Category Archives: State & Local Finance

States Worry About Dwindling Road Funds

Source: Stephen C. Fehr, Stateline.org, July 23, 2008

The two main sources of state transportation money are falling precipitously this summer as Americans cut back on driving, threatening to delay or halt crucial work on roads, rails and bridges and breeding an election-year issue for Congress and the presidential candidates.

Both the federal Highway Trust Fund and state road funds rely on federal and state taxes collected on each gallon of gasoline, but revenues are dropping because people are not buying as much gas now that prices top $4 a gallon. The slippage exacerbates a looming crisis with the $40 billion federal highway fund, already projected to run out of money before the start of the next budget year Oct. 1.
Includes graphs.

The True Cost of McCain’s Oil Industry Subsidies for Every State

Source: Ben Furnas, Daniel J. Weiss, Center for American Progress, August 11, 2008

Oil and gasoline prices are setting all-time records, helping the five biggest publicly traded oil companies in the world earn a staggering $148 billion in profits over the past year. At the same time, the U.S. government continues to provide massive subsidies to oil companies.

If elected, John McCain would preserve and create $39 billion in federal help to the oil and gas companies over the next five years. These same dollars could be better spent investing in efficiency and alternative sources of energy that would save American families money, create thousands of new jobs, and help to power millions of homes with clean, renewable sources of energy.

This report shows the state-by-state costs to taxpayers both in lost tax revenue and in lost opportunities to invest in renewable energy and create new jobs.

Latest IRS Data Reveal Fundamental Mismatches in the States

Source: Institute on Taxation and Economic Policy, August 2008

Most Unequal States Either Don’t Have a Personal Income Tax or Have One in Need of Improvement

Data released late last week by the Internal Revenue Service (IRS) indicate that 10 states have greater concentrations of reported income among their very wealthiest residents than the country as a whole. Unfortunately, the tax systems in those ten states generally ignore that very important reality. Of those ten states:
– four lack a broad-based personal income tax;
– three either impose a single, flat rate personal income tax or have a rate structure that all but functions in that manner; and
– three use a graduated rate structure, but two have cut income taxes for their most affluent residents substantially over the past two decades and are now struggling to close multi-billion dollar budget gaps.

The failure to use sufficiently progressive personal income taxes — or to levy any personal income tax at all — results in an overall tax system that is unsustainable, inadequate, and unfair over the long-run. Indeed, of these ten states, over half face severe or chronic budget shortfalls. Reforms to improve the personal income tax — or simply to institute one — should be on the agenda in each of these states.

Disentangling Preferences for Component Groups Within Medicaid: How State Governments Tradeoff Eligibility and Benefits

Source: Larry L. Howard, University of Houston – Department of Economics, January 2008

From the abstract:
This paper uses a panel of U.S. states over 20 years to examine state government demand for the provision of low income public health care through the Medicaid program. Reallocation of expenditure within the program and between other expenditure is modeled using the demand system developed in Deaton and Muellbauer (1980). I disaggregate the recipient population of Medicaid into distinct demographic groups consisting of the elderly, the disabled, and families, and estimate inter-group substitution patterns between the recipient and benefit dimensions of programmatic design. Several hypotheses of state government behavior are tested and the resulting estimates provide an important cautionary tale to major policy changes in public health care provision as significant cross price elasticities are found for all three of the component groups considered.

In this research I push to understand how state governments in the U.S. adjust their Medicaid programs in response to program cost increases, such as an increase in the number of recipients or in the cost of health care services. It is imperative to develop a clearer characterization of state response to budgetary pressure in order to accurately evaluate policies affecting public programs jointly administered by federal and state governments. This paper takes an important step towards quantifying the extent to which state governments reallocate expenditure when faced with cost increases, and shows that major changes in public health policy can have unintended consequences beyond legislative objectives.

Gloom & Boom

Source: Citizens for Tax Justice, Tax Justice Digest, July 25, 2008

States’ collective fiscal outlook appears to be quite dim and could get even darker in the months ahead according to a report released this week by the National Conference of State Legislators (NCSL). The report notes that, in the aggregate, states experienced a $40 billion budget gap for fiscal year 2009, a chasm that has been bridged largely through reductions in spending.

States Find Alternatives to Jail Produce Significant Savings

Source: Matthew Gever, State Health Notes, Volume 29, Issue 521, August 4, 2008

Cash-strapped states are reeling: the number of inmates in U.S. jails or prisons has reached a new high–230 million, or more than one in every 100 adults, according to a new report by the PEW Center on the States. In some states, corrections consumes more of the budget than Medicaid or education.

The increase is driven by a number of factors, including policies like “three strikes” and added jail time for sometimes minor parole violations. But the rise also is driven by high rates of recidivism among people convicted of substance abuse-related crimes such as driving while under the influence.

State Revenue Report

Source: Nelson A. Rockefeller Institute of Government, July 2008

State revenues slow yet again, and further weakening appears likely: Mid-year budget cuts may lie ahead.

According to a study released Thursday by The Rockefeller Institute of Government, revenue from lottery games accounted for about 8.9 percent of West Virginia’s internal state government revenues, topped only by Nevada’s 13.4 percent. By comparison, Ohio gambling revenues accounted for 1.9 percent of its own-source revenue. In Kentucky, the number was 1.5 percent.

The Equity Gap in State Funding

Source: Kevin Carey, Education Sector, April 14, 2008 (Originally published on Inside Higher Ed.)

In 1971, a lawsuit was filed in Los Angeles County Superior Court that would have a profound impact on the way American schools are funded. Serrano v. Priest was the first in a wave of elementary and secondary school finance cases that would touch nearly every state in the nation and continues to this day.

Existing funding regimes have been torn down, constitutional crises provoked, and billions of dollars spent in the name of achieving financial equity between school districts that serve the rich and the poor.

Nothing similar has ever happened in higher education. Desegregation lawsuits have brought some increased equity, but states have never had to defend the fairness of their higher education financing systems in court–at least not on grounds of economic discrimination as opposed to racial bias.

States Worry About Dwindling Road Funds

Source: Stephen C. Fehr, Stateline.org, July 23, 2008

The two main sources of state transportation money are falling precipitously this summer as Americans cut back on driving, threatening to delay or halt crucial work on roads, rails and bridges and breeding an election-year issue for Congress and the presidential candidates.

Both the federal Highway Trust Fund and state road funds rely on federal and state taxes collected on each gallon of gasoline, but revenues are dropping because people are not buying as much gas now that prices top $4 a gallon. The slippage exacerbates a looming crisis with the $40 billion federal highway fund, already projected to run out of money before the start of the next budget year Oct. 1.