The combined percent change of population or enrollment plus inflation.
Iowans need an objective and realistic measure to gauge reasonable government growth. Different analysts and advocacy groups rely on various measures because none is perfect and because the range of events that can influence the size of government and people’s sense of proportion cannot be properly captured by a simple benchmark. Nonetheless, a formulaic approach provides taxpayers a quick and easy target to track how their government is doing.
Iowans for Tax Relief (ITR) has chosen to use inflation plus population as a metric for government growth. The inflation figure is the Consumer Price Index (CPI), as measured by the U.S. Bureau of Labor Statistics (BLS) and reported by the Federal Reserve Bank of Minneapolis. Population estimates derive from the U.S. Census Bureau, and where applicable, K–12 enrollment data come from the Iowa Department of Education.
Why does ITR use these datasets?
In developing its analysis, ITR reviewed the measurement techniques described in multiple surveys of tax and expenditure limitations enacted by different states as well as academic literature and statistical analyses of these limitations. Overall, we concluded the inflation-plus-population formula is ideal because:
Other Measures
Some measures of government growth refer to personal income, and while this is a valid economic measure for some types of analysis, it is not appropriate when benchmarking property tax collections across Iowa communities.
As a benchmark, although it would provide a helpful barrier when the economy is shrinking, personal income would distort the community’s sense of a reasonably sized government when the economy is running well. During periods when Iowans’ income is increasing, such a measure would imply that government ought to grow proportionally. To the contrary, wealth and well-being should be the desired outcome to be maximized. While government is certainly easier to fund when the people are thriving, funding it at a higher level simply because the money is there will inevitably prove counterproductive.
In contrast, ITR’s choice of the CPI captures the changing value of Iowans’ wealth and the real constraints on their budgets, to which local government spending is appropriately seen as an additional expense. We settle on the CPI rather than, for example, moving toward broader indices that build on inflation, like the Gross Domestic Product (GDP) Deflator, because our focus is on actual Iowans and their buying power. The GDP Deflator is valuable for evaluating government’s influence on the overall economy, but it is a step removed from the quality of life that Iowans actually enjoy.