Category Archives: State & Local Finance

Evidence from states shows why Trump’s brand of Carrier-style dealmaking won’t work

Source: Joshua Jansa, The Conversation, January 9, 2017

In late November, President-elect Donald Trump announced that he had reached a deal with Carrier to keep about 800 manufacturing jobs in Indiana from moving to Mexico. After the announcement, we learned that the Indiana Economic Development Corporation would give US$7 million in tax credits and grants to Carrier’s parent company in exchange for keeping the jobs in the state.

Trump proudly praised the agreement as a “great deal for workers” and said that it was part of a larger approach to keep jobs at home, saying “this is the way it’s going to be.”

Having the chief executive of the United States negotiate individualized deals with corporations is certainly a new approach to economic policy nationally, though it is not without precedent. In fact, state governments have been negotiating targeted incentives with corporations for decades.

My research focuses on why states use incentives to attract and retain investment from corporations and whether they are effective. My work, as well as that of many others, shows that these deals do not create the jobs and economic growth they are purported to…..

NCPERS 2016 Public Retirement Systems Study

Source: National Conference on Public Employee Retirement Systems, December 2016

In September, October and November 2016, the National Conference on Public Employee Retirement Systems (NCPERS) undertook a comprehensive study exploring retirement practices of the public sector. In partnership with Cobalt Community Research, NCPERS has collected and analyzed the most current data available on member funds’ fiscal condition and steps they are taking to ensure fiscal and operational integrity. The 2016 NCPERS Public Employee Retirement Systems Study includes responses from 159 state, local and provincial government pension funds with more than 10 million active and retired memberships and assets exceeding $1.5 trillion. The majority –77 percent– were local pension funds, while 23 percent were state pension funds…..
Related:
NCPERS 2016 Public Retirement Systems Study Dashboard
Since 2011 NCPERS has conducted the annual Public Retirement Systems Study that surveys nearly 200 local and statewide public pensions. It is the most comprehensive survey of its kind and provides information on investment experiences and assumptions, plan administration and operations, and trends, innovations, and best practices.

With the issuance of the 2016 NCPERS Public Retirement Systems Study, in addition to the static pdf of the survey we have provided a dynamic interactive dashboard powered by Tableau to supplement the study. The dashboard will allow you to manipulate and search the survey results so that the data is refined to your specifications. Among the benefits is that you can compare survey results to plans similar to yours in size, participant composition, and plan type.

Infrastructure Financing: A Guide for Local Government Managers

Source: Can Chen, John R. Bartle, ICMA and the Government Finance Officers Association (GFOA), 2017

From the summary:
Local governments play a key role in funding, operating, and maintaining local roads, bridges, airports, transit facilities, drinking water, sewer systems, and other types of infrastructure. Yet, as is widely publicized, these jurisdictions face a serious infrastructure deficit. While municipal bonds continue to be the key options for how local infrastructure is financed, local governments are exploring new ways to finance needed expansion, upgrades, and repairs.

According to a new white paper, “Infrastructure Financing: A Guide for Local Government Managers,” issued by ICMA and the Government Finance Officers Association (GFOA), alternative financing sources, properly selected and managed, can complement traditional sources to meet infrastructure needs. Tapping these sources not only leverages new resources, but also can make it possible to complete certain projects more quickly.

Across the United States, local governments face a serious infrastructure deficit and are exploring new ways to finance needed expansions, upgrades, and repairs. Despite the fact that eroding infrastructure is seen as one of the most urgent issues facing the country, in 2012, infrastructure funding was at its lowest percentage of total local government expenditures in more than 50 years.

Prepared by Drs. Can Chen of Florida International University and John R. Bartle of the University of Nebraska at Omaha, the white paper explores how local governments are addressing the challenge of bridging infrastructure financing gaps. In this context, they:
– Describe the full range of infrastructure financing methods currently in use.
– Document emerging methods in local infrastructure financing.
– Illustrate cases where local governments have explored alternative methods of infrastructure financing.
– Offer recommendations for local government managers who are considering the use of alternative infrastructure financing options.
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Abstract

Past Due: Examining the Costs and Consequences of Charging for Justice in New Orleans

Source: Mathilde Laisne, Jon Wool, and Christian Henrichson, Vera Institute of Justice, January 2017

From the overview:
In 2015, government agencies in New Orleans collected $4.5 million in the form of bail, fines and fees from people involved in the criminal justice system and, by extension, from their families. Another $4.7 million was transferred from the pockets of residents to for-profit bail bond agents. These costs have become the subject of considerable public attention. Because many “users” of the system have very low incomes or none at all, there is growing concern that charging for justice amounts to criminalizing poverty, especially when people who can’t pay become further entangled in the justice system. In 2015, the city spent $6.4 million to incarcerate people who couldn’t pay bail or conviction fines and fees. By focusing on bail decisions and fines and fees assessed at conviction, Past Due, and its accompanying technical report, reveals the costs and other consequences of a system that tries to extract money from low-income people and then jails them when they can’t pay.
Related:
Technical Report
Summary

Public Pension Investment Risk-Taking May Result in Future Challenges

Source: Donald J. Boyd, Yimeng Yin, Nelson A. Rockefeller Institute of Government, Pension Simulation Project, January 2017

