December 13, 2009, 8:25 a.m.
Support the Troopers: A Rational Approach to Taxation
(brought to you by FromDC2Iowa.blogspot.com*)
Governor Chet Culver, looking down the well into a near-billion-dollar 2010 deficit, wants to take $46 million from Iowa's $1.144 billion Road Use Tax Fund to keep the State's Highway Patrol on the roads. Thomas Beaumont and William Petroski, "Culver takes on road industry," Des Moines Register, December 12, 2009.
Few if any industries have more power over states' legislatures than their highway lobbies. Iowa's no exception. They are an important sub-set of the industries that, together, have created America's global-warming-auto-dependent transportation system -- leaving us without the passenger rail networks other nations have. Think about it: the oil companies and their station owner-operators; the automobile manufacturers, unions, and dealers; the cement, steel, heavy equipment, and highway contractor companies; all the independent auto repair businesses; the auto scrap steel firms -- it goes on and on. We've paved some 61,000 square miles of America for roads and parking lots. That's an area that, if it were a state, would make it the 24th largest state in the country. It's roughly half the 76 million acres of soybeans, or 85 million acres of corn, farmers predicted they'd plant this year. "USDA Expects Corn, Soybean Acres on Par with Last Year," Newsroom USDA National Agricultural Statistics Service, March 31, 2009.
As the Register reports, "'This will be a bloodbath if it goes forward. This will absolutely be one of the most controversial issues of the session,' said Scott Newhard, vice president of the Associated General Contractors of Iowa." On the other hand, "The State Police Officers Council, a bargaining unit for troopers, 'is very much in favor' of Culver's plan to divert road fund money for the State Patrol, said Sue Brown, the council's executive director."
So there you have the level of analysis of this proposal at the moment: "bloodbath" vs. "support the troopers."
Can we do better? I think so. But rather than take sides in this battle of the titans, here's an effort to bring some rational, neutral principles to the analysis.
1. "What do you mean?'and 'How do you know?'" For starters, to have a rational and civil discussion we need to agree to use a more precise language and support it with data. Railing against "taxes" or "government" isn't very productive.
2. Taxes as currency. Taxes are just another way we buy stuff. We may use cash, checks or credit cards to buy clothes at the mall. We may use loans from a credit union, or auto dealer, to get a car. We may have deductions from our paycheck for a retirement fund or health insurance. We use taxes to buy our kids' K-12 education, the roads and sidewalks they travel to get there, our police and fire protection.
3. No system's perfect. You may buy a toy for your kid at the mall that breaks shortly after you get it home. The auto dealer may sell you a lemon, and then refuse to do anything about it. Your health insurance company may refuse to pay for a procedure that you think is covered by the policy you have been faithfully paying for. And we've just seen what Wall Street banks can do to our entire economy. Is there ever "waste, fraud and abuse" in government programs? Of course. (See, e.g., "State of Iowa Agency Reports on Tax Credits," December 14, 2009 (a pdf file); Clark Kauffman, "Audit: State Jobs Office Failed to Track Money," Des Moines Register, December 12, 2009.) But that's more a human condition than something endemic to government enterprise.
4. Think programs, not taxes. "Cost," standing alone is almost meaningless. It needs to be related to "benefit;" that's why there's such a thing as "benefit-cost" analysis. It's the same in for-profit businesses and government programs; the question is not "what are we paying?" it is "what are we getting for what we are paying?" It's not "how much did we invest?" it is "what is our return on this investment?" We can and do argue about values and ideology, and the validity of the formulas and data we use to arrive at those representations of costs and benefits. But at least those arguments about the utility of government programs are much more productive than arguing about "taxes" qua taxes.
5. Consequences, fairness and alternative taxes. There are many ways of raising money through taxation. Among the more familiar are income taxes, property taxes, sales taxes (and the related "value added" or VAT taxes), "sin taxes" (e.g., cigarette and alcohol taxes), capital gains, estate taxes, and "user fees" (e.g., entrance fees for public parks, swimming pools or museums; as distinguished from the "free" use of K-12 schools, for which there may also be fees).
Even if there is agreement about the benefit-cost utility of a given government program there can still be disagreement about the most appropriate and fair type of tax, and way of assessing and collecting enough taxes to pay for it (e.g., the poor may pay a disproportionately higher percentage of their income in sales and FICA taxes than the rich; property taxes may drive the elderly on fixed Social Security or other income from homes being taxed on assessed values ten times or more what they originally paid for their house).
The principle of "progressive" income tax rates has been with us since 1862, "History of the Income Tax in the United States," Information Please -- that is the notion that it's only fair the rich should pay at a higher rate than the poor (Sweden's marginal rate in 1979 was 87%) as well as paying that rate on a larger pot of income. Given that the wealthy have been notoriously more generous with their campaign contributions than the poor, legislators have tended to reduce the difference between the rates paid by each of those groups of constituents. "Between 1983 and 2003 the average (top) corporate tax rate of advanced OECD countries fell from around 50 to around 32 percent, the average top personal rate from around 66 to 48 percent." Steffen Ganghof, "Progressive Income Taxation in Advanced OECD Countries. Revisiting the Structural Dependence of the State on Capital," Paper presented at the annual meeting of the American Political Science Association, Chicago, August 23, 2004. The U.S. top marginal rate of 35% is, of course, well below the OECD average. And see Alan Reynolds, "Marginal Tax Rates," The Concise Encyclopedia of Economics (with a table of 47 countries' marginal tax rates that places the U.S. in the bottom half). Many Fortune 500 corporations pay nothing at all. Robert McIntyre and T.D. Coo Nguyen, "Freeloaders: Declining Corporate Tax Payments in the Bush Years," Multinational Monitor, vol. 25, no. 11 (November 2004).
