Monthly Archives: October 2016

Arkansas Career Pathways Initiative: How TANF can support skills for low-income parents, and how policymakers can help

Source: Brooke DeRenzis and Kermit Kaleba, National Skills Coalition, October 2016

….This issue brief highlights Arkansas’ Career Pathways Initiative (CPI) as an example of a successful state policy that helps low-income parents earn in-demand credentials. CPI combines adult education and postsecondary training with critical supports like case management, child care and transportation assistance, and help with the costs of tuition, books, supplies, and testing fees. CPI is a critical strategy for expanding economic opportunity in Arkansas, which is one of only six states with a poverty rate at 18 percent or more. Since 2005, CPI has used the federal Temporary Assistance for Needy Families (TANF) block grant to provide support services for more than 30,000 qualifying students enrolled in occupational programs at the state’s community and technical colleges. Despite the significant academic and employment barriers facing many participants, CPI students have achieved impressive outcomes: more than half of all CPI enrollees obtained at least one postsecondary credential or degree, compared to just twenty-four percent of non-CPI participants, and CPI participants earned $3,100 more per year than TANF recipients who were not enrolled in CPI programs.

The issue brief provides a short overview of the history and structure of the Arkansas CPI program, including key action steps that state policymakers, advocates, and other stakeholders can consider as they seek to develop similar programs. The brief also highlights key federal policy challenges that impact states’ ability to serve low-income jobseekers, and provides recommendations for changes that Congress should consider in 2017 and beyond…..

The Child Care Dilemma: An Overview

Source: Sarah Smith, Elizabeth Whitehouse, Council of State Governments, The Current State, Issue: 81, October 17, 2016

Affordable, high-quality and accessible child care is a challenge for many American families. CSG examines the balancing act familiar to many families in the United States–managing work and child care–and how states are working in conjunction with the federal government to improve the process for all families with young children.

Child care is an interdisciplinary policy issue touching education, health, workforce development and economic development. While studies show that early childhood education is important to cognitive development, programs can be relatively expensive, especially for low-income households. Oftentimes, families must make difficult choices between work and reliable child care. In this brief, we look at the demographics of families with children, the legislative landscape for the provision and regulation of child care, and the kinds of care that are available across the country.

Subsequent briefs will explore:
Affordability. How much does child care cost in each state, before and after subsidies?
Availability and Access. How many slots are available per child in each state, and how can families find quality options?
Quality. How are states managing certification requirements, assessing quality and developing the child care workforce?
Implications for the Workforce. What are the economic costs of child care for families? We take a look at what the cost of child care could mean for parents in the workforce and the innovative ways states are tackling the issue in their communities.

Are you paid fairly? Know Your Worth

Source: Glassdoor, 2016

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Deconstructing Household Wealth Trends in the United States, 1983 – 2013

Source: Edward N. Wolff, National Bureau of Economic Research (NBER), NBER Working Paper No. w22704, September 2016
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From the abstract:
I use the Survey of Consumer Finances (SCF) to analyze wealth trends from 1983 to 2013. Asset prices plunged between 2007 and 2010 but then rebounded from 2010 to 2013. Median wealth plummeted by 44 percent over years 2007 to 2010 and wealth inequality was up sharply. These two movements can be traced to the high leverage of middle class families, the high share of homes in their portfolio, and the drop in house prices. There was virtually no change in median wealth and wealth inequality from 2010 to 2013 according to the SCF despite the recovery in asset prices. A decomposition analysis based on “pseudo-panels” indicates that for the middle three wealth quintiles, capital revaluation explained virtually all of the change in simulated mean wealth over the 1983-1989, 1989-2001, 2001-2007, 2007-2010, and 2010-2013 periods, and implicit savings were negative. Trends in inequality as measured by the change in the P99/P2080 ratio largely reflected differences in rates of return and savings rates between the top one percent and the middle three wealth quintiles. Over 1983-1989, the higher savings rate of the top group explained all the increase. Over 1989-2001, 2001-2007, and 2010-2013, their higher savings rate led to an increase in the P99/P2080 ratio but this was offset by the higher rate of return of the middle group, which lowered inequality. Over years 2007-2010, both the higher savings rate of the top group and their higher rate of return contributed about equally to the rise in the P99/P2080 ratio.

Recoupment of Pension Overpayments: Equitable Liens and Meaningful Reform after Montanile

Source: Maria O’Brien Hylton, Jeanne Medeiros, Boston University School of Law, Public Law Research Paper No. 16-33, August 29, 2016

From the abstract:
This short paper reviews the current state of the law governing recoupment actions for defined benefit ERISA plans and focuses in particular on actions against retirees who are without fault for the overpayment. The paper argues that the current practices of many plans which focus on recovering overpayments without taking the consequences to the retiree into account are not required by either ERISA or the IRS. The practices which include ceasing all pension payments, huge cuts in payout amounts and unlimited reach back even in cases where the plan fiduciary has clearly breached its duty to participants, cause tremendous harm to participants who are invariably elderly and often disabled and/or living on a small, fixed income. The authors call for a limited reach back period of no more than three years and for a new requirement that plans obtain insurance in order to provide protection to both participants and plans when overpayment errors are discovered.

