on a Shoestring Budget?” notes that a decade-long decline in K-12 funding has reversed course (measured in inflation-adjusted dollars), beginning in 2009, the first of three years of the temporary ARRA help. As his report notes:

The American Recovery and Reinvestment Act (ARRA) allowed Iowa, during the leanest years of the recession, to continue funding education at levels comparable to and even higher than prior years. As those Recovery Act funds expired at the end of June, the end of the state’s fiscal year, Iowa lawmakers chose to provide state funds to replace Recovery Act funds.

While it might be expedient to complain about “one-time funds” being used for ongoing expenses in the state budget, that is precisely how ARRA funds were designed to be used. Effective stimulus policy, as the Iowa Fiscal Partnership and others have noted, is supposed to be temporary, timely and targeted. State fiscal relief in times of revenues shortfalls is one of those approaches, and in this case, education funding in Iowa was sustained at more traditional levels than otherwise would have happened. More teachers will be on the job in Iowa in the coming month and class sizes will be more manageable because that funding saved positions in the last few years.

Cannon’s full report — six pages, plus a four-page appendix of data tables on education funding — may be found here.

Part of making Iowa students educational achievers is to encourage critical thinking skills — the skills that will teach them to check the facts about programs such as ARRA before listening to the political talking points.

Posted by Mike Owen, Assistant Director