(Speaking of progressive taxation, Sherman Johnson has emailed me his suggestion for applying the principle to fines. He's got a point: "Fixed fines are outrageously regressive and unfair. A typical ticket for a moving violation might be $150. Parking in a handicapped space is $250. That represents less than one hour of work for an attorney or accountant -- about one minute for a CEO making $20M per year. Not much of a deterrent. For someone working a minimum wage (or close to minimum wage) job -- say $8 per hour -- that $150 ticket is about half of a weekly paycheck. That's before taxes. After taxes, that $150 is the majority of their take-home pay for the week.")
6. "Tax breaks" as subsidies. Some critics question the validity of ever transferring taxpayers' money to the bottom line of for-profit corporations, regardless of the purpose. They'd prefer to let the "free market" work its will with entrepreneurs. (For one reason why, see "State of Iowa Agency Reports on Tax Credits," December 14, 2009 (a pdf file); Lee Rood, "Other Tax Credits Raised Red Flags," Des Moines Register, December 13, 2009; Lee Rood, "IDED Moves to Recover Funding from 4 Firms," Des Moines Register, December 13, 2009.) Advocates cite the benefit in job creation, and increased revenues for the state, from such programs. Regardless of the merits of such arguments, the fact remains that the only difference between an out-and-out subsidy and a "tax break" is transparency; which is why some critics say, if you're going to give my tax money to for-profit enterprises at least appropriate it, do it above the table where we can see the money and see who's getting it. Don't hide it in the tax code. Whether you give me $100, or tell me I don't have to pay $100 I thought I would, it's $100 in my pocket that wouldn't otherwise have been there.
7. Tying pay to benefit. A part of the rationale for "public" K-12 schools, paid for by everyone in the community, is that everyone benefits from living in a community where everyone else has at least a K-12 education: less crime, a more skilled workforce, more interesting conversations with neighbors, and better quality elected officials. (A similar rationale could be, but has not been successfully, used for "universal, single-payer" health care.) But there are also the "user fees," mentioned above, in which all, or most, of the cost of a public program is paid for by those who are its primary beneficiaries. For example, student tuition at the Regents' universities could be thought of as a partial "user fee," representing perhaps something on the order of one-half the actual cost per student of providing this "public university" education (as distinguished from the virtual free ride for those whose children attend K-12 public schools). It is not always clear which public programs should be paid for by users, and which by the general taxpaying public (because, presumably, there is a general public benefit, as with public K-12 schools) -- and if users should pay what proportion of the cost they should pay.
8. Highway funds and the Highway Patrol. Which brings us to the Governor's proposed use of highway funds for Highway Patrol payroll. The Register's sidebar indicates the sources of the highway fund include "Fuel taxes, motor vehicle registration fees, fees for new registration (formerly the use tax), underground tank fees, title fees, trailer fees, special plate fees, driver's license fees, Underground Storage Tank Fund, motorcycle education, other vehicle taxes and fees, other miscellaneous and interest." It is, in short, an almost perfect example of a "user-fee" based funding system for a government program, that is, road building and maintenance. If you don't own a road worthy vehicle you don't pay registration fees or gasoline taxes. If you do, you do -- and the more you drive, the more gasoline you buy, and the more gas taxes you pay. All drivers benefit from the roads, all contribute to their need for repair, and all pay their proportionate share (assuming the big trucks and heavy equipment, which cause more damage, are paying more than just the gas tax).
That being the case, it is not irrational to argue that the Highway Patrol, the job of which is, as the name suggests, to patrol the highways, should be paid for by the same users who are paying for the highways themselves.
[December 14 modification. Since writing this, "factsgetintheway" posted the following comment on the Register's online version of its story: "The Iowa State Patrol is the state's law enforcement agency, and their functions extend way beyond traffic/motor vehicle enforcement. The Iowa Constitution clearly did not intend for functions outside of highways to be supported by the RUTF. At a minimum, those activities should be supported by the General Fund. Some of those duties & special ISP units include: assistance during prison riots & labor disputes; emergency assistance and law enforcement during disasters; an airwing used to fly emergency blood and tissue match relays, search for lost persons and other victims; Amber Alert program; canine unit for narcotics detection and criminal apprehension; Chaplains Program; executive protection for the governor and first family, Lt. Gov.; State Capitol security; safety education; and special enforcement team for intercepting illegal drugs.
"Many of these new duties have come about since 1975 when their name was changed from Iowa Highway Patrol to Iowa State Patrol.
12/13/2009 4:22:25 PM"
Assuming all of the content of this comment is true (and I have no reason to believe it's not), while it would not affect the analytical model I've laid out, it certainly would affect the result. I would agree that "at a minimum," as the commenter suggests, to the extent that the other-than-highway-related functions of the ISP can be separated out, there is not a "user fee" rationale for having them paid for out of the Highway Fund. There may, of course, be some other rationale for doing so, just not a "user fee" basis.]
