Report: Iowa must diversify to grow population, economy

As Iowa’s population growth continues to trail behind other states, Iowa policymakers and business leaders must invest in strategies to grow and diversify urban and rural communities, according to the Iowa Business Council’s annual report.

Iowa’s gross state product grew to nearly $217 billion in 2022 — up from $194.3 billion in 2021, per the report released Thursday.

Iowa Business Council Chairman Phil Jasper, president of Mission Systems at Collins Aerospace, said the 11 percent increase indicates Iowa’s resiliency emerging from the COVID-19 pandemic.

“That's vitally important as we look at potential economic headwinds ahead of us,” Jasper said.

The annual report, Iowa’s Competitive Dashboard, measures Iowa’s progress in five categories compared with other states and serves as a tool to policymakers and business leaders in determining policies that will strengthen Iowa's economy.

Demographics, diversity

This category needs the most improvement, Jasper said, noting Iowa’s population growth lags behind other states — ranking at No. 31 — and No. 45 in ethnic diversity.

According to the report, Iowa’s net migration dropped by nearly 1,900 people compared to the previous report.

“Iowa’s population needs to grow in order for business opportunities to expand and to provide opportunities for the next generation of Iowans,” Jasper said.

A group of about a dozen Ankeny businesses this week released a statement opposing GOP-backed bills that Iowa lawmakers are debating, including but not limited to legislation targeting the LGBTQ population.

Republican lawmakers passed a bill Wednesday banning gender-affirming care for minors. Other bills have been passed by at least one chamber, including a bill prohibiting transgender students from using school bathrooms that correspond with their gender identity and a ban on instruction on gender identity and sexual orientation in kindergarten through sixth grade.

Asked whether such legislation helps or hurts Iowa, Joe Murphy, executive director of the Business Council, said the organization “believes in creating a welcoming and inclusive environment throughout our member organizations.”

“Our association acts on this by dedicating time at each board meeting to discuss best practices and share perspectives and strategies on how businesses can continue to be welcoming and inclusive to every Iowan within our organizations,” Murphy said.

Specifically, the Business Council backs immigration reform. The report highlighted the federal Afghan Adjustment Act, a bipartisan proposal that provides a path to permanent residency status to Afghans who were evacuated to the U.S. in 2021.

Governance

Murphy said the Iowa Business Council supported the income tax reform legislation Gov. Kim Reynolds signed into law in 2022.

The law will bring the personal income tax rate to a flat 3.9 percent rate for all residents by 2026. Reynolds and lawmakers also dropped the Iowa corporate income tax rate from 9.8 percent to 5.5 percent and eliminated state tax on retirement income.

“We're currently engaged in efforts to further reform our property tax system, while also ensuring tax cuts enacted last year are extended to include all types of businesses,” Jasper said.

“We believe that as the tax provisions last year take effect and are combined with our overall quality of life, Iowa will become an even more attractive place for people to live, work and thrive.”

Murphy said Iowa is a top-three state within the insurance industry nationally, with many companies headquartered or offering significant operations in Iowa. Insurance companies are taxed through the premium tax but not the corporate tax rates that other companies pay, Murphy said, so reducing the premium tax would be one policy to explore, along with overall property tax reform.

Economic growth

Jasper said Iowa’s labor force participation rate remains down compared with January 2020, before the pandemic. He said Iowa has about 37,000 fewer workers since then, when its labor force participation rate was 70 percent.

“Combined with our lack of population growth, this will continue to burden growth and opportunity in state,” Jasper said.

Despite Iowa’s GSP growth, it ranks No. 30 in the nation. Murphy said he anticipates improvement of this metric as tax reform measures take full effect and fuel more economic growth.

Education, workforce

As part of a focus on work-based learning, the number of high school workplace learning opportunities increased from 121 Iowa high schools in 2020 to 360 in 2022.

According to the report, Iowa’s educational system fared better through the pandemic than the rest of the country. The report cited National Center for Educational Statistics data showing Iowa’s proficiency rates in reading and math experienced no statistical change through the pandemic.

Health and wellness

Iowa would be underperforming nationally in this category overall, were it not for the number of insured Iowans, Jasper said.

Iowa ranks No. 6 in the nation for percent of its population lacking health insurance — 4.8 percent in 2022.

The state’s percentage of obese people has stayed roughly the same at just over 36 percent.

Iowa has barely grown its number of primary care physicians per 100,000 residents, which was 86.3 as of 2021.

America’s Health Rankings also found Iowa has one of the highest instances of excessive drinking in the nation.

Data pertaining to mental health is not captured in the dashboard, but Murphy said the Business Council recognizes the impact mental health has on the economy. The council recommends boosting the supply of mental health professionals in Iowa and enhancing public mental health investment.

To view the full report, go to iowabusinesscouncil.org.

Comments: (319) 398-8494; marissa.payne@thegazette.com