Friedrichs and the Move Toward Private Ordering of Wages and Benefits in the Public Sector

Source: Maria O’Brien Hylton, Boston University School of Law, Public Law Research Paper No. 16-34, August 29, 2016

From the abstract:
In its recent Harris v. Quinn opinion the U.S. Supreme Court (in particular Justice Alito) seemed to welcome a future opportunity to reconsider the 1977 landmark Abood decision in which public sector closed shop employees were not required to join a union but could be subject to fees that cover the costs of “collective bargaining, contract administration, and grievance adjustment purposes.” Supporters of the Abood approach argue that it is a reasonable compromise that prevents non-members from free riding on the union’s efforts (i.e. enjoying the wages and benefits negotiated by the union without sharing the costs incurred.) Detractors and the plaintiffs in Friedrichs argue that free riding concerns are insufficient to overcome serious First Amendment objections. The central idea is that all bargaining in the public sector is inherently political. Public sector pay, tenure and benefits (especially expensive retiree health care and pension promises), it is claimed, now profoundly affect the ability of state and local governments to function in many jurisdictions. This article briefly reviews the major claim in Friedrichs — that public sector agency agreements violate the First Amendment — and considers the implications of a decision that, but for Justice Scalia’s unexpected death almost certainly would have overturned Abood. What would this mean for financially strapped state and local governments? To understand what a victory for the Friedrichs plaintiffs would mean, this paper looks at recent data from Wisconsin which dramatically constrained public sector agency agreements a few years ago and has seen public union membership, union revenue and political power plunge as a result. If Friedrichs had overturned Abood during the 2016 term, we would now expect to see national patterns similar to those observed in Wisconsin. In many places around the country a drop in public sector union political power would be expected to translate into a climate more supportive of reduced future expenditures on public pensions and health care.

Water and Taxes

Source: Dave Owen, University of California – Hastings College of the Law, UC Hastings Research Paper No. 214, September 2, 2016

From the abstract:
This article considers how water consumption in the United States is taxed, and how it should be taxed. It reviews the few federal and state tax code provisions that directly target water use and the somewhat larger number of provisions with indirect implications for water policy. It also draws upon existing literature on tax policy, water law, and water economics to evaluate whether taxation of water consumption makes sense.

That analysis leads to two key conclusions. First, although provisions of tax law affect water use, and although some provisions undercut key policy goals of water law, they do so only to a modest extent. The intersections between the two fields are limited and largely inadvertent. Second, the interconnections between the fields should be stronger; water use should be taxed. The reasons are similar to commonly-cited justifications for carbon taxes and other so-called Pigouvian taxes: taxation would encourage more efficient water consumption, decreasing the negative environmental and energy consequences of water overuse and alleviating conflict among competing users. Taxation also would raise revenue, which could fund badly-needed water infrastructure and governance or reduce the need to tax more socially desirable activities.

Rethinking Taxation of Privately Held Businesses

Source: Martin J. McMahon, Jr., Tax Lawyer, Vol. 69 No. 2, 2016

From the abstract:
This article proposes the repeal of current Subchapters K and S, as well as the removal from the ambit of Subchapter C of all privately held corporations and the replacement of the current tax regime for privately held business with a new regime under which all privately held businesses (including wholly owned corporations and limited liability companies, and unorganized sole proprietorships) would be taxed at the entity level under a uniform rate schedule, regardless of the form of organization. All publicly traded companies, and their controlled corporate subsidiaries, would continue to be governed by all of the structural rules of Subchapter C (and any other relevant Code sections outside of Subchapter C.) Nevertheless, the profits of privately held companies subject to the entity-level tax would not be double taxed upon distribution. Rather, a single-level tax, at the owners’ tax rates would be achieved by applying the imputation-credit model for corporate tax integration to all distributions (including profits of a sole proprietorship that have not been reinvested) to the equity owners of the entity. As a consequence of the abolition of pass-through taxation and the imposition of an entity-level tax, entity losses no longer could be passed through to the entity’s owners to offset positive income from other sources. This proposal emanates from decades-long problems with the administration of Subchapter K, governing the taxation of partnerships, and the incoherence of having three separate regimes — Subchapter C, Subchapter K, and Subchapter S — apply to privately held businesses depending of the form of organization and available elections. While it does not originate as a refinement of recent proposals to reduce the corporate tax rate and to clean up the base, its adoption would facilitate such a move. Because such a high percentage of U.S. business income is now earned by unincorporated business, it would avoid increased distortions in the choice of business entity due solely to tax planning.

City Fiscal Conditions 2016

Source: Christiana McFarland, Michael A. Pagano, National League of Cities, October 2016

This year’s City Fiscal Conditions survey finds that:
– General Fund revenues grew 3.73% in 2015, and are expected to grow 0.54% as cities close the books on 2016. Expenditures grew 3.57% in 2015 and are budgeted to increase 3.71% in 2016.
– Property tax revenue growth is returning to pre-recession levels, with a sizable increase of 3.77% in 2015 and anticipated growth of 2.60% in 2016.
– Sales tax revenues are continuing to post strong growth, with 5.49% in 2015 and 1.99% expected in 2016.
– Despite post-recession volatility, income tax revenues grew 5.82% in 2015 and are expected to grow 3.47% in 2016.
– Ending balances are returning to historic highs, standing at 24.48% of General Fund expenditures in 2015 and budgeted for 21.67% of expenditures in 2016.

Despite improved fiscal stability for day-to-day operations, local budgets continue to confront mounting challenges. Infrastructure and employee- and retiree-related costs, matched with inequitable recovery in some local housing and labor markets, threaten longer-term fiscal sustainability. These concerns are foremost on the minds of city leaders, some of whom are implementing pension reforms and leveraging fiscal planning tools.

These strategies are particularly important given that city revenues have not fully recovered from the Great Recession. As a result, many may be operating with suppressed revenues when and if another recession emerges in the coming years. For now, though, city fiscal conditions are showing signs of vitality, with local governments reinvesting in areas critical to growth and community quality of life including infrastructure and public safety.