The House Economic Growth Committee concluded its final committee meeting of the session by inviting Iowa businesses to testify on Iowa’s business climate. This idea was included in the House Republicans’ job creation plan rolled out last fall. The meeting marked the first time the Economic Growth committee engaged in an in-depth discussion with the private sector on the struggles facing Iowa businesses as they work to jumpstart the economy and create jobs.

The panelists participating in the meeting were Flora Schmidt of the Home Builders Association of Iowa and Mark Hanawalt of United Equipment Accessories, Inc. Schmidt is the Executive Officer for a state wide trade association comprised of 2200 small, independent business owners representing the construction, development, supplier and subcontractor industries. Hanawalt is the President and CEO of a manufacturing and distribution firm specializing in products utilized by the wind energy industry and various other sectors.

Ms. Schmidt focused her comments on regulatory mandates and the costs associated with complying with regulations adopted by state and local governments. She indicated that whenever a new code or regulation is adopted a substantial investment of time and money is spent in complying with it, and the costs are almost always passed onto the consumer. In the homebuilding industry, this means the cost is passed onto the homebuyer and is realized on the price tag of the house.

Ms. Schmidt also highlighted a number of state legislative issues and government hurdles that will increase the cost of doing business on Iowa’s employers and further exacerbate Iowa’s cloudy business climate including too many regulations versus voluntary compliance programs.

Mr. Hanawalt told a story of how his business started and walked legislators through the expansion process. He also spoke to the issues he believes will enable him to expand further and create additional jobs. A member of the committee asked him about the one thing Iowa can do, or not do, to help his business. His answer? “To put it bluntly, get out of my way. I am going to grow with or without you.”

Mr. Hanawalt spoke about the need to “leave money in the people’s pockets” or in other words, keep taxes low. He suggested that if Iowa truly wants to keep existing businesses here and attract new industries, the state must reorganize its tax code in an effort to reduce taxes across the board. He also emphasized on the importance of predictability in the tax code. Specifically, he said that implementing a long-term business plan is difficult when the state makes a decision to give businesses bonus depreciation in one year and then takes it away in the next.

Other controversial legislative proposals pending in the Iowa House, including labor bills, were discussed. Hanawalt said that every time the state discusses changing Iowa’s Right to Work status or implementing prevailing wage laws, economic development directors in Nebraska and South Dakota contact him asking if he is willing to pick up and move his operations to their state. A stark reality legislators must take into consideration when deciding whether or not to support such proposals.

The message of the meeting is consistent with what I’ve been saying….in order to turn the economy around and put Iowans back to work, the legislature must focus their efforts on policies that foster a positive economic climate. House Democrats must move away from talking about bills that deter business activity such as the bill to repeal Iowa’s right to work law. They must also stop balancing budgets on the backs of Iowa taxpayers.

As always, if you have any questions or concerns, please don’t hesitate to contact me via email at kraig.paulsen@legis.state.ia.us or call my office at (515) 281-3521.

The panelist that participated in the meeting were Flora Schmidt of the Home Builders Association of Iowa and Mark Hanawalt of United Equipment Accessories, Inc. Schmidt is the Executive Officer for a state wide trade association comprised of 2200 small, independent business owners representing the construction, development, supplier and subcontractor industries. Hanawalt is the President and CEO of a manufacturing and distribution firm specializing in products utilized by the wind energy industry and various other sectors.

Ms. Schmidt began the meeting by highlighting the overall challenges facing Iowa businesses. Specifically, she focused on regulatory mandates and the costs associated with complying with regulations adopted by state and local governments. She indicated that whenever a new code or regulation is adopted a substantial investment of time and money is spent in complying with it, and the costs are almost always passed onto the end user. In the homebuilding industry, this means the cost is passed onto the homebuyer and is realized on the price tag of the house.

However, the consequences of these regulations dictate much more than an increase in the cost of a home. Data suggests that every time the price of a house increases by $5,000, about 21,800 Iowans are unable to afford that house. With less Iowans being able to afford to purchase a house, the demand for building new homes decreases. In Iowa, the construction of 4,000 homes equals approximately 12,300 jobs and generates $656 million in income for Iowa residents and $124 million in taxes and other revenue for state and local governments each year. Therefore, burdensome regulations imposed and adopted by government have a negative ripple effect throughout the economy. They increase the housing costs on Iowans, leaving less disposable income which flows through the statewide economy. They make it harder for families to achieve the “American Dream” of homeownership. And, they cost individuals their jobs, contributing further to the state’s unemployment line.

