Category Archives: State & Local Finance

Spotlight: Building America

Source: Capitol Ideas, Vol. 60 no. 3, May/June 2017

Articles include:
Bridging Partnerships: How Four States Found Funds to Build
By Sean Slone

In February 2016, Rhode Island Gov. Gina Raimondo signed into law a plan to spend $4.8 billion on state infrastructure over the next 10 years. RhodeWorks, as the plan is known, received significant attention for including a new funding mechanism—tolls on heavy commercial trucks—and a focus on bringing the state’s aging bridges up to snuff.

Fueling Transportation Revenues
By Sean Slone

If the recent pattern holds, 2017 could end up being a big year for state transportation funding efforts. In 2013, six states approved major transportation packages. In 2015, eight states followed suit. The intervening even-numbered years saw less activity, perhaps owing to shorter legislative sessions in some states and re-election concerns. But transportation policy analysts are confident this year won’t buck the odd-number year trend for a simple reason: It’s time.

Help Wanted: Prioritizing Deferred Maintenance
By Katherine Barrett and Richard Greene

President Donald Trump’s promise to spend $1 trillion on infrastructure has raised the nation’s awareness about infrastructure needs in all 50 states. Above and beyond the desire or need for infrastructure additions, it’s clear that the crumbling and aging bridges, roads, water pipes and buildings currently in place need attention. The American Society of Civil Engineers recently graded the nation’s infrastructure at a D+; the same as it was the previous year.

Impact Fee Update and 2017 Outlook

Source: Pennsylvania Independent Fiscal Office, Research Brief, 2017-3, July 20, 2017

This research brief examines 2016 impact fee collections and natural gas production in Pennsylvania. It also provides an outlook for 2017.
Related:
Stronger drilling and natural gas prices projected to boost impact fees for many local governments
Source: Michael S. Higgins, Orlie Prince, Leonard Jones, Moody’s, Sector Comment, August 2, 2017
(subscription required)

Connecticut Budget Impasse Enters Second Month, a Credit Negative for Local Governments

Source: Robert Azrin, Moody’s, Sector Comment, August 7, 2017
(subscription required)

Last Tuesday, Connecticut (A1 stable) entered the second month of fiscal 2018 (which ends 30 June 2018) without an adopted state budget, a credit negative for local governments. With state legislators at an impasse, some small state aid grants are not flowing to local governments. In October, local governments are scheduled to receive a large state aid payment for education. Lacking certainty on the funding amounts, some municipalities may not have set the property tax levy high enough or may be overspending given the possibility of large state funding cuts.

Bureau of Prisons: Better Planning and Evaluation Needed to Understand and Control Rising Inmate Health Care Costs

Source: U.S. Government Accountability Office (GAO), GAO-17-379, Published: Jun 29, 2017

From the summary:
What GAO Found
From fiscal years 2009 through 2016, the Bureau of Prisons (BOP) obligated more than $9 billion for the provision of inmate health care and several factors affected these costs. Obligations for health care rose from $978 million in fiscal year 2009 to $1.34 billion in fiscal year 2016, an increase of about 37 percent. On a per capita basis, and adjusting for inflation, health care obligations rose from $6,334 in fiscal year 2009 to $8,602 in fiscal year 2016, an increase of about 36 percent. BOP cited an aging inmate population, rising pharmaceutical prices, and increasing costs of outside medical services as factors that accounted for its overall costs.

BOP lacks or does not analyze certain health care data necessary to understand and control its costs. For example, while BOP’s data can show how much BOP is spending overall on health care provided inside and outside an institution, BOP lacks utilization data, which is data that shows how much it is spending on individual inmate’s health care or how much it is expending on a particular health care service. BOP has identified potential solutions for gathering utilization data, but has not conducted a cost-effectiveness analysis of these solutions to identify the most effective solution. BOP also does not analyze health care spending data, i.e., what its institutions are buying, from whom, and how much they spend. BOP has pursued some opportunities to control its health care spending through interagency collaboration and national contracts, but it has not conducted a spend analysis to better understand trends. Doing so would provide BOP with better information to acquire goods and services more strategically.

BOP has initiatives aimed to control health care costs but could better assess effectiveness and apply a sound planning approach. Since 2009, BOP has implemented or planned a number of initiatives related to health care cost control, but has not evaluated their cost-effectiveness. Further, BOP has engaged in a strategic planning process to help control costs, but has not incorporated certain elements of a sound planning approach, such as developing a means to measure progress toward its objectives and identifying the resources and investments needed for its initiatives. By incorporating these elements, BOP could enhance its planning and implementation efforts before expending resources, better positioning itself for success as it aims to control health care costs.

Why GAO Did This Study
As of June 2017, BOP was responsible for the custody and care—including health care—of about 154,000 inmates housed in BOP institutions. Health care includes medical, dental, and psychological treatment. BOP provides most care inside its institutions, but transports inmates outside when circumstances warrant. GAO was asked to review health care costs at BOP institutions.

