Category Archives: State & Local Finance

Another Round of Fend-for-Yourself Federalism

Source: FFIS, State Policy Reports, Volume 35, Issue 8, April 2017
(subscription required)

From the abstract:
It began with the president’s “skinny” budget for fiscal year (FY) 2018, and it is continuing with chatter around tax reform. “It” is the notion that state and local governments are about to see an escalation of fend-for-yourself federalism.

Do state spending differences create an unequal playing field for children?

Source: Julia B. Isaacs, Urban Institute, April 25, 2017

Some states spend less on their children than others, including public education, health, and social services costs. Arizona, for example, spent less than $4,900 per child in 2013, whereas New York spent slightly more than $12,200 per child (after adjusting for cost of living).

These wide disparities in public investment raise concerns about whether children nationwide are on equal footing when pursuing the American Dream. Though children’s outcomes are affected by many factors, health and education outcomes tend to be better in states that spend more on children.

Differences in K–12 education funding cause most of these differences. New York also spends more per capita than Arizona on Medicaid services for children, cash assistance, child welfare services, the Children’s Health Insurance Program, child care assistance, and child support enforcement. In addition, New York has a state earned income tax credit, but Arizona does not…..
Related:
Unequal Playing Field? State Differences in Spending on Children in 2013
Source: Julia B. Isaacs, Sara Edelstein, Urban Institute, Research Report, April 25, 2017

From the abstract:
For children to thrive and reach their full potential, they need adequate food and shelter, high-quality health care and education, safe environments, and supportive parents and families. Though families play a key role in meeting children’s needs, society also provides resources and services to support children’s healthy development.

Through their funding of public schools, health systems, and social services, state and local governments provide resources and services to support children’s healthy development. Although not all investments translate directly into better child outcomes, a wide disparity in public investments raises concerns about whether children from low-spending states are on equal footing when pursuing the American Dream….

Modeling Fiscal Stress and Contracting Out in Local Government: The Influence of Time, Financial Condition, and the Great Recession

Source: Antonio M. López-Hernández, José L. Zafra-Gómez, Ana M. Plata-Díaz, Emilio J. de la Higuera-Molina, The American Review of Public Administration, First Published April 19, 2017
(subscription required)

From the abstract:
Various studies have analyzed the relationship between fiscal stress and contracting out, but have failed to achieve conclusive results. In this article, we take a broad view of fiscal stress, addressed in terms of financial condition and studied over a lengthy period (2000-2010). The relationship between fiscal stress and contracting out is studied using a dynamic model, based on survival analysis, a methodology that enables us to take into account the effect of time on this relationship. As this study period includes the years of the Great Recession (2008-2010), we also highlight the impact of this event on the fiscal stress–contracting out relation. The results obtained suggest that taking into account the passage of time and conducting a long-term assessment of financial condition enable a more precise understanding of this relation. We also find that the Great Recession reduced the probability of local governments’ contracting out public services.

SHEF — State Higher Education Finance FY16

Source: Sophia Laderman, State Higher Education Executive Officers Association (SHEEO), April 2017

From the press release:
State and local governments provided nearly $90 billion in Fiscal Year (FY) 2016 to support higher education—a slight decrease in real terms from the FY 2015 level, marking the first decline in overall state and local support for higher education in four years. However, the level of $6,954 per student (down from $7,082 per student in 2015) was caused by an 80% reduction in support in Illinois, which was able to enact only a small “stopgap” budget for 2016. Overall, 33 states increased their support per student and 17 (including Illinois) plus the District of Columbia and Puerto Rico reduced support. (Forty states had increased support per student in 2015.) Average state and local government support per student remains 17% below FY 2008 levels and is lower in 45 states than it was before the Great Recession.

Tuition income showed its lowest increase in many years, growing by 2.1% in 2016. Despite that, the share of total educational expenditures supported by tuition rose to 47.8%, near its all-time high, due to a decline in community college enrollment and an increase in enrollment in four-year institutions, whose tuition usually is higher than that charged by two-year colleges….

Use the Data:
Interactive SHEF data – Tableau (includes state breakdown for case studies)
Unadjusted Nominal Data Set (XLS)
State-by-State Wave Charts (XLS)
Link to FY 2017 Grapevine Survey

Additional Information:
Glossary of Terms
List of Data Providers
Data Descriptions

Technical Papers:
Technical Paper A – HECA
Technical Paper B – EMI and COLI
Technical Paper C – Diverse Perspectives
Technical Paper D – Measures, Methods, and Analytical Tools

USAFacts

Source: USAFacts, 2017

USAFacts is a new data-driven portrait of the American population, our government’s finances, and government’s impact on society. We are a non-partisan, not-for-profit civic initiative and have no political agenda or commercial motive. We provide this information as a free public service and are committed to maintaining and expanding it in the future.

