January 14, 2020
This news release (3 pages)
DES MOINES, Iowa (Jan. 14, 2020) — Governor Kim Reynolds set a low bar for education funding, tax fairness and future services but left room for hope on child-care access in her Condition of the State address.
“The Governor’s proposal was long on tax-cut rhetoric, short on substance to achieve clean water and educational goals, and desperately lacking in the theme of investment that she attempted to promote. Iowa will never cut its way to prosperity, but the Governor persists in this contradiction of reality,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project in Iowa City.
“She did offer a hopeful nod to an issue critical to the prosperity of Iowans — child care assistance — but left more to imagination than to a defined vision.”
Staff from the Iowa Policy Project and the Child and Family Policy Center in Des Moines provided an Iowa Fiscal Partnership summary of key points in the Governor’s proposal.
One tepid step was a proposed 2.5 percent increase in per-pupil funding for K-12 schools — better than lawmakers passed last year, but still too low for schools to meet increased costs. Stacked against vigorous — and unnecessary — proposals to further cut taxes, Iowa's commitment to education is in question when per-pupil spending growth remains below 2 percent on average over the last decade, and the Governor is not pressuring lawmakers for more. Iowa has a long way to go in assuring these critical services are restored to sustainable levels.
A welcome focus of the Governor's address came in a commitment to reducing the Child Care Assistance (CCA) "cliff effect" that causes people to lose more in resources than they gain if their pay increases by a small amount. It is also reassuring that bipartisan support appears to be growing for a solution to this long-running issue in a state that is among the stingiest on eligibility for this assistance. But the Governor's plan at this point is a mixed bag.
Many moderate-income families would see welcome help under the Governor’s plan to double the maximum net income for the Early Childhood Development and Child and Dependent Care tax credits — from $45,000 to $90,000. But what about lower-income families? We await more details about her proposal to expand the state’s CCA program for those with a tiered copay system, given that she is proposing a flat CCA budget.
The Governor would make a modest boost to CCA provider reimbursements, and would also create a child care matching grant program to help with the construction, renovation or remodeling of local child care facilities. These are helpful, small things, but they do not reflect a commitment to address head-on the structural challenges that are holding back working families.
The Governor’s tax proposals appear to follow an all too familiar formula: Raise taxes on low and moderate income Iowans in order to provide tax cuts that would benefit mostly those at the top. The sales tax, known as a “regressive” tax because it takes a much larger share of the incomes of the poor than of the rich, would rise by 17 percent — boosting the state sales tax from 6 cents to 7 cents on the dollar, raising about $540 million. This would finance further income tax cuts, including a large cut in the top rate, benefiting upper income Iowans disproportionately. An already regressive tax system would become even more regressive. It should be noted that the Governor’s proposals come on top of 2018 tax cuts that — when passed — were shown to benefit the wealthiest the most.
The Governor is following the discredited idea that tax cuts lead to prosperity. The failed experiment with drastic tax cutting in Kansas should have put an end to such wishful thinking. Piling more tax cuts on top of the massive cuts already in place will force reductions in the kinds of investments in education, infrastructure, health, and work supports that are actually the drivers of economic prosperity.
The way the Governor has shaped her proposal to raise the sales/use tax to fund the Natural Resources and Outdoor Recreation Trust Fund is all that we feared. Not only would the lowest-income families pay the most as a share of income for the new tax. Not only would the remainder of the penny tax above the three-eighths-cent go to compound that inequity rather than correct it. There are other concerns.
First, some of the new funds raised by the tax would simply displace funds that already go to natural resource programs. Second, the new formula for spending the new tax is a giveaway to the powerful agricultural interests. Finally, farm operators will pay little of the new tax because of exemptions, and the trails and parks portion in the original formula is reduced. This sends more support to voluntary agriculture practices to improve water quality that have little accountability or ways to measure progress.
We applaud the governor for tackling Iowa’s rural obstetric care shortage. She is proposing four new OB fellowships for new family-practice physicians who want to specialize in OB care in rural Iowa and new telehealth strategies to connect family practice doctors with obstetric specialists practicing elsewhere in the state.
We have a long way to go on maternal health for every group of expectant mothers, and the Governor’s proposals can play a part. But we must note that any maternal health initiative that fails to explicitly address the frighteningly high rates of maternal mortality and low birthweight for African American women and babies is incomplete. We have an opportunity to incorporate a racial equity focus in a deliberate, meaningful way.
Advocates have waited a year — since lawmakers established a children’s mental health system last session — to see how, and at what level, they would fund it. The Governor’s proposal is underwhelming. She would change the source of funding for mental health services for Iowans of all ages—lowering by $77.1 million local property taxes levied statewide while increasing by $80.6 million state appropriations (via part of a new 1-cent sales tax). That swap would open up only $3.5 million in new money. (For context, the Polk County mental health region alone faces a $13.8 million deficit in FY 2021.) That does not come close to meeting current mental health needs across the lifespan, including filling in the current patchwork of services for children.
The Iowa Fiscal Partnership will continue examining the Governor’s proposals and their development in the legislative process, on these and many issues not covered here. Watch for updates on our website, www.iowafiscal.org, and communications from the two partner organizations that form IFP as the legislative session proceeds.
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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 and Family Policy Center in Des Moines. Find reports at www.iowafiscal.org, and the IPP and CFPC websites, www.iowapolicyproject.org and www.cfpciowa.org.