The government shutdown exposed the financial insecurity and stress of many public servants.
Source: Dan Fiori, Mary Kay Cooney, Susan I Fitzgerald, Moody’s, Sector Comment, February 7, 2019
State funding for public colleges and universities is up in 43 states for fiscal year 2019 compared to increases in 32 states the previous year, according to the annual Grapevine report from Illinois State University’s Center for the Study of Education Policy. Additionally, state financial support in all 50 states increased by a median of 2.8% in fiscal 2019, more than double the 1.1% in the year before and the highest level since fiscal 2016. The increases are credit positive for the higher education sector, which is battling slower tuition revenue growth and rising expenses — both contributing factors to our negative outlook for the sector.
States Increase Higher Education Funding By 3.7%
Source: Michael T. Nietzel, Forbes, February 5, 2019
The 50 states appropriated a total of $91.5 billion to support their public universities and financial aid programs in Fiscal Year 2018-19. That’s a 3.7% increase over 2017-18 and an 18.2% increase over Fiscal Year 2013-14, according to Grapevine, the annual report of state higher education spending published by Illinois State University’s Center for the Study of Education Policy in cooperation with the State Higher Education Executive Officers…..
Fixed costs — the combination of debt service, pension contributions and retiree healthcare— continue to rise for many US state and local governments. While retiree benefits (pensions and healthcare) will continue to drive this trend, the growth level is heavily dependent on unpredictable factors such as pension investment performance and workforce demographics. Debt service costs, on the other hand, are largely stable and unlikely to increase materially,continuing the trend of the last decade. Still, total fixed costs create budgetary challenges for some governments, potentially affecting their ability to deliver core services, a dynamic also known as “crowd-out” risk…..
From the abstract:
This Policy Brief begins by reviewing the educational and societal impacts of quality pre-K programs before revealing legislative changes to state pre-K funding in 2017-18. The brief highlights four states and breaks down total pre-K funding for all states, including year-over-year changes.
Source: Rivka Liss-Levinson, Joshua Franzel, Center for State and Local Government Excellence, January 2019
From the press release:
A new report provides an in-depth analysis of local government financial literacy programs across the U.S. The report finds that only about one in four local government employers offer financial literacy programs to their workforce, according to a new survey of human resources directors. ….
…. Key findings from the report include:
• Only 26 percent of local government employers offer financial literacy programs to their workforce. A lack of prioritization by leadership (45 percent), internal resources (30 percent), or financial resources (30 percent), are the main reasons that governments do not implement financial literacy programs.
• Of those governments that do offer financial literacy programs, more than three-quarters cover planning for retirement, budgeting and planning. More than half address debt and investments.
• However, efforts to address different populations – particularly those with limited formal education, those for whom English is not their primary language, or those in different age groups – are generally not widespread.
• Only three percent of programs use mobile technology, text messages and social media. No programs report ensuring that materials are culturally relevant to diverse communities. ….
Source: Howard Chernick, Cordelia Reimers, Public Finance Review, Volume 47 Issue 2, March 2019
From the abstract:
This article uses an income-distributional approach to state tax sensitivity to examine the assumption that consumption taxes are more stable than income taxes. We estimate the 2007 to 2009 change in tax revenues as a function of state income distributions and tax burdens by income class. We estimate tax burdens as a function of income tax shares and consumption tax shares. We then simulate the change in tax revenues with tax shares at the national average. If high-income-tax states were to lower their reliance on this tax, the revenue decline during the recession would have been greater. For high consumption tax states, the revenue decline under higher income tax shares would have been smaller. Had they shifted toward consumption taxes, income tax reliant states would not have reduced the cyclical sensitivity of tax revenues during the Great Recession. The interaction between tax burdens and recession shocks by income class is key to these results.
Source: Sharon N. Kioko, Pengju Zhang, Public Finance Review, Volume 47 Issue 2, March 2019
From the abstract:
This study seeks to broaden our understanding of the impact tax and expenditure limits (TELs) have had on local governments. We chose to focus on local government use of tax-supported debt as TELs are limits on the property tax base and related revenues, two essential components used to determine a government’s legal authority to issue tax-supported debt and its fiscal capacity to maintain long-term solvency. Using county-level data, our analysis finds TELs have a negative impact on local government use of tax-supported debt, especially if the government is subject to a limitation on assessed valuation or the property tax levy.
From the press release:
Fueled by strong investment returns, public retirement systems continued to strengthen their funding levels and fine-tune their assumptions, according to an annual study by the National Conference on Public Employee Retirement Systems.
The 2018 NCPERS Public Retirement Systems Study underscores the success of efforts by pension trustees, managers, and administrators to make steady improvements that enhance the sustainability of pension funds, said Hank H. Kim, executive director and chief counsel of NCPERS. ….
…The 2018 study draws on responses from 167 state and local government pension funds with more than 18.7 million active and retired memberships, actuarial assets exceeding $2.5 trillion and market assets exceeding $2.6 trillion. The majority—62 percent—were local pension funds, while 38 percent were state-wide pension funds. NCPERS conducted the eighth annual study in September through December 2018 in partnership with Cobalt Community Research.
Two out of three college students now graduate with an average of over $28,000 in student debt, and the price of tuition continues to rise at an unsustainable rate, faster even than health care. So how do colleges spend that money?
Built specifically for college trustees, policymakers, and other higher education decision-makers, this site is designed to equip the people who oversee colleges and universities with the tools to perform their own analysis of higher education spending trends, and create benchmarks in comparison with other institutions.
In the recent report, Giving or Getting? New York’s Balance of Payments with the Federal Government, Rockefeller Institute evaluated how all fifty states compared in the tax revenue they sent to the federal government (receipts) and the levels of spending they received from the federal government (expenditures). Forty states had a positive balance of payments; they received more money from Washington than they sent. In our last blog post we looked at “the givers.” These states have high income levels and, as a result, pay more in payroll taxes than other states. These high tax burdens were not offset by high levels of federal spending, leading to negative balances of payments. In this post we take a closer look at the winners, the states with high balances of payments. Our analysis finds there are two categories of getters: states with large federal workforces and states with low incomes.
Table 1 shows the ten states with the highest per capita balance of payments. The ratio of expenditures to receipts tells us how much each state receives in federal spending for each dollar it sends in taxes. For every $1 Virginians pay in taxes, the residents receive twice as much in federal spending.