April 9, 2014
 Peter S. Fisher and Lily French, The Cost of Living in Iowa, 2014 Edition, Part 1: Basic Family Budgets. February 2014, The Iowa Policy Project. http://www.iowapolicyproject.org/2014Research/140226-COL.html
Part 2 below (6-page PDF)
or Part 1 — Basic Needs Budgets (22-page PDF)
Thousands of Iowa families do not earn enough to provide for a basic standard of living without public supports, despite one or more wage earners in the family. Overall, 1 in 6 Iowa households meet this description in recent years. For single parents, the challenge is greater than it is for married couples with children.
This is the finding of Part 2 of the 2014 edition of The Cost of Living in Iowa, building on our analysis of what it takes just to get by, for various family types. In Part 1, we constructed typical family budgets consisting of the no-frills basic monthly expenditures on rent, transportation, child care, food, health care, and household expenses needed by families of different sizes and composition in Iowa.  In this report we provide estimates of the percent of Iowa working families who do not earn enough before taxes to meet a basic family budget without help from such work supports as child care assistance, food assistance, or health care subsidies.
In this report we consider four kinds of households: single persons living alone, married couples without children living at home, married couples with children under 19 living at home, and single parents with one or more children at home. In Part 1, we presented estimates of the before-tax income required by households of these four types (with varying numbers and ages of children) that would leave the household with after-tax income just equal to the basic needs budget for that type of family. We call this the break-even level of earnings. It is the level needed to attain a basic standard of living in the absence of any work supports beyond the Earned Income Tax Credit (EITC). Taxes must be taken into account in calculating disposable income.
We rely here on data from the most recent three years of the American Community Survey (ACS): 2010-2012 released by the U.S. Bureau of Census.  We pool three years of data to get a larger sample in order to increase the reliability of estimates. Since the focus of our report is on working families, we excluded from the sample senior households and those without at least one adult working at least half time. We also cannot consider certain types of households because of difficulties in estimating how income and expenses are shared within the household. We include families with up to three children. 
As noted above, nearly 17 percent of Iowa households earned below the break-even level of income. Table 1 shows that the proportion is higher for single persons, lower for married couples (especially those without children at home), and much higher (nearly 3 in 5) for single-parent families. The proportion does not vary greatly by region of the state, though the eight counties of central Iowa have a somewhat lower share and the non-metropolitan counties in the southern third of the state have a significantly higher share of families below break-even: nearly 20 percent.
In this table and those that follow, we show both the estimate and the margin of error. The smaller the sub-population (a particular family type, or a particular region of the state), the smaller the ACS sample and the larger the margin of error of the estimate. That is why we do not present estimates for smaller population groups (e.g., married couples with one child vs. two children, or smaller geographic areas): The margin of error becomes too large. 
The proportions in Table 1 cannot be compared to similar statistics in the last version of The Cost of Living in Iowa (published in 2012) for a number of reasons. First, that version based estimates on a single year of the ACS (2010) so the sample was only a third the size and the error was larger. Second, the basic family budgets in this latest edition are constructed both for families with health insurance from an employer and those without, and the families in the ACS sample are assigned the appropriate budget depending on how they answered the health insurance questions. In the previous edition we used only one budget — an average of the costs with and without employer sponsored insurance — for everyone in the sample. Finally, this year’s analysis employed a more accurate accounting of child care costs and a better approach to estimating statewide proportions.  As a result, we cannot say anything about trends over time.
Of those Iowa families with income below break-even, about a third earn less than half the needed amount. In other words, those families would need to double their current earnings to break even. For single parents, this is especially significant: 28.7 percent of single parents earn less than half the break-even level. (See Table 2.)
How far do Iowa families fall short of the break-even level of income? In Table 3, we show the average size of the “basic needs gap” — the difference between actual before-tax earnings and the break-even level of earnings needed to meet basic needs. Among all households in the state with income below break-even, the average shortfall is $14,274 per year. While smaller households face a smaller gap, for married couples with children it is $16,768 and for single parents a daunting $21,462.
At least 100,000 households in Iowa do not earn enough to cover a basic family budget. We say at least, because we do not provide estimates for households that include adult relatives of the head of the household or spouse (adult children, siblings, aunts and uncles, parents) because it is not clear what to assume in such instances regarding the sharing of income and expenses. No doubt some of those households are struggling as well. Of the 100,000 households we identified, over a quarter consist of single-parent families, and a little over half live in 18 metropolitan counties.
Clearly work alone does not produce sufficient income to meet the basic needs of a large number of Iowa families. Such families must rely on a variety of work support programs if they are to achieve a basic standard of living. A previous report looked at one such program, Iowa’s Child Care Assistance (CCA) program.  A final report in The Cost of Living in Iowa 2014 series will consider a broader range of programs and the role they play in helping families make ends meet.
 Steven Ruggles, Katie Genadek, Ronald Goeken, Josiah Grover, and Matthew Sobek. Integrated Public Use Microdata Series: Version 6.0 [Machine-readable database]. Minneapolis: University of Minnesota, 2015. IPUMS-USA is available at www.ipums.org
 Of the 75,500 persons in the Iowa sample to begin with, we eliminated 18,400 because the head or spouse was age 65 or older, 3,835 because the household consisted of single adults sharing accommodations, and 10,700 because there were more than 5 members of the household, or the household included a subfamily or more than one family. The 56,000 persons remaining were in 23,260 households. Of those, 2,540 households were eliminated because they included an adult other than the head or spouse, and 2,320 because they did not include a working adult. That left a sample of 18,179 households containing a single person living alone, or a single adult or a married couple with children under 19 but no other adults in the household.
