Category Archives: State & Local Finance

How Do Balanced Budget Rules Impact Fiscal Performance Based On Revenue Structure?: Evidence From U.S. States

Source: Sungchan Kim, Soyoung Park, State and Local Government Review, OnlineFirst, Published April 18, 2022
(subscription required)

From the abstract:
Revenue condition needs to be considered in the design of balanced budget rules (BBRs), because revenue stream, which varies across state governments, is an important factor in balancing the budget. Also, revenue factors may influence state responses to economic crises through the employment of BBRs.Thus, this study examines the influence of BBRs on states’ fiscal performance depending on revenue structure using a panel data set from 1997 to 2016. The results demonstrate that the strongest BBRs are effective in reducing deficit shocks, although this amplifies fiscal volatility. However, the weakest BBRs play a role in stabilizing volatility. Considering revenue structure, if a state government is concerned about deficit shocks, it would do well to adopt the strongest BBRs, with lower levels of own-source revenue. Conversely, if a state government wishes to pursue fiscal stabilization, it should adopt the weakest BBRs, with lower levels of own-source revenue and less diversified source.

Fiscal Survey of States – Fall 2021

Source: National Association of State Budget Officers, Fall 2021

From the overview:
With data gathered from all 50 state budget offices, this semi-annual report provides a narrative analysis of the fiscal condition of the states and data summaries of state general fund revenues, expenditures, and balances. The spring edition details governors’ proposed budgets; the fall edition details enacted budgets.

State general fund spending is projected to grow 9.3 percent in fiscal 2022 compared to fiscal 2021 levels, according to states’ enacted budgets. This spending increase is driven by improving revenue outlooks for states as well as a host of one-time factors.

Other key highlights from the report:

  • General fund spending grew 4.3 percent in fiscal 2021 to total $931.7 billion, above originally enacted levels but still slightly below governors’ proposed budget levels pre-COVID-19.
    47 states reported fiscal 2021 general fund revenue collections came in above original budget projections.
  • Fiscal 2021 general fund revenue grew 14.5 percent over fiscal 2020 levels, with this increase partially driven by the impact of the tax deadline shift, inclusion of federal funds, borrowing, and other revenue sources in a few states, and a lower baseline in fiscal 2020.
  • In the aggregate, combined fiscal 2020 and fiscal 2021 general fund revenues came in 2.2 percent above pre-COVID-19 projections.
  • Fiscal 2022 enacted budgets are based on general fund revenues that are 2.6 percent below preliminary actual levels for fiscal 2021; revenue forecasts used to build enacted budgets were mostly developed earlier in calendar year 2021, before the most recent uptick in collections.
  • 32 states (out of 42 states able to report early in the fiscal year) indicated that fiscal 2022 collections were coming in ahead of budget forecasts, while 10 states said they were on target.
  • States adopted a mix of increases and decreases in taxes and fees, resulting in a projected net revenue change in fiscal 2022 of -$2.9 billion – including $1.7 billion in general fund revenue reductions (representing less than 0.2 percent of total general fund revenues forecasted in enacted budgets for fiscal 2022).
  • Rainy day fund balances reached a new record level of nearly $113 billion in fiscal 2021 due mainly to stronger than anticipated revenue growth, with 35 states reporting increases. The median balance as a share of general fund spending is 9.4 percent.
  • Total balances increased in fiscal 2021, nearly doubling from fiscal 2020 levels, and 46 states reported total year-end balances greater than 10 percent as a share of general fund spending.

Police and Fire Pensions in Florida: A Comparison of Conditions After 10 Years

Source: Joseph Vonasek, Robert Lee, Compensation & Benefits Review, OnlineFirst, April 5, 2021
(subscription required)

From the abstract:
This article is an analysis of 31 defined benefit police and fire pension plans of 20 municipalities in Florida. The authors conducted a similar assessment of these same plans ten years earlier to determine the fiscal impact of these plans due to state mandates that accompany state funding for each of these plans. The current study analyzes key measures of fiscal health over the last ten years for these same plans to ascertain whether the fiscal condition of these plans remained constant, that is, whether underfunded plans continued to be questionably managed and whether well-funded plans continued to be fiscally stable considering economic trends and the lessening of state mandates on the use of state funding for these plans. The findings show that the overwhelming majority of the plans neither significantly changed their financial condition nor their general ranking among the plans evaluated.

