Category Archives: State & Local Finance

Kansas Provides Compelling Evidence of Failure of “Supply-Side” Tax Cuts

Source: Michael Mazerov, Center on Budget and Policy Priorities, January 22, 2018

from the summary:
The deep income cuts that Kansas enacted in 2012 and 2013 for many business owners and other high-income Kansans failed to achieve their goal of boosting business formation and job creation, and lawmakers substantially repealed the tax cuts earlier this year. Former supporters have offered explanations for this failure to prevent the Kansas experience from discrediting “supply-side” economic strategies more broadly.  But the evidence does not support these explanations.  Rather, the Kansas experience adds to the already compelling evidence that cutting taxes does not improve state economic performance…..

Private Sector Financing: A Review of Service Delivery Models in Eight Communities

Source: Jeff Hughes, Lexi Kay Herndon, Journal – American Water Works Association, Volume / Number: 110, Number 1, January 2018
(subscription required)

From the abstract:
A study of private financing models in the water industry examines variations in implementation and design and whether outcomes differ from initial expectations.

Twenty-Five States Face Revenue Shortfalls in 2018

Source: Ryan Maness, MultiState blog, January 9, 2018

Twenty-five states are currently facing a revenue shortfall, which is a marked improvement over our report from last year, when 31 states were in deficit. New additions to this year’s list include Arizona, Florida, Kentucky, Minnesota, and New Jersey. Colorado, Delaware, Massachusetts, Mississippi, Montana, New Mexico, Virginia, and Washington have improved enough to drop off our 2018 list.

FAQ: Wide Differences in State Retiree Health Spending and Liabilities

Source: Moody’s, Sector In-Depth, December 19, 2017
(subscription required)

Retiree health benefits vary considerably among states. Despite generally greater legal flexibility to change these benefits compared to pensions, large liabilities and significant costs persist for some state employers who offer generous benefits. We do not expect new accounting rules to have a material impact on costs, but the new rules will facilitate probing credit risk, especially important for those issuers whose retiree benefits have stronger legal protections.

Adjustments to US State and Local Government Reported Pension Data

Source: Moody’s, December 19, 2017
(subscription required)

This cross-sector rating methodology replaces the Adjustments to US State and Local Government Reported Pension Data methodology published in April 2013. We have updated the description of our standard balance sheet adjustment and included a description of our standard income statement adjustment. Both of these reflect the implementation of Governmental Accounting Standards Board Statement 68 accounting standards, which requires adjustments that were not previously necessary. We have retired the concept of amortizing adjusted net pension liabilities on a level dollar basis over 20 years, a cost metric not included in any scorecards of primary rating methodologies. We have also added a description of how we calculate the “tread water” indicator….

Waking Up to Advocacy in a New Political Reality for Libraries

Source: Paul T. Jaeger, Erin Zerhusen, Ursula Gorham, Renee F. Hill, Natalie Greene Taylor, The Library Quarterly, Volume 87, Issue 4, October 2017
(subscription required)

From the abstract:
The engagement of the US federal government with libraries has been disjointed. Financial support for libraries has been controversial and inconsistent, and many policy decisions have directly affected library operations and activities, particularly those of public libraries. Libraries’ experiences with the federal government offer many lessons about the broad ideological attitude toward—and constraints on—library support before the 2016 election. These lessons have import for all public-sphere institutions as they navigate the even more complicated current environment. This article argues that the best hope for library funding and support is to concentrate efforts at the local and state levels, coordinating efforts and sharing ideas and resources across locations and types of institutions. A national advocacy strategy coordinated across the states will maximize advocacy efforts where we may have a greater chance of success.

Volatility in Income Tax, Continued Weakness in Sales Tax, Slower Growth in Property Tax

Source: Lucy Dadayan, State Revenue Report – Second Quarter 2017, Report #109, December 2017

State and local government tax revenues grew modestly in the second quarter of 2017, although revenues from state and local personal income taxes declined and continued to show significant swings from one quarter to the next. State sales taxes and corporate income taxes also increased in the second quarter, as did state motor fuel taxes, but state sales tax revenues still lagged behind rates of increases in previous economic expansions. Finally, local government property taxes grew, although their rate of growth slowed from recent trends…..

Economic Impacts of Recreational Cannabis Legalization: A Colorado Case Study

Source: Sarah Crane, Regional Financial Review, November 2017
(subscription required)

Legalization has spurred job creation in a number of industries in the production and sales process, as well as generated multiplier effects in related services and the broader Colorado economy. In addition, legal cannabis sales have generated sizable tax revenue for state and local governments.

Elimination of private activity bonds would have differing negative credit effects

Source: Moody’s, Sector Comment, December 17, 2017
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The proposed elimination of private activity bonds (PABs) as part of US tax reform would be credit negative for the public housing, healthcare, higher education, charter schools and infrastructure sectors. However, the severity of the impact would vary. Elimination of taxexempt PABs is included in the tax reform bill that passed the US House of Representatives on November 16, but it is not in the US Senate bill that passed December 2. The two bills are currently undergoing reconciliation in a congressional conference committee. The size of the PABs market is difficult to determine due to municipal bond classifications, but indications are the bonds accounted for approximately 25% to 35% of the $459 billion in municipal bonds sold in 2016. Substantial authorized PAB capacity currently exists, as the volume cap capacity of $97.4 billion at the end of 2016 was the largest ending volume cap capacity recorded since 2005…..