 We are also limited by Census geography. Since we must use the Public Use Microdata sample of the ACS, the smallest geographic area we can identify is the Public Use Microdata Area (PUMA). There are 24 PUMAs in the state under the most recent delineation, based on the 2010 census. Because we are restricted to PUMAs, the 18 counties we describe as “metropolitan” include the central counties of eight of the nine MSAs (Council Bluffs being the exception) in the state as well as four surrounding counties that are part of MSAs, but also sux counties that are near but not part of an MSA. The 18 exclude nine other counties that are part of an MSA. The 40 northern “non-metro” counties include two that are part of the Waterloo MSA, and the 32 southern “non-metro” counties include four that are part of an MSA. Nonetheless, the categories do roughly represent the situation in metropolitan vs. non-metropolitan areas.
 In the previous edition we used basic budgets that assumed that all children in the household over 6 needed child care before and after school and in the summer. In this edition, we take out such child care costs for children over age 12. This would have the effect of lowering the budgets of some families (married couples with children age 12-18 and with both parents working) and hence lowering the proportion with income below basic needs. Also, to compute statewide proportions in the last edition we compared each family’s actual income with a statewide average budget for that family type. In this edition, we compare each family’s income with the average budget appropriate for the PUMA in which the family lives to determine if income is below break-even, and then count the number of such families across the state. This is more accurate, but it is impossible to say if it results in a lower or higher proportion than the previous approach.
 Peter Fisher and Lily French, Reducing Cliff Effects in Iowa Child Care Assistance. March 2014, The Iowa Policy Project. http://www.iowapolicyproject.org/2014docs/140313-CCA-cliffs.pdf
Peter S. Fisher is a national expert on public finance and is Research Director of the Iowa Policy Project. He has served as a consultant to the Iowa Department of Economic Development, the State of Ohio, and the Iowa Business Council. His reports are regularly published in State Tax Notes and refereed journals. His book Grading Places: What Do the Business Climate Rankings Really Tell Us? was published by Good Jobs First in 2013. Fisher holds a Ph.D. in Economics from the University of Wisconsin-Madison, and he is professor emeritus of Urban and Regional Planning at the University of Iowa.
Lily French is Senior Policy Consultant for the Iowa Policy Project. She is Director of Field Education and a Clinical Assistant Professor in the School of Social Work at the University of Iowa. A former policy analyst for the U.S. Department of Health and Human Services and the Wisconsin Department of Workforce Development, she has served as an adviser to state and local government officials on issues of child care, workforce development and microenterprise development. She holds a Master of Social Work degree from the University of Michigan and a bachelor's degree in Sociology from the University of Iowa.
This is the fourth edition of The Cost of Living in Iowa and it reflects a number of changes and enhancements since the previous edition was released in May 2012. In order to report the most current information in a timely fashion, we are releasing the 2014 edition in installments. The first installment presents complete information on the basic family budgets for all family types and all geographic areas. These budgets are based on living costs for calendar 2013, and state and federal income taxes for tax year 2013, with one exception: Health care costs reflect insurance rates in effect for calendar 2014. Because of the dramatic changes in health care for 2014 brought about by the Affordable Care Act, we have chosen to model health insurance costs and public health care programs in effect for 2014. The start of 2014 saw the end of the Iowa Care Program and the start of Iowa’s version of Medicaid expansion. It also saw the beginning of health insurance plans offered on the federal exchange and the availability of premium subsidies and cost sharing for low and moderate income families through the Affordable Care Act, as well as changing private insurance premiums to reflect new minimum standards required under the Act.
The changes in health care have also prompted us to present basic budgets under two scenarios: families with health insurance through a job (employer sponsored insurance, or ESI), and families without ESI. In the past, we have presented just one budget for each family type based on a weighted average of the costs of health insurance for those with ESI and those who must purchase insurance on the private market. As a result, the budgets overstated costs for those with ESI and understated costs for those having to purchase a private plan. Since the cost differences are substantial, and since the share of lower and moderate income families without ESI is large and increasing, we present here separate budgets for each situation.
This installment provides new estimates of the proportion of Iowa families whose income falls below the basic needs level.
Our final installment will focus on work supports and how they affect basic family budgets. Since the last edition, we have greatly expanded the capabilities of the cost of living model by incorporating all of the major public supports available to low income families in Iowa: Child Care Assistance, Food Assistance (SNAP), public health insurance for adults and children (Medicaid and Hawk-I), premium assistance and cost-sharing for health insurance plans under the Affordable Care Act, the Low-Income Home Energy Assistance Program (LIHEAP), and the federal and state Earned Income Tax Credits (EITC). We will show how these programs help to close the gap between basic needs and the income received from work for many Iowa families, and the “cliff effects” that hinder the effectiveness of some programs. (A preliminary policy brief illustrating cliff effects in the Child Care Assistance program was released in December 2013: http://www.iowafiscal.org/like-falling-off-a-cliff/.) We will also illustrate the impact of selected policy changes on families and their ability to meet basic needs.