Category Archives: State & Local Finance

Local government – New York – Credit profiles will remain stable overall, though vary by municipality type, region

Source: Robert Weber, Thomas Jacobs, Moody’s, Sector In-Depth, Local government – New York, June 28, 2019
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Credit profiles among New York local governments will remain stable over the next two years, though their strength will vary by type of municipality. Cities will remain more stressed than villages and towns because of their below-average socioeconomic profiles and small tax bases relative to liabilities. Towns and villages will enjoy greater stability because of stronger wealth and income profiles and financial reserves…..

See Where Teachers Got Pay Raises This Year – Protests across the country swayed governors to push for salary bumps

Source: Daarel Burnette II & Madeline Will, Education Week, Vol. 38 Issue 36, Published in Print: June 19, 2019

More than a year after teachers across the country began walking out of their classrooms en masse to demand higher salaries, at least 15 states have given their teachers a raise.

And lawmakers in several more states are putting the final touches on plans to raise teacher salaries, according to an Education Week analysis…..

….Here’s what you need to know about each state’s plan (as of June 17) to raise teacher pay. (The average teacher salary for each state reflects the National Education Association’s estimate for the 2018-19 school year, which would not include these raises.)

Click a state in the dropdown to jump to that section: ….

A Huge Tax Break Went to a Politically Connected Company in New Jersey Despite Red Flags

Source: Jeff Pillets and Nancy Solomon, WNYC, and Alex Mierjeski, ProPublica June 26, 2019

….Generous tax breaks from New Jersey’s new economic development program, he argued, could place Camden “on a level playing field” with Holtec’s other suitors. In return, the firm pledged the retention of 160 jobs and the creation of an additional 235 positions. Six months later, the EDA awarded the company $260 million in taxpayer assistance — the second-largest tax break in state history.

What Holtec didn’t reveal, though, was that just weeks before filing its application in New Jersey, Ohio had stripped the company of tax credits there for failing to create the jobs it had promised as part of a similar program. According to records obtained by WNYC and ProPublica, none of the 200 positions it had pledged in 2009 to bring to Orrville, a small town about 20 miles outside Akron, ever materialized….

Fiscal Survey of the States – Spring 2019

Source: National Association of State Budget Officers, June 2019

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.

Governors’ recommended budgets for fiscal 2020 reflect stable state fiscal conditions, calling for investments in key priorities while saving for future challenges. Proposed spending plans would increase general fund expenditures by 3.7 percent in fiscal 2020, with 47 states proposing spending increases and governors directing the majority of new money to education.
Other key findings from the report:
– Governors proposed appropriation increases totaling $30.8 billion in fiscal 2020, including $14.1 billion in new money for K-12 education and $3.6 billion for higher education.
– States estimate general fund spending grew 5.8 percent in fiscal 2019, the fastest annual growth rate since fiscal 2007.
– No states made mid-year budget cuts in fiscal 2019 due to a revenue shortfall, and only 3 states made small mid-year reductions for other reasons.
– 28 states reported fiscal 2019 general fund revenue collections exceeding projections, with this number expected to grow after accounting for April receipts.
– Governors’ budgets are based on forecasted general fund revenue growth of 4.0 percent in fiscal 2020.
– Governors proposed a series of revenue actions consisting mostly of tax increases, including a number of proposals directed towards transportation, with a net revenue impact of $8.1 billion in fiscal 2020.
– The median rainy day fund balance as a share of general fund spending reached 7.5 percent in fiscal 2019, a new all-time high.
– Medicaid spending from all funds is expected to grow 4.0 percent in fiscal 2020, with state funds increasing 3.1 percent and federal funds growing 4.5 percent.

Kansas (State of) – Retained pension funding, vetoed tax relief are credit positive

Source: Matthew Butler, Moody’s, Issuer Comment, June 6, 2019
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On May 29, the Kansas legislature voted to override several spending vetoes that Governor Laura Kelly made when she authorized the state’s fiscal 2020 budget. One of the vetoes was of a supplemental payment to the Kansas Public Employees Retirement System (KPERS). The lawmakers’ action preserves a $51 million supplemental contribution to KPERS, a credit positive for the state. At the same time, the legislature failed to override a veto of an income tax relief bill that would have cost the state an estimated $240 million over three years. This is also credit positive, because it reduces the amount of budget reserves Kansas will use to make the supplemental pension payment, increase school funding and more quickly retire an internal loan.

The Great Recession’s Lingering Impact

Source: Rick Seltzer, inside Higher Ed, June 5, 2019

States and the public colleges they fund continue to feel the economic downturn’s effects, even after a decade of recovery, according to a new report that gives a sobering look at state funding.

‘Lost Decade’ Casts a Post-Recession Shadow on State Finances
Source: Pew Charitable Trusts, Issue Brief, June 4, 2019

Despite almost 10 years of national economic recovery, strains from the 2007-09 downturn still linger in many states

Evading the Catastrophic Costs of Nursing Home Care: A Theoretical Inquiry

Source: Gideon Yaniv, Public Finance Review, Volume: 47 issue: 4, July 2019
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From the abstract:
While many countries operate publicly funded programs to help care-needing elderly people finance the catastrophic costs of nursing home care, eligibility to public assistance may be means tested. To qualify for a means-tested program, applicants must first exhaust (spend down) their financial assets on privately paying for nursing home care, thereby wiping out their lifetime savings and children’s inheritance. They may naturally consider the possibility of hiding assets from the health agency, consequently shifting the financial burden to taxpayers. The present article adjusts two classical tax evasion models to capture the decision to evade the costs of nursing home care, focusing on the implications on the evaded costs and the program’s deficit of attempting to cope with the escalating costs of nursing home care by imposing a cost-sharing premium on the applicants’ adult children. Some insights on the socially optimal level of the cost-sharing premium are finally discussed.

2018 Annual U.S. Public Finance Default Study And Rating Transitions

Source: S&P Global Ratings, May 31, 2019
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– After rising for three straight years, the number of U.S. public finance (USPF) defaults fell to one in 2018 from 20 in 2017.
– In 2018, S&P Global Ratings raised its ratings on 1,427 USPF bonds and lowered 684.
– Local government, state government, utilities, and transportation had more upgrades than downgrades in 2018.
– Housing, higher education, health care, and charter schools had more downgrades than upgrades in 2018: This was the third consecutive year of negative rating trends for health care and housing and the eighth for charter schools.
– USPF ratings performance has been consistent with historical default trends, even at different time horizons. From 1986-2018, the one-, three-, five-, and 10-year average Gini coefficients were 94%, 87%, 81%, and 74%, respectively, when excluding housing. Gini values including housing were not as strong but still stable, with a one-year coefficient of 87%.

U.S. States Take Advantage Of A Prolonged Economic Expansion

Source: S&P Global Ratings, May 16, 2019
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– Consistent with a prolonged national economic expansion, overall state credit quality remains high.
– Even oil- and gas-reliant states have shown recent gains.
– Most states forecast improvement in fiscal 2019 fund balances, and preliminary indications are that April income tax collections will be strong.
– Most states project to build or maintain reserves in fiscal 2020, despite cautious revenue projections.
– Some states propose raising top taxpayers’ income taxes; others will increase gas taxes; and marijuana, sugary drinks, and plastics bags might become the new “sin” tax targets.
– Other state budgets will include funding for education, workforce development, and infrastructure.