That is not to say there are no contrary arguments, that anyone gives a darn about rational analysis, or that the ultimate decision will not be dictated by campaign contributions and raw political power at its worst.
But for what it is worth, this is at least a way to bring a little more rational analysis, and a little less emotion, to the resolution of a very tough budget debate.
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For the recent blog entries you may be looking for, go to "There Is No War in Afghanistan," December 4, 2009, and go to the bottom of that blog entry.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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November 13, 2009, 6:25 a.m.
Actions Speak Louder
(brought to you by FromDC2Iowa.blogspot.com*)
There is a kind of cruel irony that a university ends up harming the very public image it seeks to improve by the way it goes about hiring yet another vice president -- the one who will bear the title and responsibility for its "strategic communications." Emily Busse, "Finalists for open VP position visit campus this week," Daily Iowan, November 9, 2009. More on this higher education equivalent of "we had to destroy the village in order to save it" in just a moment . . .
. . . but first, here are links to earlier entries that support and relate to today's discussion, along with some of the other hot topics from the past week or so that are now getting the most direct hits, among which may be the entries you are looking for:
UIHC, Regents and UI -- Budget Decisions Have Been Negative Communications:
Executives trip to Disney World: "Mickey Mouse Patient Satisfaction; UIHC's Troubles: Is Orlando the Answer?" November 8, 2009
"Contributions from patients" proposal: "UIHC: 'Sick Brother, Can You Spare a Dime?'; A Check-In and a Check," October 31, 2009, 7:00 a.m. (with numerous updates through November 4, links to additional, related material -- and now with over 30 of the Press-Citizen readers' comments on B.A. Morelli's stories)
"TARP Lessons for Iowa's Budget Cutters; Barofsky: 'Anger, cynicism and distrust [an] unnecessary cost of TARP,'" October 23, 2009
"How Many Administrators Does It Take? Administrators are Multiplying & Sucking Us Dry," July 16, 2009
"A University's Strategic Communication; A Modest Proposal to the Regents' University Presidents," October 7, 2009
"Iowa's Budget Cuts and the University; Economic Collapse Tests Moral Values," October 9, 2009.
"How to Cut Iowa's Budget; Fairness, Justice and Leadership by Example," October 15, 2009.
"UI Budget: Waivers Wave Goodbye to Savings; Consistency, Hobgoblins and Waivers," October 19, 2009
"Cutting Slack, Cutting Budgets; Regents, University Presidents, Deserve Some Thanks and Credit," October 30, 2009, 8:30 a.m. (with links to prior, related blog entries)
UI, Other -- Spence break-in grand jury proceedings: "UI Spence Break-In: Gazette Scoop Illustrates Issues," October 27, 2009
School boundaries, school boards, and the ICCSD. "Drawing School Boundaries: Clarity vs. Chaos," November 11, 2009, and "School Board Election: Now Work Begins; It's Swisher, Dorau, Cooper; Old Board 'Starting Off Backing Up' With Consultant and Tough Decisions," September 9, 2009, 7:00 a.m. (with its links to 11 prior and related blog entries including, for example, "School Boundaries Consultant Folly; Tough Boundary Questions Are for Board, Not Consultants or Superintendent, Plus: What Consultant Could Do," and "Cluster Schools: Potential for IC District?")
Nicholas Johnson, "School Board Has Work to Do," Iowa City Press-Citizen, November 2, 2009 (and reproduced in blog)
"Boundaries: Only Board Can Do Board's Job; Drawing School Boundaries Made Easy," November 2, 2009
"Huh?" asks The Gazette -- a sort of family newspaper translation of "WTF?" "[T]he UI is interviewing finalists for a newly created position as vice president of strategic communication. This despite a system-wide hiring freeze and after the UI cut 40 teaching assistant positions earlier this year. It comes as leaders discuss possible student surcharges, tuition increases and cuts in benefits to existing staff. Huh?" Editorial, "Spending that could wait," November 12, 2009, p. A4.
Even the student paper's editorial writers at The Daily Iowan can see the problems with this idea that seem to have eluded the adults who run their institution. Editorial, "Due to budgetary woes, PR position should remain unfilled," November 11, 2009 ("It’s asinine to hire a PR man or woman at the same time we’re weighing a tuition increase and surcharge. These budgetary issues require our direct and immediate attention before we address our public-relations department. President Sally Mason and other officials have spoken of the need for sacrifice, yet their hypocrisy is apparent when they’re concurrently looking to fill a public-relations position.").
If there is any profession, any group of individuals, who ought to understand the need for good public relations and media relations, it would be the reporters and editors of newspapers. Moreover, when it comes to the University of Iowa, both papers could be characterized as much more in the nature of cheerleaders than rock throwers. And so, when they are editorializing against the creation of this position -- at least now -- one can assume they are attempting to be helpful; that they really do think it is a move not in the University's best interests. I agree -- and with a similar motivation.
There are at least three issues here. One is the absolute dollars. I have no idea what the total budget for this position would be: the VP's salary, benefit package, expense account -- and then assistants, support staff, travel, office, supplies, and so forth. But I assume that it would total something in excess of $300,000, and maybe much more than that. So the money is not insignificant in a time of cutbacks.
