IPERS defenses are ‘care tactics’

Concerns about IPERS changes stem directly from leaders’ comments, proposed legislation and a longtime goal of ideologues on the right who have become more strident.

IPERS, the Iowa Public Employees’ Retirement System, has come under attack in recent years for no substantive reason — only ideology and politics. Understandably, IPERS members, who number well over 10 percent of the population of Iowa, are concerned.

So, some folks are engaged in what might be called “care tactics,” to make sure the stakes on that issue are well-understood. People who care want good information, and are asking for it.

These efforts and concerns are being dismissed by those who claim there is no threat to IPERS. Political scare tactics indeed are part of the 2018 campaign on several issues — primarily taxes, as illustrated by the hair-on-fire ads on television that do more to distort than inform.

But it’s hard to make that case about pension concerns, which stem directly from leaders’ comments, proposed legislation and a longtime goal of ideologues on the right who have become more strident.

Those now dismissive of pension concerns point to recent campaign-season comments by Governor Kim Reynolds. Yet not so long ago Reynolds herself raised the prospect of some change in IPERS’ actual pension structure to a “defined contribution” or 401k-style structure for new employees.[1] Her predecessor, Terry Branstad, had made similar comments.[2] Legislation was proposed in 2017 in the Senate.[3] All of this remains fresh in the minds of those who are worried, as do efforts by others to undermine IPERS.

IPERS critics have promoted that riskier “defined contribution” structure, needlessly scaring Iowa taxpayers about Iowa’s secure IPERS system. The Des Moines Register has run such scare pieces, by Don Racheter of the Public Interest Institute[4] and by Gretchen Tegeler of the Taxpayers Association of Central Iowa.[5]

Neither the media nor IPERS critics have been able to explain how a separate system based on a 401k style structure — “defined contribution” — could be introduced for new employees without undermining existing and promised IPERS benefits for current members.

Contributions plus Interest investments equal Benefits plus Expenses in administration of the system— this is what is required for full funding of IPERS. If you reduce that first item, contributions, by setting new employees apart in a different plan, clearly that matters. It’s math.

In fact, it affects more than those new employees. Reducing contributions by diverting those from new employees reasonably means lower benefits — for current members!

The media and all policy makers should be asking more about this. It’s not enough to accept a “nothing to see here” argument from someone who in the recent past declared herself open to a change — especially when activists have pushed for it, and legislation has been proposed. The dismissal — not exposing it — is the “scare tactic.”

Let’s stay away from the “scare tactics,” and focus on the “care tactics.”

 

[1] Ed Tibbetts, Quad-City Times, “Reynolds says state looking at IPERS task force,” Jan. 26, 2017. https://qctimes.com/news/local/government-and-politics/reynolds-says-state-looking-at-ipers-task-force/article_bf76d410-c70b-5300-951c-ad1cb6bced3f.html

[2] William Petroski, The Des Moines Register, “IPERS cuts key target; unfunded pension liabilities up $1.3 billion,” March 24, 2017. https://www.desmoinesregister.com/story/news/politics/2017/03/24/ipers-cuts-key-target-unfunded-pension-liabilities-up-13-billion/99600866/

[3] O. Kay Henderson, RadioIowa, “Democrats accuse GOP of plotting that IPERS be dismantled,” December 11, 2017. https://www.radioiowa.com/2017/12/11/democrats-accuse-gop-of-plotting-that-ipers-be-dismantled/

[4] Don Racheter, Public Interest Intitute “Replace IPERS with defined-contribution plan,” The Des Moines Register, May 27, 2016. https://www.desmoinesregister.com/story/opinion/abetteriowa/2016/05/17/replace-ipers-defined-contribution-plan/84492576/

[5] Gretchen Tegeler, Taxpayers Association of Central Iowa, “Don’t minimize Iowa’s public pension debt,” The Des Moines Register, January 16,2018, https://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2018/01/16/iowas-public-pension-debt-eclipses-other-public-debt/1035979001/; also “Public retirement systems are not ideal for young, mobile employees,” The Des Moines Register, December 8, 2016, https://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2016/12/08/public-retirement-systems-not-ideal-young-mobile-employees/95148216/

 

Mike Owen is executive director of the nonpartisan Iowa Policy Project. mikeowen@iowapolicyproject.org

 

 

 

Rosy forecasts bring thorny budgets

Odd that Governor Branstad, burned so early in his tenure by overly rosy revenue estimates, would let this happen to his very own lieutenant governor as she took office.

Capitol-DSC_0119-7inA memo from the Legislative Services Agency (LSA) indicates a higher-than-anticipated cost of a special-interest sales-tax break primarily for manufacturers.