Ms. Schmidt also highlighted a number of state legislative issues and government hurdles that will increase the cost of doing business on Iowa’s employers and further exacerbate Iowa’s business climate. The laundry lists encompasses everything from legislation to government employees arguing for regulations and against private businesses. They include too many regulations versus voluntary compliance programs.

Mr. Hanawalt was less detailed in his presentation, but just as effective in getting his point across to committee members. He told a story of how his business started and walked members through the expansion process. He also spoke to the issues he believes will enable him to expand further and create additional jobs.

A member of the committee asked him about the one thing Iowa can do, or not do, to help his business. His answer? “To put it bluntly, get out of my way. I am going to grow with or without you.” The message was an echo of the presentation by the previous witness and one that exemplifies the feelings of many Iowa small businesses. Mr. Hanawalt spoke about the need to “leave money in the people’s pockets” in other words, keep taxes low. He suggested that if Iowa truly wants to keep existing businesses here and attract new industries, the state must reorganize its tax code in an effort to reduce taxes across the board. He also put emphasis on the importance of predictability in the tax code. Specifically, he said that implementing a long-term business plan is difficult when the state makes a decision to give businesses bonus depreciation in one year and then takes it away in the next.

Representative Doris Kelley asked for his input on a controversial tax increase proposed last year to eliminate federal deductibility and the effect it would have had on his business. He responded with “It would have increased my taxes, simple. Taking money away that I would otherwise invest in the economy and pay salaries.”

Mr. Hanawalt also spoke on other controversial legislative proposals pending in the Iowa House. He said that every time the state discusses changing Iowa’s Right to Work status or implementing prevailing wage laws, economic development directors in Nebraska and South Dakota contact him asking if he is willing to pick up and move his operations to their state. A stark reality legislators must take into consideration when deciding whether or not to support such proposals.

The message of the meeting is consistent with the message of the House Republican Caucus. In order to turn the economy around and put people back to work, the legislature must focus their efforts on policies that foster a positive economic climate. It is imperative the legislature move away from talking about bills that deter business activity and attempt to balance irresponsible budgets on the backs of Iowa taxpayers. House Republicans remain committed to this strategy and look forward to working with Democrats to pass legislation that helps Iowa employers flourish.

Throwing taxpayer money at the problem didn’t work.

This year, Republicans have proposed a four-point plan for job growth.

• Create a favorable climate for job growth
• End the assault on employers
• Stop property tax increases headed for families and businesses
• Ensure tax credit reviews don’t result in tax increases

Last year, the Legislature convened an interim committee to find ways to save the state money. Republicans want to put the same effort into finding ways to help Iowa’s employers by eliminating and modifying regulations. Without spending a dollar, Iowa can create jobs by removing obstacles to job growth.

Recent media accounts have shown how installers of solar powered systems are struggling with government regulations. This has created an atmosphere which has ground the industry to a halt. We propose joint hearings of the Economic Growth Committees to investigate regulations that block business expansion and preservation.

Another piece of our plan is ending the assault on employers. Even the threat of increased taxes and government mandates keep employers from thriving and adding new jobs. Democrats must withdraw the following bills:

• Ending Iowa ’s Right to Work Law
• Open Scope Collective Bargaining
• Doctor Shopping
• Prevailing Wage

These bills not only fail to create jobs, the risk of their passage has already had a chilling effect on Iowa’s overall economy.

Bad budgeting led to the recent across the board budget cut. This haphazard budgeting results in increased property taxes on Iowa’s families and employers. Governor Culver and Legislative Democrats should stop passing their budgeting mistakes down to the local property taxpayer. Each time property taxes go up, fewer jobs are created. Government must stop spending more than the state collects and we need to cut back unsustainable spending plans Democrats have previously approved.

Finally, there has been a lot of talk about reviewing state tax credits. Republicans are supportive of the review, but the beneficiaries of any “savings” must be the taxpayers through broad based tax relief, NOT state coffers.

