Category Archives: State & Local Finance

Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030

Source: Joe Nation, Stanford Institute for Economic Policy Research (SIEPR), Working Paper 17-023, October 2017

From the abstract:
California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost. Even with this delay, local and state governments are facing increasingly higher pension costs—costs that are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic. As budgets are squeezed, what are state and local governments cutting? Core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety.

Giving or Getting: New York’s Balance of Payments with the Federal Government

Source: Donald J. Boyd, Lucy Dadayan, and Jim DeWan, Nelson A. Rockefeller Institute of Government, September 2017

From the press release:
Today, the Rockefeller Institute of Government released a new report, Giving or Getting: New York’s Balance of Payments with the Federal Government, to examine what states gave in tax dollars versus what states got from the federal government.
Modeled off of the “Fisc” reports issued by Daniel Patrick Moynihan, the former United States senator from New York, the Rockefeller Institute of Government report found that:
• Thirteen states had a “negative” balance of payment with the federal government. From worst to least they are: New York, New Jersey, Illinois, California, Massachusetts, Connecticut, Minnesota, Texas, North Dakota, Colorado, New Hampshire, Nebraska, and Wyoming. New York’s residents and economy contributed approximately $48 billion more in taxes to the federal government than New York received in federal spending —- the largest of any state.
• New York’s negative balance of payments roughly equals the combined shortfalls of 2nd ranked New Jersey and 3rd ranked Illinois. California and Massachusetts rounded out the list of top five states.
• On a per-capita basis, New York had the third-worst balance of payments, after New Jersey and Connecticut. New York’s people and economy paid the federal government $2,425 more per person than they received. By contrast, the average state experienced a positive balance of payments of about $1,305 per capita.
• New York’s negative balance of payments is driven primarily by federal taxes, rather than spending. Payments from New York to the federal government were $12,820 per capita, or approximately $3,401 higher than the national average.
• Federal spending in New York was $329 lower than the U.S. average, adding to the revenue disparity, but the revenue difference is much larger than the spending difference. ….

Quarterly Survey of Public Pensions: Second Quarter 2017

Source: Melinda Caskey, Deron Pope, and Gritiya Tanner U.S. Census Bureau, Report Number: G17-QSPP2, September 2017

From the tip sheet:
This survey provides national summary data on the revenues, expenditures and composition of assets of the largest defined benefit public employee pension systems for state and local governments. The report produces three tables: Tables 1 and 3 include data on cash and security holdings, and Table 2 provides data on earnings on investments, contributions and payments.

Can State Tax Policy Increase Economic Activity and Reduce Inequality?

Source: Harvey Cutler, Martin Shields and Stephen Davies, Growth and Change, Early View, September 10, 2017
(subscription required)

From the abstract:
Previous research shows that when changes in national commodity and income tax rates affect labor supply decisions differently, relative rates can be altered to increase welfare. In the U.S., 40 states impose both a sales and income tax; however, the reliance varies widely. This paper uses a computable general equilibrium model to examine tax policy changes in Colorado. The findings suggest that the revenue neutral changes to income and sales tax rates can affect both the level of economic activity and the distribution of income. When labor force participation is highly sensitive to income tax rate changes—which this paper suggests is the case—progressive changes to Colorado’s tax policy changes can both reduce inequality and increase output and employment.

The Direct and Indirect (Spillover) Effects of Productive Government Spending on State Economic Growth

Source: Andrew Ojede, Bebonchu Atems, Steven Yamarik, Growth and Change, Early View, September 25, 2017
(subscription required)

From the abstract:
Using data on 48 contiguous U.S. states and a spatial econometric approach, this paper examines short- and long-run effects of productive higher education and highway infrastructure spending financed by different revenue sources on state economic growth. Following the Lagrange Multiplier, Wald, and Likelihood Ratio tests, the data are found to be characterized by both spatial lag and spatial error processes, leading to the estimation of a dynamic spatial Durbin model. By decomposing results of the dynamic spatial Durbin model into short- and long-run direct as well as indirect (spillover) effects, we show that accounting for spillover effects provides a more comprehensive approach to uncovering the effects of productive government spending on growth. We find that, regardless of the financing source, productive higher education and highway spending have statistically significant short- and long-run direct as well as spillover effects on state income growth.

Bankrupt Cities, Municipalities List and Map

Source: Governing, 2017

A select few cities and other public entities across the U.S. have filed for bankruptcy as they seek to pay off debts.

Governing is tracking the issue, and will update this page as additional municipalities seek bankruptcy protection.

Nationally, bankrupt municipalities remain extremely rare. A Governing analysis estimated only one of every 1,668 eligible general-purpose local governments (0.06 percent) filed for bankruptcy protection from 2008 through 2012. Excluding filings later dismissed, only one of every 2,710 eligible localities (not all states permit governments to file for bankruptcy) filed since 2008.

Detroit became the largest U.S. city ever to file for bankruptcy in 2013. The majority of filings have not been submitted by bankrupt cities, but rather lesser-known public authorities and other narrowly-defined special districts throughout the country. In Omaha, Neb., more than a dozen sanitary districts have filed for bankruptcy, accounting for nearly a quarter of all Chapter 9 filings since 2010.

It’s also important to note that only about half of states maintain laws authorizing municipal bankruptcy. View our bankruptcy laws map for each state’s policies…..

Cassidy, Graham State Estimates Irrelevant to Assessing Their Health Bill’s Effects

Source: Aviva Aron-Dine, Edwin Park, Matt Broaddus, Center on Budget and Policy Priorities, September 18, 2017

From the summary:
In rolling out their revised bill to repeal the Affordable Care Act (ACA), Senators Bill Cassidy and Lindsey Graham released estimates purporting to show that most states would see large funding gains under their proposal. But these estimates do not compare states’ funding under the proposal to what states would receive under current law, the relevant comparison. Instead, they show how each state’s funding under the proposed block grant would change over time. In reality, the Cassidy-Graham plan would cut federal funding for coverage programs by about $80 billion in 2026 compared to current law, leading to cuts in most states, and would cut federal funding by about $300 billion in 2027, with funding cuts in all states.

Hawaii Adds New Tool to Monitor State Pension Fund – Regular stress testing will help track fund’s fiscal health

Source: Greg Mennis and Tim Dawson, The Pew Charitable Trusts, September 11, 2017

Hawaii is the latest state to require regular analysis of the potential impact of future economic swings on its public pension funds. Known as stress testing, such calculations can help states monitor the fiscal strength and sustainability of these funds.

This spring, the Legislature unanimously approved a bill requiring the analyses, and Governor David Ige (D) signed it into law July 5. California, Virginia, and Washington already require extensive and routine sensitivity analyses on their public pension plans. Typically, these tests provide estimates of the future financial position of these funds under various economic and investment return scenarios. Interest among other states appears to be growing as well. ….