We rely exclusively on publicly available government data sources. We don’t make judgments or prescribe specific policies. Whether government money is spent wisely or not, whether our quality of life is improving or getting worse – that’s for you to decide. We hope to spur serious, reasoned, and informed debate on the purpose and functions of government. Such debate is vital to our democracy. We hope that USAFacts will make a modest contribution toward building consensus and finding solutions.

There’s more to USAFacts than this website. We also offer an annual report, a summary report, and a “10-K” modeled on the document public companies submit annually to the SEC for transparency and accountability to their investors.

State and Local Government Spending on Public Employee Retirement Systems

Source: National Association of State Retirement Administrators, NASRA Issue Brief, Updated April 2017

State and local government pension benefits are paid not from general operating revenues, but from trust funds to which public retirees and their employers contributed while they were working. On a nationwide basis, pension contributions made by state and local governments account for roughly 4.5 percent of direct general spending. Current pension spending levels, however, vary widely and are sufficient for some entities and insufficient for others.

In the wake of the 2008-09 market decline, nearly every state and many cities have taken steps to improve the financial condition of their retirement plans and to reduce costs. States and cities changed their pension plans by adjusting employee and employer contribution levels, restructuring benefits, or both. Generally, adjustments to pension plans have been found to be proportionate to the plan’s funding condition and the degree of change needed.

States Weigh the Price of Financial Incentives for Business Development

Source: Lisa Mckinney, Capitol Ideas, Vol. 60, No. 2, March 2017

Financial incentives for economic development are intended to motivate a business to locate or relocate in a specific state, expand their facilities or create more jobs. GASB 77 is reflective of a shift in state legislatures to more closely track the efficacy and return on investment of tax abatements and other financial incentives for economic development.

Spending in the States: Slow Growth in State Spending and Revenue Continues, NASBO Data Shows

Source: Brian Sigritz and Kathryn Vesey White, Capitol Ideas, Vol. 60, No. 2, March 2017

Fiscal year 2017 is expected to mark the seventh consecutive annual increase in both general fund spending and revenue, according to the National Association of State Budget Officers. However, fiscal progress has been uneven across states, with some states facing difficult budgetary challenges.
Related:
Following the Dollar – Budget processes in the states
Source: John Hicks, Capitol Ideas, Vol. 60, No. 2, March 2017

The Great GASB

Source: Jennifer Burnett, Capitol Ideas, Vol. 60, No.2 , March 2017

One of the acronyms policymakers likely hear most often is “GASB,” which stands for the Governmental Accounting Standards Board. …. Created in 1984, GASB is an independent organization that was developed after state and local leaders started talking about the development of reporting principles. ….
GASB is cousin to FASB, or the Financial Accounting Standards Board, which was created in 1973 and establishes financial accounting and reporting standards for public and private companies and nonprofit organizations that follow Generally Accepted Accounting Principles, or GAAP. While FASB covered standards for the private sector, no such standards existed for the public sector. ….

When to Use State Rainy Day Funds – Withdrawal policies to mitigate volatility and promote structurally balanced budgets

Source: Pew Charitable Trusts, April 2017

From the overview:
A robust and well-designed rainy day fund can give a state the flexibility it needs to weather the revenue impact of economic downturns. For this to work, states need to also have clear policies that ensure the funds are used in a way that is aligned with how their revenues respond to the business cycle. Pew’s examination of states’ rainy day fund withdrawal policies found that in some cases, those policies either fail to adequately safeguard savings from inappropriate use during times of economic and revenue growth or do not provide enough flexibility or accessibility in times of greatest need. States with flawed policies may find that their rainy day funds do not fulfill their primary intent: to keep their budgets stable regardless of how well the economy is performing.

Pew’s examination of state policies governing withdrawals from the 47 states with budget stabilization funds found that:
• Six states have no legal conditions for when funds should be withdrawn.
• Ten states have unclear conditions for when they can make withdrawals.
• Twenty-nine states do not include revenue or economic fluctuations as criteria for determining when withdrawals from these funds are appropriate.

Pew identified three elements that state policymakers should consider when designing budget stabilization funds:
1. The fund’s usage should be aligned with its purpose. Not all withdrawals from rainy day funds are consistent with the objective that the funds were created to meet. States should examine whether funds are meeting their statutory and/or constitutional purpose.
2. There should be a connection between fund withdrawal conditions and volatility. Ideally, guidelines should tie withdrawals to economic or revenue fluctuations in a clear and measurable way. Such guidance gives policymakers a clear signal on whether the time is right to use reserves.
3. The requirements for rebuilding the fund should be clear and achievable. Some states require that any money withdrawn from a rainy day fund be reimbursed within a specific time frame, which is intended to ensure that the state rebuilds its reserves. However, such requirements often fail to take the business cycle into consideration, and in some cases are so stringent that state leaders rarely authorize withdrawals—even in dire economic circumstances.