The Impact
Last updated: April 6, 2026
What it costs. Not just to employees—to Iowa communities, local businesses, and state revenue.
Documented figures on this page are sourced from IPERS annual reports, published economic studies, and Iowa tax documentation. Calculated projections are clearly labeled as estimates and show their methodology.
The Record documents what happened. The Trajectory shows what the contract framework allows. This page illustrates the economic effects—in pension dollars, tax revenue, local spending, and community infrastructure—when public employment leaves Iowa. Current outsourcing is limited to the ePMO (~10 employees). Larger scenarios are illustrative examples, not projections of planned expansion.
1. The IPERS Economic Engine
IPERS is not just a retirement benefit. It is an economic engine. When a state employee retires, their pension becomes a permanent economic anchor in their community—spent locally on groceries, healthcare, housing, and local businesses for the rest of their life. It does not depend on market performance. It does not relocate. It circulates through Iowa communities month after month.
IPERS pays $2.76 billion in annual benefits. Eighty-nine percent is spent in Iowa. According to NIRS research, each dollar of pension benefits generates an estimated $1.74 in total economic activity in the state—retirees spend at local businesses, those businesses pay employees, those employees spend in their communities. That cycle depends on the money staying in Iowa. A 401(k) invested in global index funds does not have the same local spending anchor. A salary earned by someone outside Iowa does not circulate through Iowa communities. The contract does not include a requirement that compensation be spent in Iowa.
documented Sources: IPERS FY2024 Annual Report; IPERS “Did You Know?” fact page (ipers.org); National Institute on Retirement Security (NIRS), Pensionomics series (Iowa fact sheet; co-published with AARP/NRTA); CBS2 Iowa (IPERS Cedar Rapids outreach event).
2. What Changes Under the Contract
The economic model changes fundamentally when public employees are outsourced to a private contractor. The question is not whether the employees get paid. It is where the money goes after it leaves the state treasury.
State Employment Model
- Employee lives in Iowa, pays Iowa income taxes
- Salary spent in Iowa communities—housing, groceries, childcare, local services
- Employer contributes 9.44% of salary to IPERS
- Employee contributes 6.29% to IPERS
- On retirement, pension paid monthly for life—overwhelmingly spent in Iowa
- Economic activity is anchored here. It does not leave.
CGI Contractor Model
- Contract does not require employees to live in Iowa
- Contract does not require work to be performed in Iowa
- CGI’s 401(k) contributions may be invested anywhere
- Employer share of compensation flows to CGI in Virginia, then to CGI Inc. in Montreal
- Corporate profits flow to global shareholders through TSX and NYSE
- No contractual obligation for dollars to circulate through Iowa communities
Their IPERS pension will do the same thing for decades after they retire. The contract does not require CGI to replace that employee with someone who lives in Des Moines, or in Iowa, or even in the United States.
If the work moves to CGI delivery centers in Virginia, Montreal, Bangalore, or Manila, the salary and spending go with it. The contract permits this. The only thing it requires to stay in the continental United States is the data.
documented Sources: Master Agreement #2026-BUS-7705 (scope and performance location provisions); CGI Inc. corporate filings; IPERS contribution rates (FY2026).
3. The Tax Revenue Impact
When public employment dollars leave Iowa, state and local tax revenue leaves with them. Three revenue streams are directly affected: Iowa income tax, local sales tax, and IPERS contributions.
Iowa Income Tax
State employees pay Iowa income tax on their salary. As of 2026, Iowa has a flat income tax rate of 3.9%. If CGI assigns workers who are located outside Iowa, the income tax revenue from those positions disappears from the state.
Sales Tax on Local Spending
Iowa has a 6% state sales tax, plus local option taxes of up to 1% in many jurisdictions. A portion of every salary spent locally generates sales tax revenue. When spending relocates out of state, that tax revenue goes with it. The Bureau of Labor Statistics estimates that approximately 60–65% of household income is spent on taxable goods and services. This analysis uses 55%—below the BLS range of 60–65%—to avoid overstating the effect.
IPERS Contributions
Employer contributions of 9.44% that currently flow to IPERS cease for each employee who leaves state employment. This affects the IPERS contribution base—fewer contributors supporting existing obligations to current retirees.
The table below shows estimated revenue effects at three scales. Only the first row reflects the current documented scope. The “medium” and “full scope” rows are hypothetical illustrations — they show what the math would look like at larger scales, not what has been announced or planned.
| Scale | Employees | Est. Iowa Income Tax Lost | Est. Sales Tax Lost | Est. IPERS Employer Contributions Lost |
|---|---|---|---|---|
| Current scope (ePMO, approximate) | ~10 | ~$29,250 | ~$24,750 | ~$70,800 |
| Illustrative: hypothetical medium expansion | ~200 | ~$585,000 | ~$495,000 | ~$1.42M |
| Illustrative: hypothetical full scope | ~2,000 | ~$5.85M | ~$4.95M | ~$14.2M |
Income tax per employee: $75,000 × 3.9% = $2,925
Sales tax per employee: $75,000 × 55% taxable spending × 6% = $2,475
IPERS employer contribution per employee: $75,000 × 9.44% = $7,080
estimated Based on published tax rates and IPERS contribution schedules applied to representative salary data.
