Category Archives: State & Local Finance

Falling apart: America’s neglected infrastructure

Source: Steve Kroft, 60 Minutes, November 23, 2014

Steve Kroft reports on why our roads, bridges, airports and rail are outdated and need to be fixed. … There are a lot of people in the United States right now who think the country is falling apart, and at least in one respect they’re correct. Our roads and bridges are crumbling, our airports are out of date and the vast majority of our seaports are in danger of becoming obsolete. All the result of decades of neglect. None of this is really in dispute. Business leaders, labor unions, governors, mayors, congressmen and presidents have complained about a lack of funding for years, but aside from a one time cash infusion from the stimulus program, nothing much has changed. There is still no consensus on how to solve the problem or where to get the massive amounts of money needed to fix it, just another example of political paralysis in Washington. Tens of millions of American cross over bridges every day without giving it much thought, unless they hit a pothole. But the infrastructure problem goes much deeper than pavement. It goes to crumbling concrete and corroded steel and the fact that nearly 70,000 bridges in America — one out of every nine — is now considered to be structurally deficient. …

The politics of infrastructure
Source: Steve Kroft, 60 Minutes Overtime, November 23, 2014

Steve Kroft takes a close look into the nation’s crumbling infrastructure and why it’s a political “hot potato”.

Casino and Political Gaming in Connecticut

Source: Shelley Michelson, MuniNet Guide, December 1, 2014

As casino gaming goes in the State of Connecticut, so go the State’s finances. …

…Competition in the gaming market has increased markedly since Foxwood’s opening when there were a total of 10 other casinos, all in New Jersey, which became an over-built market suffering from multiple bankruptcies and closures. As of September of this year, the number of Northeast area casinos had increased to 57, with 20 more under consideration. Competition from Rhode Island’s Twin River Casino and the slots at Aqueduct and Yonkers Racetracks in New York have cut into revenues at Foxwoods and Mohegan Sun as well as those of New Jersey casinos. Moody’s warned that the financial performance of Mohegan Sun could suffer as a result of this increased competition.

In fact, Moody’s has placed a Negative Outlook for the gaming industry nationwide; its Senior Vice President, Keith Foley, wrote in a report dated June 30, 2014, “We now estimate that the total U.S. gaming revenues reported by state gaming authorities will decrease between 3.0% and 5.0% during the next 12 to 18 months, causing overall industry (earnings before interest and tax) to decline between 4.5% and 7.5%.” …

Getting to the Route of It: The Role of Governance in Regional Transit

Source: Eno Center for Transportation, October 2014

Metropolitan regions are the economic engines of our nation and public transit is the machinery that enables the largest metropolitan areas to function, compete effectively for employers and labor, and foster innovation. The ability of transit organizations to respond to changing and expanding demands varies across the industry and is shaped to a large extent by individual governance and organizational structures. Each type of governance structure has its own implications for funding, equitable and effective service patterns, and economic growth.

Getting to the Route of It: The Role of Governance in Regional Transit looks at the issues of regional transit governance in New York and across the nation.

…The case study regions are Chicago, Boston, Dallas/Fort Worth, Minneapolis/St. Paul, New York City Tri-State region, and the San Francisco Bay Area. As a group, they represent diverse geographic regions and distinct approaches to complex transit governance issues. Through conversations with experts in each region, the team compiled key themes and lessons from each region and supplemented this research with additional data where necessary. Every case study was evaluated independently to demonstrate the different approaches that regions have taken, with varying degrees of success, to foster regional connectivity. …

The Real Root of Broken Infrastructure: Broken Governance
Source: Alex Marshall, Governing, December 2014

It’s time to rethink how we manage transit systems.

Lessons Learned from the Detroit Bankruptcy

Source: James Spiotto, MuniNet Guide, November 10, 2014

In July of 2013, Detroit was the first city that was the largest city in the state to seek protection under Chapter 9 of the Bankruptcy Code for municipal debt adjustment. Previously, Chapter 9 had been a remedy used rarely by any city, town, village or county. In the past, the largest cities such as New York City in 1975, Cleveland in 1978 and Philadelphia in 1991 had received assistance from their states in the form of loans, grants or transfer of services to other governmental entities. Such state assistance made Chapter 9 unnecessary by increasing cash liquidity, reducing expenses and providing financial oversight, support and guidance to help those cities refinance debt, address systemic problems and solve financial difficulties.

On November 7, 2014, the Court confirmed the Plan of Debt Adjustment for Detroit.