We could not afford it when Governor Terry Branstad attempted to implement it by rule in 2015, or when a scaled-back version passed in 2016, and we cannot afford it now.

But it appears likely that the new break is at least part of the reason sales-and-use taxes are flattening out, putting fresh pressure on the budget even after FY2017 cuts and continued reliance of state policy makers to push tax breaks that divert millions from critical services such as education.

There is great irony in this report coming as Governor Branstad was turning over the keys to Kim Reynolds, especially given this comment in the LSA piece by senior fiscal legislative analyst Jeff Robinson:

One potential explanation for the recent sales/use tax downturn is an underestimated fiscal impact of the sales/use tax exemption for manufacturing supplies and replacement parts. For proposed legislation in previous years, estimates of the impact of exempting manufacturing supplies and replacement parts from the State sales/use tax had been much higher.

As Robinson suggests, there was ample reason to think the cost would be “much higher” and that should have been taken into account in revenue estimates and crafting the FY17 budget.

Likewise, the four of us were present in the Iowa House chamber in 1983 when new Governor Branstad proposed a sales-tax increase, just a few months after bludgeoning his election opponent, Roxanne Conlin, with a “tax and spend” refrain. The new Governor inherited a budget shortfall right out of the gate, a product of overly rosy revenue projections by the Ray administration.

To be fair to Governor Ray, the farm crisis was unfolding back then, and the landscape was not necessarily as clear.

This time, the continuing revenue problem is due principally to out-of-control tax giveaways, which have accelerated long since Governor Ray left office. Just this one perk for manufacturing was expected to cost $21.3 million from the state budget.* However, the latest LSA analysis suggests, the cost to the state may be two or three times what was expected.

Odd that Governor Branstad, burned so early in his tenure by optimistic revenue estimates, would let this happen to his very own successor as she took office. Maybe he just forgot.

We did not forget.

 

* That cost figure grows to $25.6 million when including the dedicated revenue for local school infrastructure, and $29.2 million when including lost local-option tax revenue.

Posted by IPP Executive Director Mike Owen, IPP Founder David Osterberg, IPP Board President Janet Carl, and IPP Board Member Lyle Krewson. Owen was the Statehouse correspondent for the Quad-City Times and Osterberg, Carl and Krewson were state representatives from Mount Vernon, Grinnell and Urbandale, respectively — in 1983.

Session Recap: ‘Historic’ — not label of pride

Some legislators may boast of a “historic” session. History will mark 2017 as a low point in Iowans’ respect and care for each other.

By

4/22/17

IFP Statement: ‘Historic’ session not a label of pride

Legislative session hits working families and traditions of good governance

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Statement of Iowa Fiscal Partnership • Mike Owen, Iowa Policy Project

To describe the 2017 Iowa legislative session as “historic” is not a label its leaders should wear with pride.

Iowans needed a legislative session that worked to raise family incomes and expand educational opportunity. Iowans had long demanded water-quality improvement measures. Many called for lawmakers to address the lack of fairness, adequacy and accountability in a tax system laden with special-interest breaks and costly subsidies to corporations.

Instead, Iowans got a continued ratcheting down of funding for PK-12 public education. There were significant and serious cuts in post-secondary education that will lead to tuition increases. We saw cuts to early-childhood education and other programs that serve our most at-risk children and neglect of the child-care assistance program that helps working families struggling to get by.

The Legislature continues to demand little or nothing of industrial agriculture in cleaning up the mess it has left in our waters. Lawmakers tried to dismantle the Des Moines Water Works board, limited neighbors’ right to complain in court about pollution, and eliminated scientific research at the Leopold Center. Their ultimate action on water merely diverts resources from other priorities, such as education and public safety.

Lawmakers largely left the tax issue to the next session. An overture in the House to reform Iowa’s reckless system of tax credits was a welcome acknowledgment that this issue needs attention, but devils in the details make further discussion of this issue during the interim even more welcome.

Perhaps as troubling as the destructive nature of policy content this session, Iowa’s image of adherence to good governance took a big hit. The most controversial policy changes came not through collaborative, public discussion in committee, let alone the 2016 political campaigns, but were often dumped into lawmakers’ laps with little opportunity for amendments.