This report addresses: (1) BOP’s costs to provide health care services and factors that affect costs; (2) the extent to which BOP has data to help control health care costs; and (3) the extent to which BOP has planned and implemented cost control efforts.

GAO analyzed BOP health care obligations data for fiscal years 2009 through 2016, gathered information on BOP’s health care cost control initiatives through a data collection instrument, and reviewed BOP’s health care related strategic plans. GAO also interviewed BOP officials and visited 10 BOP institutions, selected in part, for total and per capita medical services costs. ….

Does Benchmarking Encourage Improvement or Convergence? Evaluating North Carolina’s Fiscal Benchmarking Tool

Source: Ed Gerrish, Thomas Luke Spreen, Journal of Public Administration Research and Theory, Advance articles, Published: 19 July 2017
(subscription required)

From the abstract:
Several states monitor the fiscal health of their local governments by “benchmarking” them—using a suite of financial indicators to track performance over time. Benchmarking of public organizations can facilitate performance management, leading to the spread of best practices and improved organizational performance. It is also possible that benchmarking, absent other performance routines, could create isomorphic pressures that encourage local governments to adopt policies that converge performance or financial indicators towards the group mean. This article tests these hypotheses using the introduction of North Carolina’s financial benchmarking tool in 2010. We construct a panel of the 14 indicators used to assess and compare the financial positions of North Carolina county and municipal governments from fiscal year 2008 to 2014. We find support for isomorphism as the dispersion of several indicators declined in the post-implementation period without offsetting beneficial changes in the mean indicator value. These findings pose a dilemma for the quantitative evaluation of both benchmarking and performance management systems; could offsetting changes result in null findings at the mean of the distribution?

Is Congress’ plan to save Puerto Rico working?

Source: Edwin Meléndez, The Conversation, July 31, 2017

A year ago, Congress cobbled together a plan to try to save Puerto Rico from its US$123 billion debt and pension crisis without costing American taxpayers a penny.

The law, signed by former President Barack Obama on June 30, 2016, effectively steered Puerto Rico into bankruptcy-like proceedings in federal court to prevent a massive default, while saddling the commmonwealth with an oversight board to ensure it put its fiscal house in order. ….

…. [H]as the law – known by the acronym PROMESA – lived up to its promise to “create the necessary foundation for economic growth and to restore opportunity to the people of Puerto Rico”? ….

Pennsylvania’s hybrid plan seen as falling short

Source: James Comtois, Pensions & Investments, July 24, 2017

After many fits and false starts to pension reform, Pennsylvania’s governor has a signed a measure that establishes a hybrid defined benefit/defined contribution plan for new state employees. Although some industry observers believe the new law is a step in the right direction, several others said the switch to a hybrid DB/DC plan does little — if anything — to solve the state’s core underfunding problem…..

…. Both Ms. Childers and Ms. Oakley cited West Virginia and Alaska as two states that decided to switch to a DC plan from a DB plan for state employees — and it didn’t go well for either. In 1991, West Virginia closed its teacher retirement system to new employees to address its underfunding issue, according to a 2016 NIRS survey shared by Ms. Oakley. After 10 years, the replacement DC plan was costing the state twice as much, so it went back to a pension. ….

Infrastructure Default and Recovery Rates, 1983-2016

Source: Moody’s, Data Report, July 27, 2017
(subscription required)

This study is an update to our previous publication, “Infrastructure Default and Recovery Rates, 1983-2015,” published in July 2016, and focuses on the credit and ratings performance of Moody’s-rated infrastructure securities from 1983-2016. We first characterize the infrastructure universe on the basis of its regional and sectoral distributions, overall default and credit loss rates, ratings distribution, and ratings stability. We then compare the ratings performance of the infrastructure universe vis-à-vis non-financial corporate (NFC) issuers by examining migration rates, default and credit loss rates by rating as well as rating accuracy metrics. Appendix 4 examines the performance of the infrastructure universe over the past ten years, i.e., 2007-2016.

Redefining Economic Development Performance Indicators for a Field in Transition

Source: Center for Regional Economic Competitiveness (CREC), July 2017

…State economic development leaders have embraced the need to report program outcomes to demonstrate the impact of their efforts but seek better indicators to measure those outcomes. This paper, Redefining Economic Development Performance Indicators for a Field in Transition, identifies a set of metrics beyond jobs and investment tallies to capture the broader benefits of economic development initiatives. This effort reflects an ongoing transition within economic development as the field moves from a recession-driven emphasis on job creation via business attraction and retention to a focus on wealth generation and asset building, especially among communities that have not enjoyed the benefits of economic recovery. Accordingly, this paper examines metrics that capture a wider approach to economic development by focusing on indicators related to job quality/worker prosperity and business dynamics….