Category Archives: State & Local Finance

The Determinants of the Severity of State Fiscal Crises

Source: David T. Mitchell, Dean Stansel, Public Budgeting & Finance, Vol. 36, Issue 4, Winter 2016
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From the abstract:
During the most recent recession, many state governments faced substantial budget shortfalls. Those shortfalls are often blamed on external factors like the declining economy or reductions in federal aid. What politicians themselves do, especially during expansionary years – whether they enact spending increases, implement tax cuts, increase the size of their rainy day funds, or some combination thereof – is typically given less attention. We examine those factors and find that fiscal stress tends to be positively associated with spending growth, negatively associated with the size of rainy day funds, and not statistically significantly associated with the unemployment rate or federal aid.

Determinants of Debt Concentration at the State Level

Source: Robert A. Greer, Dwight V. Denison, Public Budgeting & Finance, Vol. 36, Issue 4, Winter 2016
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From the abstract:
We examine the general factors that affect the distribution of debt among state and local governments. We measure the distribution as the percentage of total state and aggregate local debt that is issued or held by the state level of government. Using a fiscal federalism framework, we discuss the fiscal, legal, and political factors that play an important role in determining the level of government that issues debt. Findings suggest that important factors of debt concentration at the state level include state political ideology and economic factors of income per capita and unemployment rates.

A Day Late and a Dollar Short? A Study of Budget Passage in New York State

Source: Yi (Elaine) Lu, Gang Chen, Public Budgeting & Finance, Vol. 36, Issue 3, Fall 2016
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From the abstract:
Passing a budget is an attribute of sovereignty. This research highlights the fusion of multiple forces in the broader context — economic factors, political factors, budget rules, and leadership stability — in which budget negotiation takes place. Through an in‐depth case study of New York State from 1970 to 2012 and extensive interviews with prior and current key participants in the budgeting process, this research found that a divided government contributes to a late budget only when budget rules are not controlled. In addition, legal clarity of authorities among the key budget negotiators, their willingness to compromise, as well as effective executive leadership in bringing people to budget negotiation, hold the potential to reduce the extent of budget delays in an increasingly contentious and turbulent budgeting environment.

Out of Ferguson: Misdemeanors, Municipal Courts, Tax Distribution and Constitutional Limitations

Source: Henry Ordower, J. S. Onésimo Sandoval, Kenneth Warren, Saint Louis University Legal Studies Research Paper No. 2016-14, October 18, 2016

From the abstract:
The matter of police and municipal courts as revenue producers became increasingly prominent following Michael Brown’s death from a police shooting. This article considers the use of misdemeanors, especially traffic violations, for the purpose of collecting substantial portions of the annual operating budgets in municipalities in St. Louis County, Missouri. The article argues that the revenue raising function of traffic offenses has displaced their public safety and traffic regulation functions. The change in function from public safety to revenue suggests that the governing laws are no longer valid as exercise of policing power but must be reenacted under the taxing power in order to remain valid. Constitutional tax limitations in Missouri, however, prohibit the increase of existing or enactment of new taxes without an affirmative vote of the electorate. Municipalities have circumvented the constitutional taxing limitations by using laws enacted under policing powers in violation of the constitution. The police and the municipal courts enforcing traffic laws have produced a racially discriminatory and regressive local tax system that violates the tax limitations of the Missouri constitution.

Fiscal Survey of the States, Fall 2016

Source: National Association of State Budget Officers, 2016

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.

States’ enacted budgets for fiscal 2017 project moderate general fund spending growth for the seventh consecutive year. However, progress since the Great Recession has been uneven, and many states are seeing softening state tax collections. Key findings from the report:
– General fund revenue growth slowed in fiscal 2016, with 25 states ending the year with collections below budget forecast.
– 19 states reported net mid-year budget reductions in fiscal 2016, a historically high number outside of a recessionary period.
– 24 states so far are reporting fiscal 2017 general fund revenues coming in below projections, the highest number of states expecting revenue shortfalls at this time in the fiscal year since 2010.
– States enacted a mix of tax increases and decreases effective in fiscal 2017.
– Most states continue to bolster rainy day funds, despite slower revenue growth and other challenges.

Punishing Poverty: The high cost of probation fees in Massachusetts

Source: Wendy Sawyer, Prison Policy Initiative, December 8, 2016

From the introduction:
In Massachusetts, probation is a much bigger part of the correctional control “pie” than incarceration in prison or jail. Almost three out of four people under state correctional control are on some form of probation. If you are one of these 67,000 people, the state tells you probation is “an opportunity for you to make positive changes in your life,” allowing you to remain in the community, work, and be with family and friends instead of serving time in jail or prison. While this may sound like a great deal, it comes at a price.

Probation service fees in Massachusetts cost probationers more than $20 million every year. People are placed on one of two tiers of probation: supervised and administrative, and they are currently charged $65 and $50 per month, respectively. With an average probation sentence of 17-20 months, a Massachusetts resident sentenced to probation is charged between $850-$1,300 in monthly probation service fees alone — on top of many other court fines and fees.

Probation fees are relics of the 1980s. A result of “tough on crime” politics and a misguided attempt to plug a budget in crisis, probation fees do nothing to further the mission of probation services in Massachusetts. In fact, they work against probationers who struggle to meet the demands of their probation and the needs of their families. With money tight in the Commonwealth again, lawmakers may be tempted to hold on to probation fees for the revenues, but this policy is fiscally shortsighted and morally bankrupt.

A group of state lawmakers and judges has recently called for re-evaluation of court fines and fees, suspecting that these costs unfairly impact the poor and make it harder for people to succeed. This report analyzes state probation and income data to confirm those suspicions, and argues that the state should reverse its outdated and counterproductive policy.

Employee Contributions to Public Pension Plans

Source: National Association of State Retirement Administrators (NASRA), Issue Brief, October 2016

Unlike in the private sector, nearly all employees of state and local government are required to share in the cost of their retirement benefit. Employee contributions typically are set as a percentage of salary by statute or by the retirement board. Although investment earnings and employer contributions account for a larger portion of total public pension fund revenues (see Figure 1), by providing a consistent and predictable stream of revenue to public pension funds, contributions from employees fill a vital role in financing pension benefits. In the wake of the 2008-09 market decline, employee contribution rates in many states have increased. This issue brief examines employee contribution plan designs, policies and recent trends….