In what could accurately be called a “session of suppression,” lawmakers achieved:

  • Wage suppression, with a bill to preempt local minimum wage increases while refusing to raise Iowa’s repressive, 9-year-old minimum of $7.25.
  • Workplace suppression, gutting collective bargaining protections for public employees, and making it more difficult for Iowans recover financially from injuries on the job.
  • Health-care suppression, achieved in workers’ compensation legislation while also refusing to reverse Governor Branstad’s disastrous move to privatize Medicaid.
  • Local suppression, whacking at local government control in a variety of areas: minimum wage, legal defenses against concentrated animal feeding operations (CAFOs), fireworks sales, and collective bargaining options.
  • Voter suppression, with a bill to make it more difficult for many citizens, particularly low-income and senior voters, to exercise their right to vote.
  • Suppression of children’s healthy development, with additional cuts to Early Childhood Iowa and Shared Visions that will reduce access to critical home visitation, child care and preschool services for some of our most at-risk youngsters.

Some legislators may boast of a “historic” session. History will mark 2017 as a low point in Iowans’ respect and care for each other, a legacy that will not be celebrated when future Iowans look back on this session and the closing act of Governor Branstad’s long tenure in office.

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The Iowa Fiscal Partnership is a joint public policy analysis initiative of two nonpartisan, nonprofit, Iowa-based organizations — the Iowa Policy Project in Iowa City, and the Child & Family Policy Center in Des Moines. Reports are available at www.iowafiscal.org, and on the websites of the two partner organizations, www.iowapolicyproject.org and www.cfpciowa.org.

New rule! Governor wants to make laws himself

We have entered a new world of executive authority in Iowa.

We all know the drill: The Legislature passes bills and the Governor signs or vetoes them, whereupon they become either laws, or nothing.

Not anymore, apparently.

The move by the Branstad administration to implement a new sales tax break worth an estimated $40 million a year — possibly more — is taking place outside the legislative session. If it succeeds, we have entered a new world of executive authority in Iowa.

Business lobbyists wanted the change, it could not pass the Legislature, and the administration thinks it has found a short cut: Change the longstanding interpretation of the existing law. Presto, tens of millions of dollars will be available for manufacturers. And those same tens of millions of dollars will not be available for schools.*

Consider a Des Moines Register guest opinion by Mike Ralston of the Iowa Association of Business and Industry, a lobbying group representing manufacturers who would benefit from the change:

Part of the change affects Iowa’s existing sales and use tax exemption for machinery and equipment used in the manufacturing process.  The change is sound policy.

If that’s the case Mr. Ralston wants to make, let him make it during the legislative session. This rules change skirts the legislative process, and Iowans are noticing. Jon Muller writes in an insightful piece on the Bleeding Heartland blog:

It’s easy to look at political discourse today and conclude everything is a battle between Democrats and Republicans, the left and the right, liberals and conservatives. But far more is going on with this issue. … A Democrat will surely be Governor again someday, and it would be a mistake to set a precedent that allows the Executive Branch to so drastically change the tax climate. If Republicans in the Legislature do not stand up against this unprecedented over-reach of power, they will almost certainly live to regret it.

James Larew, an Iowa City attorney who was general counsel to former Governor Chet Culver, served for four years as Culver’s appointee on the Administrative Rules Review Committee, a panel of legislators who have the authority to delay the rule change from taking effect. He advised the panel: “This is new territory. What is sauce for the goose eventually becomes sauce for the gander, too.” Larew went on:

The balance of political power changes from one election to the next.

The balance of constitutional power — the relationship between the Iowa General Assembly and executive departments of government — is more serious and more lasting.

Broad interpretive powers given up by the Legislature, in one moment of time, concerning one issue, are not easily, later recovered.

As the Cedar Rapids Gazette opined in an editorial, the change “breaks the rules of good government.” The Gazette wrote:

The Branstad administration should drop its rule change bid and make its case to the General Assembly, which is elected to craft a budget and write tax policy. If it’s truly a great idea that will create jobs, as the department contends, surely the sales job won’t be that difficult.

Many businesses, we often note at IPP and the Iowa Fiscal Partnership, already pay no income tax in Iowa, and they just had their property taxes slashed. The corporate appetite for tax cuts is insatiable. Guess who pays?

*  Note: The Department of Revenue estimate of the cost of this tax break to both the state and local governments is over $40 million for each of the first four full years of implementation, according to a document provided the Administrative Rules Review Committee. The Legislative Services Agency has told ARRC that it does not have enough information to determine the accuracy of that estimate. We have revised the initial version of this blog post to reflect this uncertainty, until state officials agree on an estimate.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project

 

REAP: Long on Promise, Short on Support

REAP is kept well short of the $20 million annual support that had been envisioned — a nearly 25-year trend that keeps REAP well short of its potential.

When Iowa’s Resource Enhancement and Protection program (REAP) was established in 1989, the Legislature set its spending authority at $30 million, but funded it at only half that — $15 million. The next year, funding (FY1991) was set at $20 million, an amount we thought was sustainable.