Since 1937 and the enactment of Chapter 9, there have been 660 cases filed. Chapter 9 is simply a process of debt restructuring to give a municipality breathing room so that it may implement a recovery plan that will allow it to reinvest in the municipality, stimulate its economy, create new jobs, attract new businesses and residents, add to its taxpayers and increase its revenues to create an economic recovery. …

Lesson One: Do not defer funding of essential services and infrastructure. ….
Lesson Two: Labor and pension contracts under state constitutional and statutory provisions should not be interpreted as a suicide pact. ….
Lesson Three: Don’t question that which should be beyond questioning and is needed for the long-term financial survival of the municipality. ….
Lesson Four: Debt adjustment is a process, but a recovery plan is a solution. ….
Lesson Five: Successful plans of debt adjustment have one common feature: virtually all significant issues have been settled and resolved with major creditors. ….
Lesson Six: One size does not fit all. ….
Lesson Seven: A recovery plan must provide for essential services and infrastructure. ….
Lesson Eight: Confirmation of a plan of debt adjustment is only the beginning of the journey to financial recovery – not the end. ….

Local Government Strategies to Address Rising Health Care Costs

Source: Elizabeth Kellar, Christine Becker, Christina Barberot, Ellen Bayer, Enid Beaumont, Bonnie Faulk, Joshua Franzel, Mark Ossolinski, and Danielle Miller Wagner, Center for State and Local Government Excellence (SLGE) and University of Tennessee, December 2014

From the abstract:
Rising costs over the last decade have prompted many local governments to make changes to their health plans and strategies. Cost sharing, wellness program, and disease management initiatives are widely reported. Other changes cited include increased reliance on high-deductible plans, dependent eligibility audits, and altering retiree benefits.

Key findings:
– The top cost drivers of local government health care increases were increased claim costs (64 percent); prescription drugs (57 percent); an aging workforce (46 percent); insurance company price increases (45 percent) and federal health care policy (45 percent).
– Fifty-seven (57) percent of respondents increased cost sharing of premiums paid by employees and nearly half of respondents reported that their local governments changed the way health insurance is provided.
– Nineteen (19) percent of those reporting health plan changes shifted employees to a high-deductible plan with a health savings account and 14 percent established a health reimbursement arrangement.
– Disease management programs, on-site clinics, dependent eligibility audits, and regular review and rebidding of health care vendor contracts have achieved significant savings.
– Respondents reported that providing easy access to health services at work sites not only supports employee wellness, but also reduces employee absenteeism and health care costs.

Manufacturing Low Pay: Declining Wages in the Jobs That Built America’s Middle Class

Source: Catherine Ruckelshaus & Sarah Leberstein, National Employment Law Project (NELP), November 2014

Key findings:
• Americans perceive manufacturing jobs as “good jobs.”
• Manufacturing wages now rank in the bottom half of all jobs in the United States.
• The perception that manufacturing jobs are highly paid disguises how many workers are stuck at the bottom.
• Manufacturing wages are not even keeping up with inflation.
• In the largest segment of the manufacturing base—automotive—wages have declined even faster.
• There has been a resurgence in the number of auto industry jobs since the economic crisis peaked in 2009.
• New jobs created in the auto sector are worse than the ones we lost.
• Heavy reliance on temporary workers hides even bigger declines in manufacturing wages.

…This report will trace some of the drivers of this anemic rebound in manufacturing and its largest sector, auto manufacturing. “Onshoring” of jobs by manufacturers is on the rise in the United States; jobs are rebounding here due to a combination of a wage convergence between domestic and international jobs and aggressive supports from U.S. states. At the same time, the decline in relative wages in the manufacturing sector is striking: in the last decades, wages in the sector have fallen behind private-sector pay, so that wages for production workers in manufacturing are now more than 4.0 percent less than the private-sector average, and they continue to decline….

…..The costs to local and state budgets are staggering. Notable deals have included the following:
• A nearly $1.3 billion package to Nissan to build a Canton, Mississippi plant in 2001, including a controversial 25-year state tax rebate for jobs that, in many cases, start at just $12 per hour;
• A $1 billion subsidy package for ThyssenKrupp to build a steel plant in Mobile, Alabama;
• A 2007 package deal for Alcoa worth $5.6 billion, giving a 30-year discounted electricity deal for an
aluminum plant;
• A $3.2 billion deal in tax breaks and other subsidies for Boeing’s aircraft manufacturing facilities in
2003; and
• A 2006 deal with Kia Motors brokered by Georgia Governor Sonny Perdue, worth $410 million and estimated to cost about $160,000 for each of the projected direct jobs at the plant….

State Expenditure Report (Fiscal 2012-2014 Data)

Source: National Association of State Budget Officers, 2014

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 latest edition of NASBO’s State Expenditure Report finds that total state spending in fiscal 2014 is estimated to have grown at its fastest pace since before the recession, largely due to an increase in federal Medicaid funds as a majority of states chose to expand enrollment under the Affordable Care Act. Total state spending growth in fiscal 2013 was more modest; however, total state expenditure did return to positive growth following declines in fiscal 2012.