Category Archives: State & Local Finance

State and Local Fiscal Facts: 2016

Source: National Conference of State Legislatures (NCSL), The Council of State Governments (CSG), National Association of Counties (NACo), National League of Cities (NLC), U.S. Conference of Mayors (USCM), International City/County Management Association (ICMA), National Association of State Budget Officers (NASBO), National Association of State Auditors Comptrollers and Treasurers (NASACT), Government Finance Officers Association (GFOA), National Association of State Retirement Administrators (NASRA), 2016

State and Local Finances · Municipal Bonds · State and Local Pensions

In the past few years, state and local government revenues have been slowly improving. While challenges remain, officials have been taking steps to replenish rainy day funds and address long-term structural imbalances.

Federal Spending in the States 2005 to 2014

Source: Pew Charitable Trusts, Fiscal Federalism Initiative, Issue Brief, March 3, 2016

From the overview:
The federal government spent $3.3 trillion in the states during its 2014 fiscal year. But the amount and composition of federal spending vary widely from state to state. As a result, federal budget decisions that increase or decrease areas of spending affect each state differently. The distribution of federal spending provides important context for understanding the effect that federal fiscal policy has on the states.

This analysis combines publicly available data sources to show the state-by-state distribution of federal spending, divided into the five major categories:
• Retirement benefits, which are payments to individuals and include Social Security retirement, survivor, and disability payments; veterans’ benefits; and other federal retirement and disability payments. Social Security accounts for about four-fifths of these payments.
• Nonretirement benefits, which are payments to individuals and include Medicare benefits, food assistance, unemployment insurance payments, student financial aid, and other assistance payments. Medicare accounts for nearly two-thirds of these payments.
• Grants, which include funding to state and local governments for a variety of program areas such as health care, transportation, education, and housing, as well as funding for individuals and other nonfederal entities, such as research grants. Medicaid grants to states account for about half of all federal grants.
• Contracts for purchases of goods and services, from military and medical equipment to information technology and catering services. Defense purchases account for two-thirds of federal contracts.
• Salaries and wages for federal employees. Roughly two-thirds of this spending is for civilians, and one-third is for military personnel…..
• Federal Spending in the States: Methodology (PDF)
Ten-Year Historical Data (XLS)
States Tables (XLS)

How Big a Burden are State and Local OPEB Benefits?

Source: Alicia H. Munnell, Jean-Pierre Aubry, and Caroline V. Crawford, Center for State and Local Government Excellence, Issue Brief, March 2016

This brief attempts to answer the question: How big of a burden are OPEB benefits to state and local governments?
Key findings:
• Aggregate unfunded OPEB liabilities are an estimated $862 billion – nearly two thirds of which is held at the local level;
• These unfunded liabilities are equivalent to 28 percent of the unfunded liabilities of pensions when pension liabilities are calculated with an interest rate comparable to OPEBs; and
• While OPEB liabilities are large, several factors – such as sponsors’ flexibility to scale back benefits – limit their potential drain on resources.

Slicing the Budget Pie for Big Business: How Three States Allocate Economic Development Dollars, Large Companies versus Small

Source: Kasia Tarczynska and Thomas Cafcas with Greg LeRoy, Good Jobs First, March 2016

From the press release:
Amidst a political season thick with pro-small business rhetoric, a new study on what states actually spend to help create private-sector jobs reveals a sharp bias against the “entrepreneurial economy.” In a detailed analysis of three diverse states—Florida, Missouri and New Mexico— the new research finds that at least two-thirds of their economic development spending primarily benefits large businesses. Less than a fifth clearly benefits small businesses, and about an eighth cannot be assigned either way. In total, the study looks at $344 million spent annually through more than 60 programs…..

Suggestions for the Needed Standardization of Determining the Local Economic Impact of Professional Sports

Source: Robert W. Wassmer, Ryan S. Ong, Geoffrey Propheter, Economic Development Quarterly, Published online before print March 9, 2016
(subscription required)

From the abstract:
An effort to secure a local government subsidy for a professional sports venue or event typically cites findings from a private consultant’s economic impact analysis on its purported benefits to the jurisdiction(s) offering the subsidy. Scholars have consistently expressed concerns regarding the ability of the public, and the officials that represent them, to detect the deficiencies that often plague such an analysis. We review the previous academic research to identify a common set of concerns regarding this form of analysis. These concerns are the basis for a list of 20 evaluative questions to consider in a critical assessment of an economic impact study. To illustrate the practicality of these questions, we ask them of previous studies regarding the economic impact of different professional sport venues or events in five different U.S. cities.

Revenue Estimating in the States

Source: Erica MacKellar, LegisBrief, Vol. 24 no. 12, March 2016

Revenue estimating is one of the most important parts of the state budgeting process. Before the governor and legislature can allocate funds, they must know how much is available to spend. Estimating the amount of revenue a state will receive in a given fiscal year may sound straightforward, but accurate forecasts rely on many factors, and states use a variety of strategies for determining the forecast.

Public Pension Plan Investment Return Assumptions

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

From the introduction:
As of September 30, 2015, state and local government retirement systems held assets of $3.56 trillion. These assets are held in trust and invested to pre-fund the cost of pension benefits. The investment return on these assets matters, as investment earnings account for a majority of public pension financing. A shortfall in long-term expected investment earnings must be made up by higher contributions or reduced benefits.

Funding a pension benefit requires the use of projections, known as actuarial assumptions, about future events. Actuarial assumptions fall into one of two broad categories: demographic and economic. Demographic assumptions are those pertaining to a pension plan’s membership, such as changes in the number of working and retired plan participants; when participants will retire, and how long they’ll live after they retire. Economic assumptions pertain to such factors as the rate of wage growth and the future expected investment return on the fund’s assets.

As with other actuarial assumptions, projecting public pension fund investment returns requires a focus on the long-term. This brief discusses how investment return assumptions are established and evaluated, and compares these assumptions with public funds’ actual investment experience.

Federal Tax Reform Raises Questions, Possible Revenue Changes for States

Source: Anne Stauffer and Mark Robyn, Pew Charitable Trusts, March 8, 2016

As the presidential candidates add their voices to the chorus of lawmakers in Washington calling for comprehensive tax reform, policymakers should be mindful that changes to the federal tax code can have complex repercussions for state tax policy and revenue.

States have a great deal at stake when Washington considers changes to tax policy because nearly every state that levies personal income taxes connects in some way to the federal system. Understanding the extent to which state income taxes are connected to the federal system is important for policymakers at both levels of government when evaluating federal revisions or reforms. ….
What States Have at Stake in Federal Tax Reform Proposals