Category Archives: State & Local Finance

Credit Conditions: U.S. State And Local Government Credit Conditions Improve As Economic Growth Picks Up

Source: S&P Global Finance, July 26, 2018
(subscription required)

Midway through 2018, accelerating economic growth is providing a favorable near-term backdrop for credit conditions in the state and local government sectors. According to S&P Global Ratings’ updated baseline forecast, U.S. GDP is on a trajectory to expand by 3.0% in real terms in 2018….

Driven into Debt: How Tickets Burden the Poor

Source: ProPublica and WBEZ, 2018

Parking, traffic camera and vehicle tickets generate millions of dollars in desperately needed cash each year for the City of Chicago. But for the working poor, and particularly for African Americans, paying for tickets can be difficult — opening the door to more fines and fees, and spiraling debt. Drivers who don’t pay what they owe face tough punishments from the city and state that threaten their livelihoods.

Articles include:
Chicago Hiked the Cost of Vehicle City Sticker Violations to Boost Revenue. But It’s Driven More Low-Income, Black Motorists Into Debt.
Source: Melissa Sanchez, ProPublica, and Elliott Ramos, WBEZ July 26, 2018

Now, a former official regrets the move and wants the city to revisit it. Some policies, she said, are “terrible.”

How ProPublica Illinois and WBEZ Worked Together to Find Thousands of Duplicate Tickets in Chicago
Source: Melissa Sanchez, ProPublica, and Elliott Ramos, WBEZ July 6, 2018

We heard from you about how ticket debt, especially from $200 city sticker citations, has affected you. And we would like your help as we continue our reporting.

Three City Sticker Tickets on the Same Car in 90 Minutes?
Souce: Melissa Sanchez, ProPublica, and Elliott Ramos, WBEZ June 27, 2018

Chicago has issued 20,000 duplicate city sticker tickets since 2007. City officials are now looking at whether this violates a city ordinance and say motorists might be in for a refund.

Chicago Begins To Rethink How Bankruptcy Lawyers Get Paid
Source: Melissa Sanchez, ProPublica, May 9, 2018

Judges are demanding that lawyers tell their clients that their other debts might not get paid, but their lawyers will.

Some States No Longer Suspend Driver’s Licenses for Unpaid Fines. Will Illinois Join Them?
Source: Melissa Sanchez, ProPublica, March 15, 2018

Our analysis shows suspensions tied to ticket debt disproportionately affect motorists in largely black sections of Chicago and its suburbs.

She Owed $102,158.40 in Unpaid Tickets, but She’s Not in the Story
Source: Melissa Sanchez, ProPublica, March 2, 2018

Still, we want to tell you a little bit about her, and about some of the other people we interviewed, because they helped inform our ticket debt investigation.

How Chicago Ticket Debt Sends Black Motorists Into Bankruptcy
Source: Melissa Sanchez and Sandhya Kambhampati, ProPublica, February 27, 2018

A cash-strapped city employs punitive measures to collect from cash-strapped black residents — and lawyers benefit.

The Many Roads to Bankruptcy
Source: Melissa Sanchez, ProPublica, February 27, 2018

Here are some stories of Chicagoans driven into ticket debt.

Connecticut in Crisis: How inequality is paralyzing ‘America’s country club’

Source: Jared Bennett, Center for Public Integrity, July 25, 2018

The state is caught in an economic straitjacket and there’s no easy way out…..

…. Blue chip companies like General Electric have either left or are threatening to leave. A yawning budget deficit continues to loom over the state, amplified by some of the nation’s most glaring economic inequality. Greenwich, home to hedge funders and Manhattan corporate titans, and the Norman Rockwell suburbs of Westport, New Canaan and Darien share few priorities with Hartford, New Haven and Bridgeport, gritty cities struggling with searing poverty and fiscal disaster. Connecticut’s political leaders must choose between what seem like equally rotten options: cut services, and push more burden onto the urban poor, or hike taxes, and risk repelling both the suburban rich who pay much of the freight and new businesses that might consider moving here. Put simply, Connecticut is in a bind with precious little room to maneuver.