Iowans are dealing with job losses and employers are struggling to stay open, the last thing they need are higher tax bills. When a tax credit is capped or eliminated, someone’s taxes are going up. The only entity that benefits from higher taxes is government. Raising taxes is not the answer to Iowa’s budget problems.

House Republicans recognize these are just a few ideas to help kick-start our job market. Throughout the session and beyond, we will continue to develop new ideas for long term job creation in Iowa. Iowa’s best days are ahead of us. But we must have an environment that encourages employers to invest in our state and our workforce.

To see other Republican Solutions, visit the Real Solutions page.

Earlier this month, the nonpartisan, nonprofit Small Business and Entrepreneurship Council released its 14th annual analysis of the public policies affecting the business climate in each state and the District of Columbia. After collecting their data they then ranked each state on 1 – 51 scale (one being the best business climate and 51 the worst). “The 2009 Small Business Survival Index: ranking the policy environment for entrepreneurship across the nation” has ranked Iowa 41st.

In their analysis, the SBEC examined a number of policy issues to determine each state’s overall ranking. Some of the factors include: personal income taxes, capital gains taxes, corporate income taxes, property taxes, unemployment taxes, the number of health insurance mandates and crime rates, among others. Here is how Iowa ranked in the above categories:

Personal Income Taxes: 25th
Capital Gains Taxes: 41st
Corporate Income Taxes: 49th
Property Taxes: 33rd
Unemployment Taxes: 47th
Health Insurance Mandates: 6th
Crime Rate: 9th

As illustrated in the above rankings, Iowa scores very poorly in corporate income taxes, unemployment taxes, capital gains taxes and property taxes. It also does not have a very competitive personal income tax structure. Conversely, Iowa’s right to work status, low crime rate and relatively low number of health insurance mandates are Iowa’s strengths.

Small businesses are the lifeblood of the Iowa economy. Small businesses and entrepreneurs are the engines that drive economic growth and job creation. It is imperative that the legislature enact policies that provide employers with the ability to thrive rather than struggle. House Republicans will soon be announcing a number of proposals that seek to strengthen the business environment in Iowa. The House Republican plan is designed to help the over 100,000 Iowans currently out of work to find a job and turn the economy around.

The states with the best business climates include: South Dakota, Nevada, Texas, Wyoming, Washington, Florida, South Carolina, Colorado, Alabama and Virginia. Those joining Iowa with an anti entrepreneurship and small business climate include: Hawaii, Minnesota, Massachusetts, Rhode Island, Maine, Vermont, New York, California, New Jersey and Washington DC.

10% Across the Board Cut Analyses
Administration and Regulation ATB Cut Analysis
Health and Human Services ATB Cut Analysis
Economic Development ATB Cut Analysis
Natural Resources ATB Cut Analysis
Transportation ATB Cut Analysis
Education ATB Cut Analysis

A summary of the cuts submitted by agencies to comply with the 10% across the board reduction in the Economic Development bill include cuts for the following: Iowa Workforce Development, Cultural Affairs, Economic Development, and the Office of Energy Independence (Power Fund). The cuts are as follows:

Iowa Workforce Development:
• Leave vacant a position created by Deputy Commissioner retirement.
• Reduce purchases of office equipment.
• Reduce cell phone use to essential staff.
• Revert funds for field office operations.
• Eliminate inspection of inflatable amusement rides.

Cultural Affairs:
• 40% reduction in three grant programs: Big Yellow School Bus, EZ 1-2-3 and Iowa Arts Council Mini Project Grants.
• Eliminate workshops and conferences.
• Suspend intake of records from agencies to state records center.
• Suspend microfilming of weekly Iowa newspapers.
• Reduce site visits to major cultural organizations.
• Close gift shops at Historical Building and Western Trails Center.

Economic Development
• Reduce funding for assistance to Iowa companies.
• Reduce Travel Guides by 20%.
• Eliminate the Iowa State Fair give-away campaign.
• Decrease assistance to Main Street Communities by 67%.
• Reduce Tourism advertising by 25%.
• Reduce funding for the Targeted Small Business program activities.

Office of Energy Independence (Power Fund)
• Reduce in-state and out of state travel for Power Fund board members.
• Reduce “outreach” services to potential Power Fund applicants.
• Reduce amount of funding available for grants.

