Friday, May 15, 2020

Pelosi's Phase 4 Spending

House Democrats in Washington, D.C., are pushing a 1,815-page "Phase 4" stimulus package. As usual, some details are lacking, but we do know they would like to allocate as much as $1 trillion in new aid for state and local governments across the country. 

How much do they want to send to Iowa?

Using guidelines outlined in the legislation, one estimate calculates Iowa would receive $5.6 billion from this proposed 4th stimulus package. In addition to a flat amount that every state would receive, Speaker Pelosi’s plan would allocate dollars to the states based on population, COVID prevalence, and unemployment, among other factors.

While basing potential aid on those factors isn’t necessarily wrong, sending Iowa nearly $6 billion may be unnecessary; before the pandemic hit, 2021’s budget was likely going to be around $8 billion.  

Does Iowa need these federal dollars?

It's too early to know the economic impact the virus will have on our state at this time. Iowa currently has approximately $1 billion in rainy day funds – enough to fund state government for 37 days

A TEF Iowa report shows after pausing the state's economy for just three weeks, future state and local tax collections have been reduced over $112 million. TEF Iowa will release new estimates before the end of the month. 

Iowa House and Senate leadership have wisely joined the Governor in asking Iowa's Revenue Estimating Conference to meet before the legislative session reconvenes. Their revised state revenue estimate will be needed to create the Fiscal Year 2021 budget.

Phase 4's future

Michael Zona, a spokesman for Senate Finance Committee Chairman Chuck Grassley, called the House Democrats legislation, "DOA in the Senate."

That does not mean there will not be a Phase 4 stimulus package. Zona added, "Sen. Grassley will work with his colleagues on Phase 4 legislation if it becomes necessary. It's too early to say what that legislation might encompass. It would need to address any ongoing problems in an effective manner."

President Trump said there was "no rush" to negotiate Phase 4 and tweeted, "Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat-run and managed when most of the other states are not looking for bailout help?”

The bottom line

Many state and local governments are facing massive budget shortfalls as a result of lost revenue. However, the economic problems created by COVID-19 should not be used as an excuse to send absurd amounts of money to states.

Federal dollars are never free. Aside from coming with strings attached that often require more state spending, these federal dollars are simply your tax dollars being recycled. And since our federal deficit continues to grow, these are all dollars that are going to have to be paid to Uncle Sam in the future by all of us, including our children and grandchildren.

As we wrote last week, Congress should give state and local governments more flexibility to use the dollars that have already been appropriated before adding trillions more to our national debt.
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Show Me Reform

The Show-Me State of Missouri has just shown other states how to make it easier for individuals to enter the workforce. A bill universally recognizing out-of-state occupational licenses was passed with bipartisan support by the Missouri Legislature, including unanimous passage by the Senate.

Missouri's new law allows an individual to apply and receive an occupational license based on the training or testing he or she has already completed in another state. This reform will save applicants time and money and encourage an easier transition into the workforce.

Why recognize out-of-state licenses?

ITR has been advocating for licensing reform for a while, and the reality is excessive and burdensome occupational licensing laws serve as a hidden red tape tax that disproportionately impacts Iowa’s working class. These laws make it more difficult and more expensive for Iowans to earn a living and fill high-demand jobs. 

One in four jobs across Iowa requires an occupational license. These licenses are basically a permission slip sold by the government, allowing someone to work. Unfortunately, Iowa is the second most licensed state in the country. This makes it more difficult and more expensive for workers to earn a living and fill job openings.

In Iowa, out-of-state applicants are forced to spend extra time and money to complete additional testing or training requirements just to be re-licensed to do the same job they've already been doing.

Will Iowa pass occupational licensing reform too?  

In January, Governor Kim Reynolds kicked off this year’s now suspended legislative session by identifying her most important priorities during her Condition of the State address, including occupational licensing reform.  At that time she stated,
"Licensing reform is a topic that has bipartisan support, but that doesn’t mean it will be easy. There will always be entrenched interests who benefit from overly burdensome regulations. But we can’t let those interests stand in the way of opportunity. These reforms are long overdue, and this is the year we will begin to fix a broken system."
As the legislative session continued, the Governor introduced a comprehensive licensing reform bill that was making its way through the legislative process, in addition to good bills introduced by the Iowa House and Senate. (Visit the Legislative Update page on our website to review the status of these bills.)

Then in March, when the COVID pandemic struck, Governor Reynolds took action and temporarily eased licensing restrictions for Iowa's medical professionals to respond to the crisis. 