Second, there is the priority setting. Might there be some benefit to the institution from a VP for strategic communication? Perhaps. Although it's always seemed to me that strategic communications is something that simply must come from the CEO (or in this case, university president); it's not something that can be farmed out to a consultant, or delegated to an employee. But that's not really the issue. It is not enough to say that there would be some benefit from this expensive VP position. There would be some benefit from a German Department, too, and that's been abolished. The issue is opportunity cost; the issue is relative benefit from the VP compared with the benefits that would come from other expenditures.
As the DI editorial, above, notes, "TA cuts, potential tuition hikes, and … a new public-relations hiring? . . . The position has been vacant for the last eight years, and . . . should stay that way. . . . [F]illing it would not be prudent or fiscally responsible, given the economic climate and the university’s budget reductions. In times likes these, UI officials need to prioritize."
Third, absolute dollars and a mistaken sense of priorities aside, there is the fact that this public relations move has already been another public relations disaster. Editorial writers are not the only ones criticizing the idea. Those who put utilize the newspapers' invitation to submit online comments about their stories are decidedly lacking in enthusiasm for this hire as well.
The University's public relations problems this past month have not had to do with a lack of creativity and writing ability on the part of those who prepare its news releases. It's had to do with the decisions and oversight of its administrators.
The UIHC decides it's going to stop giving patients a dollar-and-a-quarter to cover their parking expenses, and at the same time turns around and hits them up for donations to the UI Foundation on UIHC's behalf the moment they check in at a clinic. The next thing that needs to be defended is their administrators' decision to take a long weekend at Disney World. Meanwhile, it turns out they spent $60 million on a computer system that seems to have a few bugs in it (for which they announce the creation of yet one more administrator), and the Athletic Department is going ahead with a $43 million building project -- either sum alone nearly enough to cover the combined total of all the cuts required in all three Regents' universities budgets. See, e.g., a couple of the stories linked above, "Mickey Mouse Patient Satisfaction; UIHC's Troubles: Is Orlando the Answer?" November 8, 2009, and "UIHC: 'Sick Brother, Can You Spare a Dime?'; A Check-In and a Check," October 31, 2009, 7:00 a.m. (with numerous updates through November 4, links to additional, related material -- and now with over 30 of the Press-Citizen readers' comments on B.A. Morelli's stories).
The Gazette and Daily Iowan are right to editorialize about the cost of yet one more UI vice president. But that is, in some ways, the least of the problems created by one more high-priced hire in these times.
I have often returned to the theme -- as in the first eight blog entries linked from the top of today's entry -- that the best "strategic communication" from the University at this time of budget cutting and tuition raising is "fairness, justice and equity." We need to communicate that our wealthiest and most powerful are taking more than their fair share of the pain, not less; that we are not transforming their "wants" into "needs" while treating others' "needs" as "superfluous;" that we are not living on an Iowa Animal Farm in which "some are more equal than others."
In the course of doing so I've noted the lessons provided for us by "the Department of the Treasury's Special Inspector General, Neil Barofsky, [who] says the Treasury's handling of the TARP program . . . 'have contributed to damage the credibility of the program and of the government itself, and [that] the anger, cynicism and distrust created must be chalked up as one of the substantial, albeit unnecessary, costs of TARP.'" "TARP Lessons for Iowa's Budget Cutters; Barofsky: 'Anger, cynicism and distrust [an] unnecessary cost of TARP,'" October 23, 2009.
The most significant word in that quote? "Unnecessary." The public's "anger, cynicism and distrust" is not a necessary consequence from Iowa's, and the UI's, budget cutting. As the comic strip character Pogo once observed, "We have met the enemy and he is us." [Graphic credit: Wikipedia.] It is we, not the woozle, that has been making the tracks around Winnie the Pooh's barn. We who have caused those gunshot wounds in our feet. To the extent we have "strategic communications" problems at this time, it turns out that most of them are of our own making.
Damage control is a part of the responsibility of publicists. And it's important. But it's not "strategic communications."
It's our actions that are speaking louder than any words from an additional high-priced UI VP ever could.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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October 30, 2009, 8:30 a.m.
Regents, University Presidents, Deserve Some Thanks and Credit
(brought to you by FromDC2Iowa.blogspot.com*)
The sound of one shoe dropping.
The Iowa universities' presidents have presented their budget-cutting plans to the Regents, and the Regents have taken some votes.
Those who comment on newspapers' online stories are not always known for their civility and graciousness, and they've offered little toward the decisions reported in the stories about yesterday's [Oct. 29] Regents' meeting in Cedar Falls.
I've never hesitated to provide free blog advice to the Regents and the UI administration. (See, e.g., the blog entries linked from "TARP Lessons for Iowa's Budget Cutters," October 23, 2009.)
But on this occasion, without agreeing with everything they've done, I think we need to cut the Regents and the three university presidents some slack, and give them thanks and credit for a creative effort at fairness and equity in their execution of the thankless task of deep budget cuts.
Presidents' Bonuses. In those linked prior blog entries I've called for the important symbolism of the presidents' rejection of the $155,000 in potential bonus payments promised by the Regents. In the case of UI President Sally Mason, the $80,000 bonus was as much as a 15% increase above her regular salary -- mere symbolism for the UI community and people of Iowa, perhaps, but no small amount of pocket change for an individual State employee.
Yesterday she passed up the money, saying "“This year our budget difficulties are extraordinary. I too must do my part.” ISU President Gregory Geoffroy said, “I don’t expect one, nor would I accept any kind of performance bonus under these economic circumstances.”"Mason Turns Down Bonus Pay," Daily Iowan, October 29, 2009.