Connecticut’s troubles are extreme but hardly unique. The recovery that has entrenched Connecticut into the haves and have-nots has been unequal in other regions as well – from Florida to California and down to Texas. As the stock market climbs but wages remain relatively flat, the Constitution State serves as a troubling bellwether of national priorities that seem to favor wealth creation for the few before investments in the broader economy. ….

The Return-On-Investment from Your Public Library is Unbelievable!

Source: Oleg Kagan, EveryLibrary, July 17, 2018

If libraries were a business, you’d want to buy that stock.

Wise investors know a good deal when they see it, which is why so many people who are smart and rich love their public library. It’s simple, really, if you consider what the average U.S. household pays for library services (~$7.50/month) and put that next to a public library’s vast offerings, the point is obvious. For under ten dollars you get thousands of books, music, movies, wholesome activities for kids, very expensive market research databases, and a much, much more. But say you’re still not convinced that libraries are a smart investment. Okay, what if I tell you that over and over again research has shown that the Return-on-Investment (ROI) for your local library is around $5 (but could be up to $9), for every dollar spent. It’s true: for every dollar that communities invest in library services they get five back!….

Related:
Should We Replace Libraries with Amazon?
Source: EveryLibrary, July 22, 2018

Of course not. It’s a terrible idea.

So why did Forbes publish this article that made that horrendous suggestion?

We have no idea….

There are, of course, many problems with this idea. First of all, libraries cost the average American taxpayer over 18 years old just $4.50 per month. An Amazon Prime subscription alone is nearly double that price and you get very little for free with that subscription because you still have to buy books or pay more to gain access to premium goods or services. If you want audio books or eBooks on Amazon, you need to pay for an Audible subscription or Kindle unlimited ($10 a month or twice the cost of a library) but you can get that for free through Overdrive (Libby) at your local library. If you want newly released movies, you have to buy the premium Amazon channels or you can get those for free at your library. If you want access to premium music you have to pay another $7.99 a month on Amazon or you can use Freegal or Hoopla at your library for free. And, if you want magazines, you can just get those for free from your library with Zinio or PressReader……

cost of various library services compared to costs of Amazon services

Return on Investment for Public Libraries
Library Research Service
Public Libraries – A Wise Investment
Final Report

Individual Reports for Participating Libraries
Cortez Public Library
Denver Public Library
Douglas County Libraries
Eagle Valley Library District
Fort Morgan Public Library
Mesa County Public Library District
Montrose Library District
Rangeview Library District

Study-Related Information and Resources
Personal ROI Calculator
Calculate your individual estimated return on investment based on your personal library use

Library ROI Calculator https://www.lrs.org/public/roi/calculator.php
Calculate an estimated ROI for your library

CAL Presentation
PowerPoint presentation of “Public Libraries – A Wise Investment” from 2007 Colorado Association of Libraries Conference

Questions for Key Informants
Approaches to use for key informant interviews during the study

Kansas Supreme Court rules in favor of K-12 public schools, a credit positive for districts

Source: Denise Rappmund, Matthew Butler, Moody’s, Sector Comment, July 18, 2018
(subscription required)

On June 25, the Kansas Supreme Court ruled that the Kansas (Aa2 stable) state legislature’s latest K-12 public school funding bills still do not meet the state’s constitutional standards for adequately funding public education. This ruling is a credit positive for Kansas school districts because it will mean a modest amount of additional operational revenue to districts, on top of the $643.9 million in additional funding over the next five-year period covered by the legislature’s current funding plan. Further, the court has also stated that the current plan is to remain in temporary effect with a stay on the ruling through June 30, 2019, during which time the state will need to re-submit to the court a remedy that will bring funding up to state standards for student achievement.

Large, established toll road systems are better positioned for the next recession

Source: Maria Matesanz, Eriq Alexander, Kurt Krummenacker, Moody’s, Sector In-Depth, July 17, 2018
(subscription required)

Large road systems will experience more stable traffic and revenue trends in a recession than smaller or less well established systems, based on our analysis of their performance during and after the last recession. From a financial and operational standpoint, we expect larger toll roads to maintain steady traffic growth and performance with minimal negative credit effects associated with typical traffic and toll revenue drops seen during recessions. We define large, established toll roads as those that operate multiple assets and have been in operation more than 15 years….