These are direct, first-order revenue losses. They do not include the secondary effects of reduced local spending on property tax bases, school funding, or municipal services. They do not include the multiplier effects documented in the next section.
documented Tax rates: Iowa Code; IPERS contribution rates: IPERS FY2024 Annual Report. estimated Salary assumption and spending ratios are estimates based on published salary data and BLS consumer expenditure data.
4. The Multiplier Effect
The direct revenue losses in Section 3 are only the beginning. Public pension dollars do not sit still—they circulate. A pension dollar spent at a local grocery store becomes wages for the grocery worker, who spends it at a local restaurant, which pays its suppliers. The dollar circulates through the community, generating economic activity at each step.
IPERS’s own data shows that 89% of pension benefits are spent in-state. According to NIRS research, each dollar of pension benefits generates an estimated $1.74 in total economic activity in the state through direct, indirect, and induced spending effects. These are measured economic effects from published research.
That local spending pattern differs structurally from a 401(k) invested in a global index fund, where capital circulates globally rather than through Iowa communities. It also differs when salary is earned by someone outside Iowa. The IPERS multiplier depends on the money staying in-state. The contract does not include a requirement that compensation be spent in Iowa.
When an employee leaves IPERS and moves to a private 401(k), the multiplier chain breaks. A 401(k) invested in a total market index fund distributes capital globally—the economic activity it generates has no anchor in Iowa. The retirement income may be spent anywhere the retiree lives, which may or may not be Iowa. The structural guarantee that pension dollars circulate locally disappears.
documented Sources: IPERS FY2024 Annual Report; National Institute on Retirement Security (NIRS), Pensionomics series (Iowa fact sheet; co-published with AARP/NRTA); CBS2 Iowa (IPERS Cedar Rapids outreach event).
5. Beyond the Paycheck — Community Infrastructure
The tax and multiplier calculations capture the measurable financial impact. They do not capture the full picture. Public employees are community members. Their salaries support the property tax base through homeownership. Their spending supports school districts. Their presence sustains municipal services.
When public employment leaves a community, the effects extend beyond the paycheck:
- Housing markets: Homeowners who relocate or whose positions are eliminated reduce demand, affecting property values and the property tax base that funds schools and local services.
- School enrollment: When families leave, school enrollment declines. Iowa funds schools through a per-pupil formula—fewer students means less funding.
- Local business revenue: Every household that leaves a community takes its daily spending with it—restaurants, retail, childcare, automotive services.
- Civic participation: Public employees serve on school boards, coach youth sports, volunteer in their communities. When positions relocate, that civic infrastructure thins.
When Iowa closed the Juvenile Home in Toledo in 2014, an estimated $10 million in annual economic activity was removed from Tama County. This is what “the money leaving” looks like at the community level—not an abstract economic concept, but reduced school funding, closed storefronts, and a weakened local tax base.
The CGI contract does not close a single facility. But if the work moves to employees outside Iowa, the economic effect on local communities follows the same pattern: the spending leaves.
documented Iowa Juvenile Home closure: documented in The Record; Common Good Iowa analysis; Bleeding Heartland.
6. This Doesn’t Discriminate
The economic fallout of outsourcing public employment does not care about your race, gender, religion, sexual orientation, or political ideology.
When public employment dollars leave a community, every business in that community is affected. The grocery store doesn’t check the voter registration of the customers who stop coming. The landlord doesn’t care whether the empty apartment belonged to a Democrat or a Republican. Property tax revenue doesn’t decline along party lines.
This is economic math. It affects everyone in the radius of the spending that disappears.
Even if you have no opinion about unions, privatization, or state employment policy, you have an interest in whether public spending stays in your community.
The Record documents what happened.
The Trajectory shows what the framework makes possible.
This page illustrates the economic effects.
What happens next is not written yet.
Read The Solution →7. Source Documents
IPERS and Economic Impact Sources
- IPERS FY2024 Annual Report — Benefits paid, beneficiary count, in-state spending percentage
- IPERS “Did You Know?” fact page (ipers.org) — Economic impact summary data
- National Institute on Retirement Security (NIRS) — Pensionomics series (Iowa fact sheet; co-published with AARP/NRTA); $1.74 in economic activity per $1 of pension benefits
- CBS2 Iowa — IPERS Cedar Rapids outreach event coverage
- Bleeding Heartland — IPERS workforce crisis article
Tax and Revenue Sources
- Iowa Code — Income tax rate (3.9% flat rate, effective 2026)
- Iowa Code — Sales tax rate (6% state, plus local option)
- IPERS contribution rates — Employer 9.44%, Employee 6.29% (FY2026)
- Bureau of Labor Statistics — Consumer Expenditure Survey (spending ratio basis)
Contract and Government Sources
- Master Agreement #2026-BUS-7705 — Scope, performance location, employment provisions
- Common Good Iowa — DOGE proposal analysis, Iowa Juvenile Home economic impact
- CGI Inc. — Corporate filings (TSX: GIB.A, NYSE: GIB)
Related Pages on This Site
- The Record — The documented history of Iowa’s privatization actions
- The Trajectory — What the contract framework allows
- The Contract — Full analysis of the CGI master agreement and SOW
- Build a Scenario — Model the personal financial impact
- Methodology — Calculation references and source documentation