ISU's President Geoffroy went further, and "called the bonuses bad public policy. 'I think that they create enormous public relations issues for us. I would urge you to think about other ways to structure compensation.'" Staci Hupp (with contributions from Jason Clayworth, Gunnar Olson and B.A. Morelli), "University employees spared from layoffs," Des Moines Register, October 30, 2009.
Geoffroy's bonus would have been a 12% salary boost; UNI's President Ben Allen was in line for an 8% bonus.
Nor is this all. Both Geoffroy and Allen were offering to sacrifice 12 days' pay -- a not insignificant contribution at their salary level.
Fairness and Equity. I've also called for basic fairness, hoping that those with the least power and pay would not end up bearing a disproportionate share of the burden, while the relatively powerful at the top of the salary scale escaped unscathed. The model I urged we avoid was that of Wall Street, where bonuses in the multi-billions continue to flow to the wealthy, while the homeless and unemployed are ignored. It's a matter of substance as well as symbolism.
Here again, I think the Regents and the presidents have made significant strides in that direction.
Although Geoffrey and Allen are taking furloughs of 12 days, ISU employees earning under $60,000 a year will only lose 4 days pay. Note that 12 days is both three times the number of unpaid days suffered by those at the bottom of the pay scale, and given the presidents' salaries a much greater total cash loss per day for the presidents as well. "Senior administrators will take 10 days." [Staci Hupp's story, linked above.]
The cut in State contributions to individuals' retirement programs also has an equitable impact. At the UI the TIAA-CREF program involves a 5% of salary contribution from the employee, and a 10% of salary contribution from the University.
The proposal is that the 10% from the State be reduced to 8%. (Regent Michael Gartner and others thought it would be better to reduce it to the IPERS 7% level -- which would have made it even more equitable.) This has been described as a "2% reduction" ("a temporary 2 percent reduction," B.A. Morelli article, linked below). That may be a good public relations characterization in selling it to the beneficiaries who are being cut. But it's bad mathematics, and poor public relations in selling it to the people of Iowa, parents and students.
To cut a contribution from 10% of salary to 8% is a 20% cut, not a 2% cut.
I think a 20% cut in a benefit program is a significant cut; though I don't think it's unreasonable (especially since employees under this program are still getting slightly more than those with IPERS).
But my point for now has to do with equity. For a university president earning $450,000, 10% represents $45,000; 8% represents $36,000. That's a $9000 reduction -- what by my standards is a significant cut.
For an employee earning $40,000 the 10% is $4000; the 8% is $3200 -- an $800 cut. That's still significant for someone earning that salary. But the point is: those who earn the most lose the most; those who earn the least lose the least in the absolute dollar contributions they would otherwise receive into their retirement fund.
The $100 Student Surcharge. In the context of the presidents' self-imposed cuts in their own pay and benefits, and the effort to spread the burdens in accordance with employees' ability to bear them, the $100 surcharge for students doesn't seem outrageous.
I opposed the surcharge, as did four of the nine Regents, both as a matter of principle and of public relations. I believe in the 21st Century a college education in 2009 is a necessity that is the functional equivalent of a high school education in 1909 -- as I have laid out from time to time in this blog. It is internally inconsistent today to provide high school education at no cost to parents, while charging them a half or more of the full cost of college. Either we should charge for high school (which I would hope no one would advocate) or we should make "K-16" the modern standard for "public education." (Ditto for one of the greatest returns on public investment: the "K-prep" programs for those age 2 to 4.) Consistent with that position, I did not support the surcharge.
From a public relations perspective I simply posed the benefit-cost question: Is the benefit (the revenue from the $100/student) worth the cost (in student-parent hostility at a mid-year $100 add-on).
However, in the necessary spirit of compromise in putting together a package that spreads the burden among the beneficiaries, a $100 contribution, that is a surcharge rather than a permanent increase, and one that enables the Regents to reach the universities' $59.8 million share of the necessary State-wide budget cuts by putting 10% of it ($5.7 million) on students, it really can't be dismissed as an unreasonable part of the package. My position is not dissimilar to that of Regents' President Miles: "“I do not favor the idea of a $100 surcharge for our students at this late a date,' Miles said. 'But I think it’s reasonable.'” "Regents support surcharge," Daily Iowan, October 29, 2009.
Capital Expenditures. I have also noted the difficulty of imposing salary and benefit cuts, and layoffs, while continuing capital expenditures at the UI that cost roughly as much as all the required budget cuts for the three universities combined ($60 million for a UIHC computer system that has had a bad track record at other institutions and requires a $250,000 administrator to watch over it; a $47 million refurbishing of the Carver Hawkeye Arena). Here again, President Mason is proposing to cut some $5.1 million in building proposals as a part of her total budget cutting efforts. "Mason outlines cuts for UI," Daily Iowan, October 29, 2009.
Lest we be too happy about yesterday's meeting we need to recall that after this year's $600 million cut in State funding comes next year's projected $1 billion cut. So long as the federal government refuses the only surefire way to increase consumer spending (in an economy 70% driven by consumer spending) -- keeping home dwellers in their homes, and starting a federal WPA-CCC-style jobs program -- unemployment/underemployment will continue to increase or, best case, hold steady, this "recession" will continue, Iowa's tax revenues will continue their decline, and the economic pain for all will only increase. Javier C. Hernandez, "Day After Rally, Stocks Retreat on Consumer Weakness," New York Times, October 30, 2009 ("On Friday [Oct. 30], the Commerce Department reported that consumer spending in September dropped by the largest amount in nine months, a dreary data point that . . . reinforced the slow, halting recovery of the United States economy.").
