Third quarter 2018 combined tax revenues for Property, Sales and Gross Receipts, and Income Taxes increased 4.6 percent to $320.9 billion from $306.7 billion in the same quarter of 2017.
Source: S&P Global Ratings, December 3, 2018
Michigan local government units, including municipalities, counties, and school districts, have demonstrated relatively stable credit quality over the past year.
Source: S&P Global Ratings, December 17, 2018
Last week a federal judge in Texas struck down the Affordable Care Act as unconstitutional in a lawsuit brought by 20 state attorneys general. In S&P Global Ratings’ view, if this ruling is not overturned the credit quality of many health care providers, insurers, and states could be hurt….
Source: S&P Global Ratings, December 12, 2018
New Jersey municipalities and counties find themselves in an uncertain position. They could face a large hike in pension costs should the state not follow the current schedule of increasing pension contributions.
Source: S&P Global Ratings, December 13, 2018
S&P Global Ratings’ U.S. public finance team continues to highlight key pension and other postemployment benefit (OPEB) trends. In 2018, our research has provided comprehensive national and regional insight on these obligations and rising governmental costs to inform a forward-looking view on credit risk. In case you missed them, we have compiled a list of research reports published in 2018 on these topics.
Source: S&P Global Ratings, December 17, 2018
The economic recovery in the U.S. hit a turning point in 2018, starting its tenth year and becoming the second longest on record. The recovery has not broken any records for speed, however, and the slow pace has been a significant factor for credit conditions in U.S. public finance. The economic expansion in 2018 has been an anomaly with a surge in growth driven largely by tax reform and federal spending.
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 fiscal conditions continue to show signs of improvement and greater stability. According to enacted budgets, state general fund spending is expected to grow 4.3 percent in fiscal 2019 compared to fiscal 2018 levels, with all program areas seeing increases in appropriations.
Other key findings from the report:
– States enacted appropriation increases for fiscal 2019 totaling $41.1 billion across all program areas, compared to just $12.7 billion in new appropriations enacted in their fiscal 2018 budgets one year prior.
– Only 7 states made mid-year budget cuts due to a shortfall in fiscal 2018, totaling $456 million.
– General fund revenues grew a robust 6.4 percent in fiscal 2018, led by a 9.8 percent increase in personal income tax collections.
– 40 states saw general fund revenue collections come in higher than budget projections in fiscal 2018, the highest number of states to do so since fiscal 2006.
– General fund revenues are projected to grow 2.1 percent in fiscal 2019 based on forecasts used to enact state budgets, with a median growth rate of 2.3 percent.
– States enacted a mostly modest mix of tax increases and decreases, many in response to the federal tax law, with a net estimated revenue impact of +$3.1 billion in fiscal 2019.
– States continue to strengthen their reserves, with the median rainy day fund balance as a share of general fund spending expected to rise to 7.3 percent in fiscal 2019, from a recent low of 1.6 percent in fiscal 2010.
Source: David Levett, Rachel Cortez, Alexandra S. Parker, Moody’s, U.S. Public Finance, Sector In-Depth, December 14, 2018
Heavy pension burdens have weakened credit quality for many Illinois cities in recent years, but some Illinois municipalities have maintained exceptional credit profiles. Such cities typically have drawn on their strong legal revenue-raising flexibility and high median family incomes (MFI) to support increased pension contributions while maintaining strong reserves. However, credit quality could deteriorate for even these cities if they do not continue to absorb growing pension contributions and keep already high unfunded liabilities in check…..
From the summary:
What’s the prognosis for the fiscal health of state and local governments across the nation?
Our annual outlook suggests the sector will have an increasingly tough time covering their bills over the next 50 years. Our model shows both revenue and spending will increase; however, spending will rise faster. Revenues may be insufficient to sustain the amount of government service currently provided.
Our model also suggests health care costs will largely drive the spending increases—in particular, Medicaid spending and spending on health benefits for state and local government employees and retirees.
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