Most states adopt timely fiscal 2019 budgets amid strong revenue growth

Source: Matthew Butler, Nicholas Samuels, Emily Raimes, Timothy Blake, Moody’s, Sector In-Depth, July 16, 2018
(subscription required)

Growth in state tax revenue was robust in fiscal 2018 and positioned many states to carry an operating surplus into fiscal 2019, which for all but four states began on July 1. Likely aided by the strong revenue performance, all but two states began fiscal 2019 with an adopted budget in place, which is a departure from the past few years when several states entered the new fiscal year without an enacted budget.

The “Privatization” of Municipal Debt

Source: Ivan T. Ivanov – Federal Reserve Board, Tom Zimmermann – University of Cologne, July 12, 2018, Paper prepared for: Brookings Municipal Finance Conference July 17, 2018

State and local governments in the U.S. have substantially increased their reliance on private bank loans in the aftermath of the Great Recession. Using loan-level data on bank lending to U.S. municipal governments, we document that these loans have high effective debt priority and are likely to allow borrowers additional debt capacity. Specifically, banks loans to municipalities are highly collateralized, include additional seniority and guarantee provisions, and have short maturities. Consistent with the idea that financially weak borrowers are more likely to resort to higher priority debt, banks’ assessments indicate a non-trivial fraction of municipal borrowers to be high risk. Last, we show that exogenous adverse income shocks lead to a significant increase in bank financing in the debt structure of municipalities. These results suggests that the reliance of municipalities on private debt is likely to increase in an environment of eroding fiscal positions.

Related:
View Ivanov’s slides
View MacNaught’s slides
Colin MacNaught (BondLink)

The Retail Sales Tax in a New Economy

Source: John L. Mikesell – Indiana University, Sharon N. Kioko – University of Washington, presented at the Brookings Institution’s 7th annual Municipal Finance Conference, July 16-17, 2018

For the second half of the 20th century, the retail sales tax was the largest single source of tax revenue to state government and the second largest source for local governments. Born out desperation during the Great Depression, the retail sales tax became the single largest source of tax revenue for the states by 1947. While consumption is an indispensable measure of household ability to pay, the U.S. retail sales tax fails to fully capture that measure in its taxable base. As a result, the tax is not economically neutral, horizontally equitable, robustly revenue-productive, or simple to collect. Since its adoption, political, social, and economic forces have created a tax that is both “too broad” or “too narrow”. We explore patterns of change and their impact on the retail sales tax. Specifically, we explore how changes in consumption, policy, and technology, particularly the internet, have made the retail sales tax less neutral, equitable, administrable, and productive. We also examine which policy options have been successful and what policy changes should be encouraged.

Related:
View Kioko’s slides
View Gordon’s slides
Tracy Gordon (Urban Institute)

Budget Processes and the Great Recession: How State Fiscal Institutions Shape Tax and Spending Decisions

Source: Kim Rueben, Megan Randall, Aravind Boddupalli, Urban Institute, July 16, 2018

As states enter the 2019 fiscal year, most have passed budgets on time and are finally logging tax revenues at pre-Great Recession levels, arguably exhibiting the highest degree of fiscal health since the recession’s 2009 trough. While many states have seen notable annual revenue growth over the last five years, in as recently as 2017 ten states struggled to pass a budget on time. In October, 2017, for example, Connecticut Gov. Dan Malloy approved the state’s two-year $40.2 billion budget more than 100 days after the fiscal year began. Representing a strong bipartisan effort, the package included spending cuts, new taxes and fees, and new fiscal controls meant to stabilize the state’s financial future. These controls included strengthening revenue and spending limits and specifying how money should be deposited into a rainy day fund – the assumption being that additional fiscal controls would help the state move toward a more sustainable fiscal path.

What evidence, however, shows that fiscal institutions, such as those adopted by CT, help states respond to unexpected fiscal or economic pressures? Following up on previous literature, new data and the magnitude of states’ fiscal challenges during the Great Recession make this an important time to reexamine the role of budget rules in determining state fiscal health and helping states weather fiscal uncertainty.

Related:
View Rueben’s slides
View Watkins’ slides
Ben Watkins (State Board of Administration, Florida)