For details on all proposed budget cuts, refer to the following documents:
SUMMARY – Preliminary Departmental ATB Implementation Plans
ALL DEPARTMENTS – Preliminary Budget Cut Plans

“It is outrageous that the executive branch has been administering this program for two years in violation of the laws passed by the Legislature.

“Regular Iowans are not allowed to sidestep the law and state government cannot be allowed to either.

“This is another example of why House Republicans offered proposals last year to provide a more open and transparent state government. Regrettably, these were defeated in the Senate.”

Currently, the unemployment trust fund has a balance of $508 million. However, throughout the last twelve months, $709 million in unemployment benefits have been paid to Iowans out of work. In July 2009, $75.5 million in benefits were paid out to 74,135 claimants, 148% or $45 million more than was paid in July 2008. In the last month alone unemployment payments increased by 20%. Iowa’s unemployment rate is currently at 6.5% and is expected to continue to increase, meaning additional dollars will be needed to pay claims.

Employer contributions are established from two primary factors, whether or not the business is new, and the number of layoffs a business has made in the last five years. Therefore, employers who frequently layoff employees pay a higher unemployment contribution rate than those who do not. Iowa Workforce Development is required by law to use a formula to establish the contribution matrix used to decide the rate paid by employers. Unemployment contribution rates are determined by wages, with the contribution portion set at $24,500 for 2010.

“The governor’s lack of oversight and failure to properly manage the film tax credit has not only put the program in jeopardy but already wasted millions in taxpayer money. Republicans will work to bring more transparency and openness to this initiative, ” said House Republican Leader Kraig Paulsen.

The Letter reads as follows:

Download: The full letter in PDF format

Four months ago the Democrat controlled legislature approved the largest spending package in Iowa’s history in addition to borrowing over $800 million leaving Iowa taxpayers with a bill a little under $2 billion. It was sold as the answer to Iowa’s economic troubles. Now that the dust has settled and the Governor’s reckless bonding scheme “I-JOBS” is underway, Iowa’s economy continues to tank as unemployment climbs.

On August 21, 2009, Iowa Workforce Development announced Iowa’s unemployment rate has increased yet again, reaching its highest level since 1986. The jobless rate in Iowa is now 6.5%, up from the 6.2% reported last month. Last year at this time Iowa’s unemployment rested at 4.1%. Today, over 109,000 Iowans are out of work, 5,600 more than last month and nearly 40,000 more than one year ago a 57% increase. The manufacturing sector continues to bear the brunt of the impact, shedding 4,800 more jobs in July. Iowa’s manufacturing industry has lost more than 30,000 jobs in the last year. All this announced just prior to the unfortunate news that Cummins Filtration will eliminate 400 filter assembly jobs in Lake Mills and send them to Mexico. While Iowa’s private sector is forced to tighten its belt during these difficult economic times, state government continues to grow adding 700 positions in the last year, 200 last month alone.

According to Iowa Workforce Development Director Elizabeth Buck, “recent signs at the national level indicate that the recession may soon be over.” But in the same breath stated, “…the Iowa economy will continue to shed jobs for some time…” To make matters worse, the Obama Administration recently announced the recession is not over, predicting unemployment nation wide will eclipse 10% in the 4th quarter of 2009 and maintain double digit levels at least through most of the 1st quarter of 2010. The Administration is also revising previous deficit projections from $7 trillion to $9 trillion.

Rather than taking action to reform Iowa’s tax code and reduce the tax burden on individuals and Iowa businesses – to spur job creation – Democrats appear content on their borrow and spend approach while embracing Iowa’s record jobless rate by touting the fact that “Iowa’s employment numbers outperform neighboring states” (iowahouse.org 8/21/09 press release). However, this claim is somewhat misleading because Iowa’s three neighbors to its west have unemployment rates much lower. Furthermore, 17 states and the District of Columbia saw its unemployment rates fall during the month of July.

House Republicans declared in April and maintain today, borrowing and spending is not the answer to our economic ills. In order to pull Iowa out of this deep financial hole the legislature must enact commonsense policies to create an environment that drives economic growth and long-term sustainable job creation. Borrowing, spending and eventually taxing is not the answer, today’s unemployment rate and deficits are proof of that.