There are many more rewarding investments for that multi-trillion-dollar debt Washington is passing along to my great grandchildren than handing it over to the guys who created the problem -- but then, I guess the two-year-old really has been rather miserly with his campaign contributions.
I suffer no illusion that any of the decisions made by the State universities presidents, or the Board of Regents, came about as a result of entries in this blog. But given the extent to which what was done was consistent with what I was urging be done, the only decent option open to me at this point is to give all of them some credit for an exceedingly difficult job relatively well done -- along with a "thank you."
Yesterday the Regents dropped the soft, cloth house slipper. When "the other shoe" drops it, and we, may make a little louder sound.
My sources:
Staci Hupp (with contributions from Jason Clayworth, Gunnar Olson and B.A. Morelli), "University employees spared from layoffs," Des Moines Register, October 30, 2009;
B.A. Morelli, "Regents approve UI tuition surcharge; Layoffs not totally off the table," Iowa City Press-Citizen, October 30, 2009;
"Mason turns down bonus pay," Daily Iowan, October 29, 2009;
"Regents support surcharge," Daily Iowan, October 29, 2009;
"Mason outlines cuts for UI," Daily Iowan, October 29, 2009.
[When this entry was written the online Daily Iowan for today was not yet available. Now that it is, the following should also be listed:
Emily Busse, "Board of Regents Approve UI Budget Plans," Daily Iowan, October 30, 2009, p. A1;
Editorial, "UI Admins Should Share the Budget Burden," Daily Iowan, October 30, 2009, p. A6;
Tom Moore, "Students Must Take Some of the Burden with Budget Cuts," Daily Iowan, October 30, 2009, p. A6.]
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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October 15, 2009, 7:20 a.m.
Related entries regarding University of Iowa Budget Issues: See "A University's Strategic Communication; A Modest Proposal to the Regents' University Presidents," October 7, 2009; and "Iowa's Budget Cuts and the University; Economic Collapse Tests Moral Values," October 9, 2009.Other current, hot topics: Hancher-Voxman-Clapp Relocation. Five-part series on relocation and rebuilding; see Part V, with its links to the prior four, and its "update" analysis of the October 12 forum's "third option" and proposal to raise Hancher, plus a link to the UI Facilities Management Website with streaming video and Power Point slides from the July 9 and October 12 public forums at McBride Auditorium, and "Hancher Relocation Process and Site; University Offers Useful Model for Major Decisions," July 10, 2009 (commentary about the relocation decision making process).
New School Board; Governance; School Boundaries. "School Board Election: Now Work Begins," September 9, 2009 -- with links to 11 related blog entries.
Fairness, Justice and Leadership by Example
(brought to you by FromDC2Iowa.blogspot.com*)
When public budgets need trimming it can be done in ways that produce anger, resentment, and painful hardship -- or in ways that can build morale, a sense of community, and loyalty.
It's pretty simple really.
Will the widespread perception be that those who used their power and position to take more than their share when times were good have now continued to use their power and position to keep more than their share when times turned bad and cuts had to be made? Or will the perception be that those in administrative and protected positions are willing to give more than their share, to carry more of the burden, than those who will suffer the most from layoffs and reductions in pay?
Whatever financial and other burdens we will be asked to bear at this time in Iowa's history need to be compared with those of World War II. Soldiers were drafted (although far more volunteered than these days). Men went off to war, and women went off to build ships in shipyards. The rich got a tax surtax, not tax cuts. Even grade school children were expected to use their allowance to buy "savings stamps," ultimately to be traded in for an $18.75 "war bond." Everything was recycled for the war effort, from bacon fat to newspapers. There was no "cash for clunkers" -- just lots of clunkers and no cash. The auto companies weren't building cars; just jeeps and tanks. Food was rationed, as was gasoline. Once you'd exchanged your ration coupons you just did without. We grew our own food in "victory gardens."
Today we fight our wars on the cheap. No one gets drafted. The rich get tax cuts. There's no rationing. The stores are full. Video of our killed and injured fighting men and women is, by consent, kept out of our living rooms. And best of all, we don't have to pay for our wars. We just pass the cost, in the form of multi-trillion-dollar debt, on to our grand children. And when we run out of money we just print more, or borrow from the Chinese, and operate the federal government with a $1.4 trillion deficit. Meanwhile Wall street executives pay themselves multi-million-dollar bonuses with taxpayers' money, the Dow-Jones goes back to 10,000, and it looks like millions of Americans are going to continue to find adequate health care beyond their reach.
So what does this bit of nostalgia and political commentary have to do with Iowa's budget cuts?
World War II, with all its sacrifices, built a stronger sense of community, what it meant to be an American, a sense of pride, of communitarian spirit, than I have ever seen since.
How could that have been possible? My opinion, and that's all it is, is that at least a part of what made it possible was the perceived sense of fairness. The rich took more of the financial burden, not less. We were all in it together.