It never again reached that level — though lawmakers attempted to set it at $25 million for the 25th anniversary of the program in the just-completed fiscal year. Governor Branstad vetoed $9 million that year, leaving REAP at $16 million for FY2015, where it stands for FY2016 as well.

Ironically, the 2014 veto came as the state was promoting its voluntary Nutrient Reduction Strategy. Twenty percent of REAP goes to these programs. The veto reduced funds available to help farmers implement new nutrient runoff reduction and filtration measures that could contribute to the goals of the nutrient strategy. Actions like these contributed to a long-term REAP shortfall of more than $220 million.

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See our new Iowa Policy Project report, REAP: A Case Study of Stewardship. With a more clear understanding of how REAP can make a difference in our quality of life, all Iowans may evaluate how it should be funded. In practice, REAP is kept well short of the $20 million annual support that had been envisioned — a nearly 25-year trend that keeps REAP well short of its potential.

IPP-osterberg-75Posted by David Osterberg, IPP co-founder and environmental researcher

On big issues, Iowa leaders emerging locally

In the absence of state-level leadership, it’s inevitable, perhaps, that local officials will find a way to help their constituents.

If state leaders won’t lead, local leaders in Iowa are showing they will take up the job.

On three big issues in the last several months, we have seen this:

I don’t know about you, but I’m beginning to see a trend.

Public policy matters in Iowans’ lives, in critical ways. We elect people who can take care of it in a way that works for all Iowans, but not enough who will. In the absence of state-level leadership, it’s inevitable, perhaps, that local officials who also are hired to work for their constituents will find a way to help them.

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

The case for Governor Branstad’s minimum wage increase

The time is right for Governor Branstad to propose a minimum wage increase. It’s the right thing to do, and the ball is in his court.

Election Night 2014 — the hours that established why Governor Terry Branstad should push for an increase in the state minimum wage.

At first blush, this might not seem obvious. It was a big Republican night, and support of the minimum wage is not a marquee issue for Republicans.

On Election Night, a minimum-wage critic won the U.S. Senate seat of one of the nation’s most high-profile and ardent supporters of a minimum-wage increase, Iowa’s Tom Harkin, and Republicans took control of that chamber. Over in the House, Republicans flipped one seat and now hold three of Iowa’s four, along with a historically overwhelming majority that makes the minimum-wage increase sought by President Obama highly unlikely.

This turns the focus to the Iowa Statehouse, where the power structure remains effectively the same: Republican governor, narrowly Democratic Senate, slightly stronger Republican majority in the House.

With little change in Des Moines, why would passage be more likely now?

For one thing, we have gone one more year without an increase. It has been almost seven years now at $7.25; it is only a matter of time — and we may be there — when Iowa reaches a tipping point where inertia succumbs to an increase in the minimum wage.

For another, the near-certainty that it will not pass in Washington erodes pleas to wait for the feds. Recall that Iowa stopped waiting in 2007, passing the $7.25 wage that took effect in January 2008, almost 19 months ahead of the federal $7.25.

Finally, the tipping point noted above may be signaled in state referendum victories on Election Night for minimum-wage forces in two neighboring “red” states — Nebraska and South Dakota — indicating the time is right politically. Of the states bordering Iowa, only Wisconsin is stuck with us at $7.25.

State minimum wages higher than U.S. minimum on Jan. 1, 2015
State minimum wages higher than U.S. minimum on Jan. 1, 2015 (National Conference of State Legislatures)

An increase would be popular in Iowa. A recent poll showed 53 percent support for an increase to $10.10 an hour.[i] No politician in either party will be disadvantaged in 2016 having supported a minimum wage increase.

On the merits, it is well established that a minimum-wage increase is overdue. It comes nowhere close to a family-supporting income, and it has not kept pace with rising costs for almost seven years. Families depending on minimum-wage income have not seen lower costs of food, fuel, housing, clothing and health care in those years. Passing it now would mean:

  • Fewer Iowans in poverty.
  • A boost to local and state economies as families have more to spend.
  • A fiscal benefit to the state as less is needed to support extremely low-income working families.
  • More resources to support stronger work-support programs to point low-wage workers on a path to the middle class.

In the past, Governor Branstad has made it clear the issue was not his priority but he has not ruled it out.[ii]

For all of these reasons, the time is right for Governor Branstad to move ahead. It’s the right thing to do, and the ball is in his court.

[i] http://globegazette.com/news/iowa/poll-majority-of-iowans-favor-raising-minimum-wage/article_1b688a49-214b-5688-bfff-9e74ead757bd.html

[ii] http://whotv.com/2014/01/31/minimum-wage-branstad-hasnt-ruled-out-increase/

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