Key Provisions of the American Rescue Plan Act of 2021

Source: National Association of Towns and Townships (NATaT), March 15, 2021

…The American Rescue Plan Act of 2021 includes $350 billion in direct financial relief for all state, local, tribal, and territorial governments; extends federal supplemental unemployment benefits; increases funding for the Paycheck Protection Program; provides funding to assist schools in safely reopening; provides additional utility assistance; and includes additional funding for COVID-19 testing, vaccination, and treatment, among other provisions that assist many industries, businesses, and individuals.

Many of the federal departments and agencies that received additional or new funding for programs and financial assistance will likely begin issuing guidance for this funding over the coming weeks.

This NATaT Special Report, based largely off summary documents provided by Senate Democratic leadership, covers each title of the American Rescue Plan Act of 2021, including funding levels and provisions that may be of interest to towns and townships.

Across U.S. Public Finance, All Sectors Stand To Benefit From The American Rescue Plan

Source: Robin L Prunty, Marian Zucker, S&P Global Finance, March 18, 2021

Key Takeaways:
– The American Rescue Plan’s funding will support credit quality of issuers across all U.S. public finance sectors.
– The plan’s flexibility will afford issuers the opportunity to address unique financial and economic challenges associated with the pandemic.
– Many of the initiatives will support a more robust economic recovery across the country.

White House Releases State-by-State Fact Sheets to Highlight Nationwide Need for the American Jobs Plan

Source: White House, Press Release, April 12, 2021

Today, the White House released state-by-state fact sheets that highlight the urgent need in every state across the country for the investments proposed by President Biden in the American Jobs Plan. The fact sheets highlight the number of bridges and miles of road in each state in poor condition, the percentage of households without access to broadband, the billions of dollars required for water infrastructure, among other infrastructure needs.

Individual fact sheets for each of the 50 states, the District of Columbia and Puerto Rico are linked below.

Analysis for the States: The American Jobs Plan Act

Source: Council of State Governments, 2021

…According to an official fact sheet released by the White House, the Plan proposes an investment of $2 trillion over the course of the next 15 years, consisting principally of one-time capital investments. Funding sources include an increase in the corporate tax rate to 28% and efforts to better enforce global minimum tax rates on corporations.

As proposed, the Plan constitutes the most extensive federal investment in infrastructure, job and workforce development and technology research and development to date. Furthermore, the Plan is unique in its broad focus, including efforts to address climate change as well as long-standing racial injustice and gender inequity. Notably, nearly 40% of the benefits of climate and clean infrastructure investments will be focused on disadvantaged communities. Proposed advances in job development, specifically within STEM fields1 and the care economy, also will directly benefit women and communities of color.

The remainder of this document breaks down the funding in the American Jobs Plan by its major components:
• Transportation
• Building Upgrades, Modernization, and Repairs
• Jobs Investments
• Other Funding

Analysis for states: The Coronavirus State and Local Fiscal Recovery Fund

Source: Council of State Governments, 2021

The American Rescue Plan Act of 2021, a $1.9 trillion economic relief package, was signed by the president on March 11. Part of this package includes the Coronavirus State and Local Fiscal Recovery Fund, which provides approximately $350 billion in new federal fiscal assistance for states, territories, tribes, counties and municipalities. An additional $10 billion is available to states, territories and tribal governments for critical capital projects that directly enable work, education and health monitoring in response to COVID-19.

The American Rescue Plan: K-12
The American Rescue Plan: Employers

How the COVID-19 Pandemic is Transforming State Budgets

Source: Urban Institute, Last updated April 16, 2021

The COVID-19 pandemic and resulting recession have dramatically reshaped state economies and budgets. But the severity of the pandemic and economic downturn varies significantly across states, creating unique economic and political pressures. We collected health, economic, and fiscal data for all 50 states and the District of Columbia to show how each individual state has changed during this crisis and suggest what might be needed for recovery.