When the legislative session resumes, ITR encourages legislators and Governor Reynolds to keep moving forward, pass meaningful permanent occupational licensing reform, and slash the red tape tax just like our neighbors to the south did.
Click to Email the Governor and Your Legislators

Legislature to Reconvene June 3rd

Iowa House and Senate leadership announced plans for the legislature to reconvene on Wednesday, June 3rd. The session has been suspended since March 16th. 

Governor Kim Reynolds, Senate Majority Leader Jack Whitver, and House Speaker Pat Grassley have asked the Revenue Estimating Conference (REC) to meet before the legislative session resumes. The new REC estimate will be used as a data point for the legislature to use in the creation of a FY 2021 budget.

“Iowa’s fiscal health is strong, and we are prepared for this time of uncertainty,” Reynolds said. “But as Iowa continues to recover and grow from the COVID-19 pandemic, it’s critical that we have as much information available to us to make informed decisions. The Revenue Estimating Conference can provide guidance as we assess COVID-19’s impact on the state’s finances.” 

“As the Iowa Senate does the work of setting a reliable, sustainable budget, it will collect as much data as possible in creating that budget,” Whitver stated. “Iowa is in the midst of a fiscal situation without any precedent and we will seek as much information from as many sources as possible in the creation of the FY 2021 budget.”

Grassley added, “Two months have passed since our last revenue estimate and much has changed during that time. It would be prudent for the Revenue Estimating Conference to meet and reassess Iowa’s situation so we have the most up to date information and data possible as we begin to put together next year’s state budget.”

Keeping an Eye on Georgia

Three weeks ago, Georgia's Governor started to ease restrictions in his state. Soon after, ITR co-wrote and shared an op-ed that was published in the Des Moines Register and Sioux City Journal, saying Georgia's reopening is worth studying. 

So, what has happened in Georgia over the last 21 days? Confirmed cases and deaths have started to decrease. 
Source: Georgia Department of Public Health

On May 8, Governor Reynolds lifted some restrictions in 77 counties. A week later, on May 15, the reopening was extended statewide. Below is a list of what is open, open at 50 percent, and still closed:

Fully open:
  • Grocery stores
  • Banks and Credit Unions
  • Gas stations/Auto supply
  • Pharmacies
  • Day Care
  • Mail/Shipping services
  • Veterinarians
  • Service Stores
  • Medical spas
  • Tanning facilities
  • Massage therapy
  • Tattoo establishments
  • Campgrounds
  • Drive-in theaters

Open at 50%:
  • Restaurants
  • Fitness centers
  • Malls
  • Other retail stores
  • Salons and barbershops
  • Libraries
  • Social & fraternal clubs
Still Closed
  • Bars
  • Theaters
  • Casinos
  • Senior centers
  • Adult daycares
  • Museums
  • Aquariums and zoos
  • Swimming pools
  • Playgrounds
  • Skating rinks and parks
  • Door-to-door sales
  • Mass gatherings (with exceptions)
  • Farmers markets (with exceptions)
  • Auctions

More Information:

Read the governor's full proclamation with details and exceptions here.   
As Iowa reopens, not everybody will rush out; most will use good judgment and begin by returning to patronize the businesses they trust. Americans are a self-governing people. That means exercising some self-restraint and demonstrating what we’ve learned about social distancing over the past month-plus.

Personal responsibility remains paramount. We are all still required to be smart, vigilant, and considerate toward others.

Links of Interest

Governor extends initial reopening plan to all 99 counties - DM Register

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery - Tax Foundation

Pandemic Not ‘Disastrous’ Enough for Property Tax Relief - Bloomberg Tax

Prediction: Recession of 3 to 9 months and a swift recovery by early 2021 -

Traffic picking up a little more on Iowa roadways - Radio Iowa

Iowa DOT may delay road projects due to drop in gas tax collections - Ia Capital Dispatch

Coronavirus Tax Relief Resources - Internal Revenue Service

In Case You Missed It

Iowa's economy has shrunk $1.6 billion

Disappearing Income, Jobs, and Gov't Tax Revenue
We Don't CARE for Needless Spending
Are federal COVID-19 economic impact payments taxable in Iowa?
Should Iowa Freeze Government Salaries?

No easy answers when budget reductions loom
How bad is the economic impact?
Reopening Iowa: Georgia's approach is worth monitoring
Getting back on track

Getting our economic train back on the tracks
Deregulation can fuel recovery
Expanding educational opportunities with 529 expansion
Potential property tax increases?

ITR Asks Congress to Fix the Federal CARES Act
Iowans Are Hurting
Telehealth House Calls

Complete 2020 ITR Watchdog Newsletter Archive
It’s easy for politicians to yield to noisy special interest groups when the taxpayer keeps quietly paying the bills.
Copyright © 2020 ITR Foundation, All rights reserved.

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