Iowa’s fiscal health strong, but population growth critical

DES MOINES — Iowa’s financial health is strong, but its physical health not as much.

The state’s tax climate is improving — with room to improve even more — and its eclectic catalog of industries is contributing to that good economic health, but the state needs to find ways to attract more residents.

Those are some of the top findings of an annual analysis recently published by the Iowa Business Council, a nonprofit that advocates for 22 of Iowa’s largest businesses, including Alliant Energy, Casey’s, Corteva Agriscience, John Deere, Fareway, Hy-Vee, MercyOne, MidAmerican Energy, Pella, Principal, UnityPoint Health and Wellmark Blue Cross and Blue Shield of Iowa.

The council’s annual Competitive Dashboard, designed to inform policy discussions with business leaders and elected officials, covers five categories: economic growth, workforce and education, governance, health and wellness, and demographics and diversity. The Competitive Dashboard measures Iowa’s performance in those categories against other states.

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“By addressing issues such as competitive tax policy, workforce planning initiatives and economic development tools, Iowa can become an even more competitive state,” Phil Jasper, president of Raytheon and chairman of the Iowa Business Council, said during a virtual news conference when the report was published.

Iowa’s performance

Iowa’s Gross State Product increased by more than 9.5 percent to $238.3 billion compared to last year’s report. Noting Iowa’s strong standing in manufacturing value as a percentage of its GSP, Iowa is well diversified across multiple industries which helps economic resiliency, the report stated.

Iowa’s economy is poised for even more growth, with significant increases in competitiveness relative to its tax climate. Iowa’s state ranking for corporate tax climate has improved from 46th in 2010 to 29th in 2023. For the individual tax climate, Iowa’s standing has improved from 41st to 22nd in the same time frame.

The Dashboard rated Iowa as “outperforming” in labor force participation rate, manufacturing value as a percentage of GDP, post-high school education, the state’s public pension funding ratio, and the percent of the population without health insurance.

As of November 2023, Iowa’s labor force participation rate of 68.1 percent was sixth-best in the country, according to the report. The 93.5 percent of Iowa students who received some education after high school was eighth-best in the country. The state’s public pension is funded at better than 100 percent and is ninth in the nation. And 4.5 percent of Iowans do not have health insurance, which is the fifth-lowest mark in the country.

At the opposite end, the Dashboard rates Iowa as “underperforming” in the percentage of residents who are obese, the number of mental health care providers per capita, and the ethnic diversity of the state’s population.

According to the report, 37.4 percent of Iowans are considered obese, which is the 38th highest such number in the country. The state ranks 43rd for number of mental health care providers per 100,000 residents. And the state’s 17.2 percent of residents that are non-white ranks 45th in the country.

More workers needed

Jasper and Joe Murphy, president of the Iowa Business Council, said the state’s financial health is encouraging — they noted the state’s GDP grew 9.5 percent over the previous year’s report — but highlighted the need for more workers in the state.

“That really illustrates the resiliency throughout the industry sectors represented in Iowa,” Jasper said. “As we look for areas to improve in this category … our available workforce continues to be the limiting factor in terms of the potential of our economy. We’re effectively tapped out on our workforce.

“The good news is that Iowa continues to outpace the national average on its labor force participation rate. But when you pair that participation rate with our very low unemployment rate, that continues to feed the urgency of retaining more population, and honestly recruiting new Iowans into our state.”

The report notes that Iowa’s population growth has for years consistently trailed the national average and says increasing the state’s population is “critical to building a talent pipeline and expanding state revenues.”

Iowa’s overall net migration for 2022 to 2023 increased by nearly 1,500 individuals, the report says.

One way to achieve that population growth, the reports states, would be through federal immigration policy changes.

Jasper and Murphy said the Iowa Business Council supports federal immigration reform that includes expanding work visas and expediting the process for those who are waiting to come to the country legally.

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“This is a very politically charged issue for the country, for the state, for everybody involved,” Murphy said. “We see our role as really stating the facts in stating the need in an unemotional and non-political way. The simple fact is we need to grow our state’s population, and one of the best ways to do that would be through legal immigration means. …

“There are a number of common-sense areas that we can engage on and are engaging on. But we really view our role to lower the rhetoric, lower the temperature, take the politics out to the extent that we can, and just talk about the business need for why we need more individuals in our communities, among our businesses, and working toward making a better Iowa.”

Housing, child care

As more means to growing Iowa’s workforce, the report highlighted the need for more affordable housing and access to affordable child care.

Murphy said the state needs 25,000 more housing units by 2030, and 18,000 of those need to be single-family housing.

“Updating and creating new housing stock is certainly a workforce initiative,” Murphy said. “If you’re able to live in the community where you want to work or are working, you’re much more likely to stay in that community and therefore stay in Iowa.”

Comments: (515) 355-1300, erin.murphy@thegazette.com