Category Archives: State & Local Finance

Mandatory Reentry Supervision – Evaluating the Kentucky Experience

Source: Pew Charitable Trusts, Issue Brief, June 2014

From the overview: http://www.pewstates.org/research/analysis/mandatory-reentry-supervision-85899546028
In 2011, the Kentucky Legislature passed the Public Safety and Offender Accountability Act (HB 463), which sought to earn a greater public safety return on the state’s corrections spending. The historic measure included a mandatory reentry supervision policy that required every inmate to undergo a period of post-release supervision so that no inmates would be released from prison to communities without monitoring or support.

This brief summarizes recent state corrections data and an independent evaluation of the policy commissioned by The Pew Charitable Trusts, which found that mandatory reentry supervision:
∙ improved public safety by helping reduce new offense rates by 30 percent.
∙ resulted in a net savings of approximately 872 prison beds per year.
∙ saved more than $29 million in the 27 months after the policy took effect.

Libraries See Light After Years of Cuts

Source: Marsha Mercer, Stateline.org, June 4, 2014

…Buffeted by financial and cultural pressures, public libraries around the country are struggling to remain relevant and connect with patrons in the high-cost digital age. States, never a deep pocket for public libraries, have cut or even zeroed out aid, forcing libraries to rely more heavily on local funds. …

… Overall, states slashed funding to public libraries 37.6 percent from fiscal 2001 to 2010, from $1.28 billion to $799.4 million, the Institute of Museum and Library Services reported in a survey for fiscal 2010 which was released in January. The institute is the primary source of federal funds to libraries and museums. (See the institute’s 50-state interactive here.)

Meanwhile, local revenue dedicated to libraries grew 23.5 percent over the 10 years, from $7.76 billion in 2001 to $9.59 billion in 2010.

States provide only about 7.5 percent of operating revenue for public libraries; local governments shoulder 85 percent. Gifts, fines, fees and grants contribute about 7 percent and the federal government just 0.5 percent, according to the institute.

States that fail to support their public libraries risk losing federal Library Services and Technology Act grants, which are part of the 0.5 percent federal contribution. ….

Central Falls Retirees v. Bondholders: Assessing Fear of Contagion in Chapter 9 Proceedings

Source: Maria O’Brien Hylton, Boston University School of Law, Public Law Research Paper No. 14-21, May 9, 2014

From the abstract:
Modern Chapter 9 litigation has been characterized by extraordinary protections for municipal bondholders, and Central Falls is no exception. Although not well understood by politicians, fear of contagion has encouraged the adoption of legal arrangements that have limited the bankruptcy courts’ ability to include bondholders in the cost of restructuring municipal debt. This preference for bondholders (and, by extension, their insurers) has meant increased misery for taxpayers and retirees. Given that all of these actors appear to have been complicit to some degree in the creation and maintenance of the fiscally imprudent conditions that triggered bankruptcy and that evidence of true contagion is modest, it is hard to justify special protections for bondholders.

School librarians a rare find in California public schools

Source: Lillian Mongeau, EdSource, May 26, 2014

…California employed 804 school librarians in 2012-13, which translates to one certified school librarian for every 7,784 students in 2012-13, according to data from the California Department of Education. That is the lowest per-student ratio of any state in the country. The national average in the fall of 2011, the most recent year for which data is available, was one school librarian for every 1,022 students, according to The National Center for Education Statistics. The lack of certified librarians has led to a decrease in student access to books, a decline in student research skills and the loss of an important resource for teachers, said Janice See-Gilmore, president of the California School Library Association….Beginning in 2009, the funding set aside for libraries became “flexible,” meaning it could be spent on other priorities as districts scrambled to slash their budgets during the recession. Many districts now employ only one teacher librarian who oversees all the libraries in the district….

The 7 Deadly Sins of Public Finance

Source: Liz Farmer, Governing, June 2014

This is part of the ongoing Finance 101 series that breaks down the basics of public finance for public officials.

There’s no sure-fire way to get fiscal policy right. But there are a few simple ways to get it disastrously wrong.

The temptation of the quick fiscal fix has seduced just about every lawmaker at one time or another. Scraping pennies together to balance the budget? Perhaps skipping a contribution to the public employee pension plan is the best way to get through the year. Can’t afford to pay for building maintenance? Push some of it off into the following year’s liabilities. Governments have been using these and other money-shuffling tricks since balanced budgets and municipal financing were invented. But in the aftermath of the Great Recession, short-sighted gimmicks like these became more common as governments looked for any solution to combat dwindling revenues. Revenue is back up now in most places, but some of the fiscal trickery has hardened into common practice….

What follows is Governing’s list of the most tempting financial schemes that can severely weaken a government’s fiscal future when practiced as a matter of course. Although the consequences aren’t necessarily lethal, those that make heavy use of these 7 Sins of Public Finance find that they only succeed in digging deeper financial holes.

1. Balancing the Budget with One-Time Fixes ….
2. Ignoring the Long-Term Consequences of a Deal ….
3. Taking on Too Much ….
4. Misapplying a Temporary Windfall ….
5. Shortchanging Pension Obligations ….
6. Making Unrealistic Projections About Rate of Return ….
7. Ignoring Financial Checks and Balances ….

Infrastructure 2014: Shaping the Competitive City

Source: Colin Galloway, Rachel MacCleery, Urban Land Institute, EY, 2014

From the summary:
Infrastructure 2014, based on a survey of approximately 440 top public and
real estate leaders from around the world, assesses the role of infrastructure
in supporting and attracting metropolitan real estate investment and supporting urban prosperity, and identifies key infrastructure investment priorities and bottlenecks.