This morning's papers carry the news that Governor Chet Culver has cut his own salary by 10%. That $13,000 won't do much toward a $600 million deficit. But it will do a lot toward creating the sense of fairness so essential to a successful budget-cutting. Jennifer Jacobs, "Culver to cut his own pay by 10 percent," Des Moines Register, October 14, 2009 ("Iowa Gov. Chet Culver will cut his salary by 10 percent, as will all department directors, the governor announced today. The governor’s salary is $130,000. A 10 percent cut would amount to $13,000.").
I earlier proposed a variation of that for the Regents' universities presidents: the similar (important symbolic, but less significant substantively) benefit of their telling the Regents they want the possibility of bonuses for themselves (for this current academic year) taken off the table -- as Iowan and University of Connecticut President Mike Hogan has done. "A University's Strategic Communication; A Modest Proposal to the Regents' University Presidents," October 7, 2009.
I'm truly sorry they did not do this on their own before I wrote that, or at least shortly thereafter. That's how, and when, it would have had its most powerful impact. But, as is so often the case, better late than never. I'm still waiting -- and prepared to praise them when they do.
I earlier predicted that the Regents' mandate that all construction stop (B.A. Morelli, "UI officials shocked by cut; layoffs likely," Iowa City Press-Citizen, October 9, 2009 ("Regent President David Miles announced in a statement Thursday . . . a construction moratorium on all projects")) would be modified to permit the building of athletic facilities, even though that would have been a tough public relations sell. Nicholas Johnson, "A University's Strategic Communication; A Modest Proposal to the Regents' University Presidents," October 7, 2009. They resolved it yesterday by permitting all construction to continue. Staci Hupp, "Iowa Board of Regents scraps delays in construction," Des Moines Register, October 15, 2009 ("Members of the state Board of Regents on Wednesday backed away from a plan to halt new building projects at Iowa's three state-run universities . . ..").
So while University of Iowa personnel will be undergoing the pain associated with yet another $25 million budget cut a $47 million refurbishing of the Carver-Hawkeye Arena will continue without review. Steve Batterson, "Carver renovations on pace to begin in fall," Quad City Times, October 3, 2009 ("In a timeframe now measured in weeks instead of months, Iowa director of athletics Gary Barta expects work on the $47 million renovation of Carver-Hawkeye Arena to begin this fall . . . 'and we are on schedule to make that happen,' Barta said during an appearance at the Scott County I-Club dinner on Thursday"); and Tom Witosky, "Budget woes might stall U of I arena's renovation," Des Moines Register, October 11, 2009 ("The regents records . . . show that [the UI] athletic department receives $882,000 from the university general fund . . ..").
For those who will say, "Ah, Nick, but that money comes out of a different fund," I respond, "bull feathers," or perhaps "pig wings!" (1) We're talking here about appearances. For these purposes it makes no difference where the money is coming from; those who are already perceived as favored will be seen to be getting more while the rest of us are getting less. (2) The Iowa City Community School District is proposing to "borrow" from its construction funds to cover its operating expenses (an approach, incidentally, I do not support). It may very well be that, contrary to the usual "that's a different fund" mantra, there really would be a way that construction funds could help with the UI's current problems. (3) And, even if not, there would be useful substance as well as symbolism to at least temporarily postponing some of these construction projects (in spite of what I acknowledge are always costly disadvantages in doing so).
Will the most administratively powerful, and highest paid, University employees take a disproportionately larger cut in pay, suffer a disproportionately higher percentage of unfilled positions, layoffs and early retirements? Or will the burdens fall equally -- or worse still, with less impact -- on them as on those who will suffer the most from a cut in pay or unemployment?
As for increasing students' tuition both mid-year and again next fall, see Nicholas Johnson, "Free College, or Let Students Cover it All?," Des Moines Register, October 2, 2002, p. 11A. (Ironically, while students may be the least able to bear the coming financial burden, and are looking at not one, but the possibility of two, tuition increases during the next 12 months, "UI Student Government President Mike Currie said . . . 'This is definitely a university-wide sacrifice [in which] the real issue is to make sure we [the students] are making . . . no more and no less than anybody else.'" That, like Culver's action, is another example of what I mean by budget-cutting leadership. Emily Busse, "$24.7 Million; UI President Sally Mason has two weeks to target hefty budget cuts; Tuition increase, layoffs on the table," The Daily Iowan, October 15, 2009, p. A1.
These are some of the the subjects this blog will be watching and reporting on over the days and weeks to come: examples of fairness, justice, and leadership by example as the State, and University, execute their budget cutting responsibilities.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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October 9, 2009, 7:15 a.m.
Economic Collapse Tests Moral Values
(brought to you by FromDC2Iowa.blogspot.com*)
Iowa's Governor Chet Culver, left with very little option given the Iowa Constitution's requirement of balanced budgets, a decline in tax revenue, and the inevitable delay in a legislative response, has exercised his power to order across-the-board cuts in State spending. It's a 10% cut, roughly 50% more than most feared, and it's "starting today" (he said yesterday, October 8). Jennifer Jacobs, "$565 million slashed from state's budget," Des Moines Register, October 9, 2009; Jennifer Jacobs, "Culver orders 10 percent cut, 'hundreds' of layoffs," Des Moines Register, October 8, 2009; B.A. Morelli, "UI officials shocked by cut; layoffs likely," Iowa City Press-Citizen, October 9, 2009;
Times are tough, and they're not likely to get better soon -- certainly not so far as unemployment is concerned, now heading into double digits. And even these numbers fail to take account of those who have given up looking for work, are no longer receiving unemployment benefits, the former full time employees now holding part time jobs, those who have jobs but are under-employed at low skill jobs paying a fraction of what they earned before, those who have taken a significant cut in pay or no longer have health care or other benefits, or those whose medical bills leave them no option but bankruptcy.
