Category Archives: State & Local Finance

States Face Two Immediate Financial Issues: Short-Term Borrowing And Big Budget Deficits

Source: Nicholas Johnson, Center on Budget and Policy Priorities, October 7, 2008

From the summary:
States face two distinct financial problems right now. First, California and Massachusetts officials last week raised concerns about their states’ ability to access credit markets for short-term borrowing. Second, most states have been facing budget deficits that have forced, or are now forcing, them to raise taxes, cut spending, or do both to balance their budgets.

These issues are serious, but they are distinct from one another. To better understand them, and to understand what the federal government should do to resolve them, we should take a closer look at each.

Votes Count: Legislative Action on Pre-K Fiscal Year 2009

Source: Jennifer V. Doctors, Pre-K Now, September 2008

In spite of worsening economic conditions across the country, the majority of states stood firm in their commitment to investing in pre-kindergarten programs, according to “Votes Count: Legislative Action on Pre-K Fiscal Year 2009,” a state-by-state analysis of pre-k funding released by Pre-K Now with support from The Pew Charitable Trusts. This year’s “Votes Count” also unveils a new list of the places families would have the best and worst chances of enrolling their children in a high-quality, state-funded pre-k program; ten states make the notable lists.

State Budget Troubles Worsen

Source: Elizabeth McNichol and Iris J. Lav, Center on Budget and Policy Priorities, September 26, 2008

From the summary:
New gaps have opened up in the budgets of at least 15 states plus the District of Columbia just two months after they struggled to close the largest budget shortfalls seen since the recession of 2001. These 15 states include more than half of the 29 states that have already moved to cut spending, use reserves, or raise revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again.

Current estimates are that these mid-year gaps total $5.9 billion — 3 percent of the budgets of the eleven states that have estimated the size of the gap — but they will almost certainly widen as the continuing economic turmoil causes revenues to come in below estimates in more states.
See also:
Facing Deficits, Many States Are Imposing Cuts That Hurt Vulnerable Residents

Federal Spending Increased 4.4 Percent in 2007

Source: U.S. Census Bureau, Press release, CB08-146, October 2, 2008

The federal government allocated $2.56 trillion in domestic spending for fiscal year 2007, up 4.4 percent from the prior year, according to the U.S. Census Bureau. This and additional important information on federal funding is included in two new reports being released today. The Consolidated Federal Funds Report: 2007 provides a broad overview of how and where the federal government distributes funds. Statistics are broken out by federal department and agency, as well as by state, county and subcounty area. The second report, Federal Aid to States for Fiscal Year 2007, contains data on federal grants to state and local governments.

Retirement and disability payments to individuals accounted for $783 billion (more than 30 percent) of total federal spending. Of that amount, 80 percent, or $623 billion, went to Social Security recipients. Social Security was composed of retirement insurance payments ($369 billion), survivors insurance ($113 billion), disability insurance ($105 billion) and supplemental security income payments ($36 billion).

Nearly half of all domestic government spending (excluding interest on the federal debt) went to Social Security, Medicare and Medicaid, accounting for $1.22 trillion. The one-year increase in spending for these three programs was approximately $198 for every person in the United States.

Rhode Island’s Remarkable Tax Credit Disclosure Report

Source: Citizens for Tax Justice, Tax Justice Digest, September 22, 2008

Last week, Rhode Island’s Department of Revenue Division of Taxation released a study detailing the tax credits and incentives that nearly 120 companies operating in Rhode Island received over the past year. The report is a result of recent disclosure legislation intended to reveal to the public and policymakers just how much money Rhode Island corporations receive. The release of the report is quite timely as lawmakers are coming to terms with a projected shortfall and may dip into the state’s rainy day fund. The disclosure legislation required the state “to annually report the names, address and amount of tax credits received during the previous fiscal year.”

Wage Enforcement Can Be a Revenue Raiser for Strapped State Budgets

Source: Progressive States Network, Stateside Dispatch, September 22, 2008

One reason for this trend towards wage enforcement is that state governments lose billions of dollars in revenue each year by failing to enforce state wage laws. Instead of spending state money on costly, wasteful local enforcement of immigration laws, stepped up enforcement of wage laws will more than pay for itself. For example, a February 2007 report by Cornell University researchers estimated that 704,000 of the seven million private-sector workers in New York state were misclassified as independent contractors, costing the state $175 million in unemployment insurance taxes each year and undermining those workers’ rights. Another study by New York’s Fiscal Policy Institute estimated that due to off-the-book wage payment violations, the state was losing $26 million in unpaid income taxes in the construction industry alone.
See also:
Cornell University Institute for Labor Relations, The Cost of Worker Misclassification in New York State
California, 2007 Fraud Deterrence and Detection Activities report
2006 Fraud Deterrence and Detection Activities report
National Employment Law Project, Combating Independent Contractor Misclassification in the States

Projections of Education Statistics to 2017

Source: William J Hussar and Tabitha M. Bailey, National Center for Education Statistics, NCES 2008078, September 17, 2008

From the summary:
This publication provides projections for key education statistics. It includes statistics on enrollment, graduates, teachers, and expenditures in elementary and secondary schools, and enrollment and earned degrees conferred expenditures of degree-granting institutions. For the Nation, the tables, figures, and text contain data on enrollment, teachers, graduates, and expenditures for the past 14 years and projections to the year 2017. For the 50 States and the District of Columbia, the tables, figures, and text contain data on projections of public elementary and secondary enrollment and public high school graduates to the year 2017. In addition, the report includes a methodology section describing models and assumptions used to develop national and state-level projections.

Medicaid Medical Management: A Potential Savings for States Facing a Budget Crunch

Source: Paul H. Keckley and Howard Underwood, Deloitte LLP, 2008

From the summary:
Medicaid is facing difficult times. Enrollments are climbing, costs are soaring, enrollee health problems are more complex and providers who will agree to treat them are rapidly disappearing.

Today Medicaid is a $340 billion program that covers 62 million Americans and, at 22 percent, is the single largest expense category in state fiscal budgets.

If left unchecked, rising Medicaid costs will likely divert investments in education, general services, infrastructure and employee compensation. But what can policymakers and other stakeholders do to prevent the single-largest expense category on their state fiscal budget from getting even larger?

Medicaid Medical Management: A Complex Challenge for States, a new study by the Deloitte Center for Health Solutions, part of Deloitte LLP, provides a strategic view of one critical aspect of Medicaid oversight that offers savings potential while also improving the quality of health services provided to enrollees – medical management programs.

This report explores several ways in which states can use Medicaid medical management to control their Medicaid costs. Leading practices encompass two main categories: Clinical Population Care Management and Administrative Medical Management.

Thinking Outside The Hospice: States Look To Expand Palliative Care Services

Source: Matthew Gever, State Health Notes, Volume 29, Issue 524, September 29, 2008

Historically, palliative care has been seen as the provision of comfort for the terminally ill and those closest to death. In the last decade, however, palliative care has evolved and is now an approach that tries to improve the quality of life of patients and their families facing the problems associated with life-threatening illnesses. Along with helping patients and their families cope, palliative care may also offer some cost savings for states.

Districts’ Borrowing May Face Hit From Continued Financial Crisis

Source: Michele McNeil, Education Week, Vol. 28, Issue 06, September 24, 2008

Even as federal officials and members of Congress struggled this week over a rescue plan for troubled portions of the nation’s financial sector, states and school districts braced for ripple effects that could further threaten their stressed budgets.

The situation could have its biggest long-term impact on districts’ capital projects, as the upheaval in the credit and stock markets threatens to drive up the cost of borrowing money.