The latest report from the Rockefeller Institute’s Pension Simulation Project examines the difficult choices public pension funds faced as interest rates fell over the last 25 years. Public plans generally increased investment risk in an effort to avoid lowering expected investment returns, creating substantial potential for plans to become severely underfunded or to require sharp increases in government contributions in the future. This is the fourth report of the Pension Simulation Project, supported by the Laura and John Arnold Foundation and The Pew Charitable Trusts.
Related:
Policy Brief
News Release

State and Local Governments’ Fiscal Outlook: 2016 Update

Source: U.S. Government Accountability Office (GAO), GAO-17-213SP: Published: December 8, 2016

From the summary:
Fiscal sustainability presents a national challenge shared by all levels of government. GAO’s simulations of long-term fiscal trends in the state and local government sector—published since 2007—have consistently shown that state and local governments face long-term fiscal pressures driven largely by the rising health-related costs of Medicaid and the costs of health care compensation for employees and retirees. Absent any policy changes, the state and local government sector faces a gap between expenditures and receipts in future years. Closing this gap will require state and local governments to make policy changes to assure that receipts are at least equal to expenditures.

GAO’s model uses the Bureau of Economic Analysis’s (BEA) National Income and Product Accounts (NIPA) as the primary data source and presents the results in the aggregate for the state and local sector as a whole. The model shows the level of receipts and expenditures for the sector until 2065 based on current and historical spending and revenue patterns. The model assumes that the current set of policies in place across state and local government remains constant to show a simulated long-term outlook. GAO’s model incorporates Congressional Budget Office (CBO) economic projections, which capture near-term cyclical swings in the economy. Because the model covers the sector in the aggregate, the fiscal outcomes for individual states and localities cannot be identified. This product is part of a body of work on the nation’s long-term fiscal challenges.

State and Local Pension Reform Since the Financial Crisis

Source: Jean-Pierre Aubry and Caroline V. Crawford, Center for Retirement Research at Boston College, Issue in Brief, SLP#54, January 2017

The brief’s key findings are:
• Since the financial crisis, 74 percent of state plans and 57 percent of large local plans have cut benefits or raised employee contributions to curb rising costs.
• Plans with a larger pension cost burden and lower initial employee contributions were more likely to enact such changes.
• And, among plans that made changes, those in states with the strongest legal protections for current workers were more likely to limit the cuts to new hires.

Quarterly Summary of State and Local Government Tax Revenues for 2016: Q3

Source: U.S. Census Bureau, G16-QTAX3, December 20, 2016

Third quarter 2016 tax revenues for the four largest state and local government tax categories increased 2.2 percent to $294.2 billion, from $287.9 billion in the same quarter of 2015. …. The estimated total for third quarter 2016 state and local property tax revenue grew 3.2 percent to $105.7 billion (±2.5 billion). This is not statistically different from the $102.4 billion (±2.6 billion) collected in the same quarter of 2015 (see Figure 2). Local governments collected $101.9 billion of total property tax revenue in the third quarter of 2016. ….

State Expenditure Report (Fiscal 2014-2016)

Source: National Association of State Budget Officers, 2016

Overview:
This annual report examines spending in the functional areas of state budgets: elementary and secondary education, higher education, public assistance, Medicaid, corrections, transportation, and all other. It also includes data on the State Children’s Health Insurance Program and on revenue sources in state general funds.

– The total state spending growth rate slowed in fiscal 2016, following a 10-year high in fiscal 2015.
– Medicaid continued to increase as a share of total state spending, while K-12 remained the largest category from state funds.
– Transportation led the way in spending growth from state funds in both fiscal 2015 and fiscal 2016, while Medicaid experienced the largest gains from all funds.
– Revenue growth slowed considerably in fiscal 2016 as states saw weaker collections from sales, personal income, and corporate income taxes.
Related:
Summary
Archives

SPOTLIGHT: Aging States

Source: Capitol Ideas, November/December 2016

Articles include:
FUNDING LONG-TERM CARE
Facing a wave of aging baby boomers, many states are trying to make it easier for seniors to stay in their homes—as many prefer—instead of moving into more costly nursing homes. With high stakes for state budgets, many states are undertaking long-term planning to pay for long-term care.

TOP STATES FOR RETIREMENT
What is the best state for retirement? It’s a popular question among baby boomers, who increasingly seek more livable communities that will allow them to age in place. How are states responding? Drawing from an AARP scorecard on state long-term services and supports, here’s a look at top states for retirement and aging.

IMPROVING SENIOR MOBILITY
For many seniors, staying active in their golden years depends on staying mobile. But in many states and communities, transportation systems haven’t been developed with seniors or individuals with disabilities in mind. That’s changing as states are taking steps to improve transportation mobility for older adults.

ENDING ELDER ABUSE
Elder financial abuse costs older Americans $2.9 billion per year, but the harm to seniors caused by fraud often extends far beyond the checkbook. Oregon Attorney General Ellen Rosenblum shares key steps her state has taken to strengthen elder abuse prevention and response.

TAXING RETIREES
When state leaders discuss the fiscal challenges of an aging population, the focus is often on costs for senior services. However, as CSG Senior Fellows Katherine Barrett and Richard Greene point out, declining tax revenues are also a concern.