Nouriel Roubini is one of the few economists to have predicted, early and with some considerable precision, the magnitude of the financial crisis that has now played out before our eyes. He says there's more to come, including an additional 10% drop in home prices once demand from first-time buyers dissipates. (Among a great many other things, the $8000 first-time-buyer credit program expires November 30. Recall the precipitous decline in new car sales following the expiration of the "cash for clunkers" auto industry subsidy). What's worse, he notes, is that "The stress is moving from residential mortgages that are still in deep trouble, to commercial real estate, where they [banks] are just starting to recognize that they're going to have massive, massive losses" -- from some $2 trillion in questionable commercial real estate loans. He continues, "Most of these losses are not [yet] recognized because they're keeping the loans at face value on their books." Walter Brandimarte, "US housing market not bottomed-economist Roubini," Reuters, October 8, 2009.
Worse, as Elizabeth Warren noted on yesterday's "On Point" with Tom Ashbrook, Congress has essentially turned over the writing of the regulatory reform legislation to the lobbyists for the very guys who created the problems, are already back to business as usual, and are rapidly leading us into an even more severe financial catastrophe on down the road. "Creating Jobs in a Jobless Recovery," On Point, October 8, 2009. (Harvard Law School Professor Elizabeth Warren is chair of the Congressional Oversight Panel charged with monitoring the Troubled Asset Relief Program, TARP.)
Also on the program was Robert Reich, former Secretary of Labor and now a professor of public policy at the University of California, Berkeley. He advocated, as I have over the past year, a re-enactment of the Glass-Steagall Act. First enacted in 1933, it limited bank speculation. In our headlong rush to the promised land of deregulation its prohibitions on bank holding companies owning financial companies were repealed in 1999. (Glass-Steagall also created the Federal Deposit Insurance Corporation.) Notwithstanding the rather persuasive, multi-trillion-dollar evidence we now have of its necessity, there is little to no enthusiasm in Washington for its return.
Nor is there support for the logical mantra, "If it's too big to fail, it's too big." By turning trillions of taxpayers' dollars over to the Wall Street banks, while ignoring the Main Street banks, the 100 that have failed are simply gobbled up as the big get even bigger. There's no movement to bring them to manageable size, nor to curtail their risky behavior, and the rewards in bonuses that result. Banks are calling the shots, telling the taxpayers, "Heads we win, tails you lose." Congress is content to let them continue to speculate with depositors' money, secure in the congressional promise that if they profit from their risky investments they get to keep the profits, and if they lose Congress will cover their losses with taxpayers' money. A sweet deal indeed, with no signs it's about to change.
So not only is it bad and getting worse, the odds are good -- given elected officials' disinclination to alienate their most generous campaign contributors -- that the light at the end of the tunnel is the headlight on an onrushing train of even more serious financial disasters for Main Street, brought to us courtesy of Wall Street and Pennsylvania Avenue.
When I was in Washington we had reasonable Republicans one could work with, and even admire -- while disagreeing over the details of policy. Nor am I today a partisan "anti-Republican." I am bi-partisan in my disgust with both parties' willingness to sell out the best interests of their constituents, especially those least able to fend for themselves, for the campaign contributions that enable them to be a member of Congress for life.
I would welcome a return of a constructive, civil and rational Republican "loyal opposition." It's not good for the Republican Party, and certainly not for the nation, for them to fashion their positions solely on their effort to "crush Obama" -- for example, recently cheering the news that his Copenhagen effort to bring the Olympics to Chicago had failed, or to stand in a solid phalanx of opposition to whatever he proposes as an obviously necessary health care reform. In the final analysis I don't think the American people are looking for "the Party of 'No.'"
Meanwhile, back in Iowa we have an especially urgent need to put partisanship behind us at this time, to come together, to put selfishness and greed behind us and focus on a shared sacrifice.
So I was disappointed to see on the Iowa House Republicans' Web site the reaction of their leader, Kraig Paulsen (R-Hiawatha), to the current State budget crisis: "'Today the governor raised property taxes,' said Paulsen. 'The result of this across the board cut is higher property taxes for Iowans. A tax increase that could have been avoided by better management of the state budget. The governor is pushing his out-of-control spending problem on to the backs of Iowans.'”
This is a time of testing of our moral values. As the late AFL-CIO President George Meany once explained it to me, "Nick, it's all about who gets the beans and who gets the pork chops." In his time workers could afford not only pork chops, but homes and college education for their kids. Ultimately, with "trickle down" economics, more were reduced to eating beans and limiting their kids education to high school. And that was in "our best of times."
We are heading into "the worst of times." How will we allocate the pain? Will those best able to absorb it accept a little more? Or will the wealthy, the CEOs and other administrators, continue to assume an entitlement to a continuation of a lifestyle that is multiples of what others can enjoy?
There is an issue of tough, serious, specific substantive decisions here.
But two days ago I blogged about the importance of appearances as well as substance. Nicholas Johnson, "A University's Strategic Communication; A Modest Proposal to the Regents' University Presidents," October 7, 2009.
That's also important.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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