Among the findings in Infrastructure 2014:
∙ Good infrastructure is a key driver of where real estate investment dollars go;
∙ Improving the quality of public transit, roads and bridges, and pedestrian infrastructure is among survey respondents’ highest priorities;
∙ The public’s willingness to pay for infrastructure is a top factor that will shape infrastructure over the next decade;
∙ Funding and financing for infrastructure are seen as resting on cooperation between developers and local governments; and
∙ Long-term maintenance and operations of infrastructure are oft-neglected considerations, and concern public and private leaders alike.

Capital Budgeting in the States

Source: Michael Streepey, National Association of State Budget Officers, Spring 2014

From the summary:
State governments play a central role in building and maintaining the nation’s infrastructure. Financial decisions for infrastructure, or capital projects, impact public assets such as roads, bridges, university buildings, prisons, water resources and more. Investments in infrastructure are complex and require significant resource commitments and organizational planning. The additional considerations inherent to capital goods require different budgetary plans, concepts and practices, from those used to prioritize spending on day-to-day expenses. This report delivers state-by-state comparative information on the ways budget officers develop and implement capital spending plans.

After several years of slow recovery, states have shifted some of their focus from immediate budgetary pressures to long-term structural challenges like infrastructure. This report delivers information such as:
– how states make decisions to invest in new facilities or maintain old ones;
– ways states distinguish infrastructure spending from day to day operating expenses;
– criteria for project financing strategies and options for funding infrastructure;
– efforts to mitigate fiscal risks from debt issuance, and more.

Examples of Report Findings
– Transportation is not included in the capital budget: 19 states.
– The definition of infrastructure is being broadened to include technology: 29 states include information technology in the capital budget;
– Many states are still directly investing in university infrastructure: 26 states fund higher education capital projects with general fund dollars;
– Citizen involvement in capital infrastructure can vary: In 19 states, only voters can approve general obligation debt issuance.
– Projects are required to have an estimate of fiscal impact on future operating budgets: 43 states.

As states continue to face budgetary constraints, capital budgeting and prioritization of capital needs will continue to remain important for future infrastructure investments.

Swapping Our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street Profits

Source: Charlie Eaton, Jacob Habinek, Mukul Kumar, Tamera Lee Stover, Alex Roehrkasse, and Jeremy Thompson, Debt & Society, 2014

This report examines the role of interest rate swaps in the University of California’s massive expansion of borrowing from Wall Street over the last decade. The report highlights the costs to students and taxpayers of UC’s interest rate swaps and debt-driven profit strategies. Such strategies have been called into question for Wall Street banks, let alone for public universities. Based upon our findings, we offer recommendations regarding renegotiation of UC’s interest rate swaps and the governance practices for UC’s overall borrowing program. …

Borrowing Against the Future – The Hidden Costs of Financing U.S. Higher Education

Source: Charlie Eaton, Cyrus Dioun, Daniela García Santibáñez Godoy, Adam Goldstein, Jacob Habinek and Robert Osley-Thomas, Debt & Society, 2014

…In recent years, students’ families and colleges have increasingly sought capital from three main financial markets. Public colleges faced declining state appropriations, and the average cost of tuition, room, and board increased much faster than grant aid for needy students. This pushed families to borrow increasing amounts from student loan markets to pay for college costs. Private and public colleges increased institutional borrowing, particularly from municipal bond markets for capital projects. And the rapid growth of for-profit colleges was fueled by equity investors that provided them with capital. All of this financing comes at great cost, in the form of either interest payments or profits earned to satisfy equity investors.

In this report, we estimate – for the first time – the total cost to the American higher education system of reliance on capital from each of these markets. The report covers the years for 2002 to 2012 – the only years for which adequate data are available. For student loans, we estimate the total interest paid annually on all outstanding student loans — both private and federal. For institutional borrowing, we describe total interest payments on college and university debts — the largest share of which went to funding amenities. In the case of for-profit colleges with capital from equity markets, we estimate the costs to students and taxpayers of profits made by these institutions —and the vast share of revenue they brought in from federal student aid programs — to satisfy stock shareholders and private equity investors. Except where noted, our estimates cover all colleges that received federal Higher Education Act Title IV funds and granted two-year, four-year, or graduate degrees between 2002 and 2012….

Criminal Justice Consensus Cost-Benefit Working Group – Final Report: A Study Commissioned By Act No. 61 2013-2014 Legislative Session State Of Vermont

Source: The Vermont Center for Justice Research, April 2014

Pursuant to Act 61 this project had the following goals: 1) determine the costs of the criminal and juvenile justice system including costs to victims; 2) develop “Throughput Models” of the criminal justice system to identify how cases proceed through the system and to serve as a tool to assess the costs of policy changes; 3) analyze the cost benefits of the Bennington County Integrated Domestic Violence Docket Project using the Results First Model; 4) assess the quality of justice data collection systems for the purpose of conducting cost -benefit analysis; and 5) investigate the need for and the most appropriate entity within state government to manage an ongoing criminal justice cost benefit model.

Given that the project was limited to approximately six months, the results reported in this report should be viewed more as a proof of concept than as a final product. All of the objectives set forth in Act 61 were accomplished. In some cases, however, costs associated with particularly complicated or highly-specific criminal and juvenile justice activities were more loosely estimated or left unaddressed than would have been the case if there had been a longer study period. With that caveat in mind, the report provides a wealth of information regarding criminal and juvenile justice costs and provides a firm foundation on which to base additional analysis.