Category Archives: State & Local Finance

Issues with Taxing Marijuana at the State Level

Source: Richard Phillips, Institute on Taxation and Economic Policy (ITEP), May 2015

From the press release:
While the focus of marijuana legalization debates is rightly on the potential health and criminal justice impacts, the decision to legalize marijuana also has real implications for state and local revenue.

Over the past two decades, 23 states and the District of Columbia have enacted laws allowing the production and use of marijuana for medical purposes. Taking this one step further, Colorado, Washington, Alaska and Oregon are moving forward with systems that will permit the general production and purchase of retail marijuana. California, Maine, Nevada and others may soon follow in the coming years.

Given the increasing prominence of these issues, the Institute on Taxation and Economic Policy (ITEP) has written a new report providing a comprehensive overview of best practices for taxing marijuana and the potential impact these taxes could have on state and local revenue.

One of the central findings of the ITEP report is that predicting how much money state and local governments could raise from marijuana taxes is extremely difficult. To start, no jurisdiction in the world has legalized marijuana in modern times for a sustained period of time so there is not much historic data to go on. ….

Tales from the Trenches: Evolution of Strategic Sourcing

Source: Chuks Amajor, Mike Smith, Elena Moreland, National Association of State Procurement Officials (NASPO), Research Paper, March 2015

Strategic sourcing has been around for a few decades. This paper provides valuable insight into the use of this approach to state procurement. It discusses benefits and challenges, common misconceptions, how it differs from traditional procurement and where it can add value. Information obtained through phone interviews with 15 states are highlighted in the paper. The paper also addresses most successful and challenging spend categories and an assessment of how strategic sourcing has evolved over the past decade and where it is headed.
How Strategic Sourcing Can Save a Bundle
Source: Krista S. Ferrell, Governing, Governing Institute Voices, May 8, 2015

It’s a way to do procurement with proven benefits, and it’s catching on at all levels of government. But some myths need to be dispelled. ….
Myth #1: Strategic sourcing equals sole sourcing. Reality: Strategic-sourcing initiatives often result in multiple awards.
Myth #2: Strategic sourcing means buying the cheapest product regardless of quality. Reality: Maintaining or enhancing quality is a key component of most strategic-sourcing engagements.
Myth #3: Strategic sourcing is a one-size-fits-all approach to procurement. Reality: Strategic-sourcing methodology anticipates and provides for unique circumstances and challenges.
Myth #4: Strategic sourcing is a one-time project. Reality: Strategic sourcing involves continuous improvement over the lifecycle of many contract iterations. …..

The Smell Test for Bad Data

Source: Katherine Barrett & Richard Greene, Governing, Smart Management, May 7, 2015

There are many ways numbers can be misleading. Here are a few. ….

…. Another lesson: Whenever anyone is comparing annual data from one state to another or one city to another, the information should be based on precisely the same time period. Consider financial reports for pension plans. Fifteen of the states base them on a calendar year, while the rest use the fiscal year to calculate annual investment results. When policymakers compare data from two states, the results can be very misleading. For example, Oregon’s pension investment results for 2008 showed a 27 percent loss, whereas California’s showed only a 4.9 percent drop. But this says little about actual pension performance because the 2008 investment results for Oregon represent the full blow of the devastating stock market drop in the fall, whereas California’s results only took the state through June 30th and the fall losses showed up in its 2009 report. …..

Pulling Up the Higher-Ed Ladder: Myth and Reality in the Crisis of College Affordability

Source: Robert Hiltonsmith, Dēmos, May 2015

From the summary:
In today’s competitive economy, nothing is more important than getting a college education. Yet college tuition costs in the U.S. have been increasing at a breakneck pace, making college unaffordable for millions of Americans. In the last decade alone, the average tuition at public 4-year universities has risen by nearly $3,000. There is a broad consensus that out-of-control tuition is a serious problem for the nation, making it much more difficult for young people, particularly those from low-income families and communities of color, to complete a college degree. However, there is no such agreement on why tuition is increasing. Experts have blamed rising tuition on everything from administrative bloat, to increased availability of grants and loans, to campus construction booms. Demos and others, in contrast, have focused on declining state funding as the culprit, as we demonstrate in our Great Cost Shift series. Although academics and media alike have tried to put the question to rest, public confusion on this issue is one reason why effective solutions remain illusory in almost every state.

This brief attempts to pinpoint the cause(s) of spiraling tuition by taking a deep dive into public university revenue and spending data from the National Center for Education Statistics’ Delta Cost Project Database. In the brief, we split public 4-year universities into two categories: research institutions—schools that have a high level of research activity and award a significant number of doctorates—and master’s and bachelor’s universities—schools that primarily award master’s and/or bachelor’s degrees. Research institutions consistently enrolled about 60 percent of all undergraduates at public 4-year institutions in the decade covered by the brief, while master’s and bachelor’s universities accounted for the remaining 40 percent. We find that declining state appropriations for higher education is indeed the primary driver of rising tuition, responsible for 79 percent of tuition hikes at public research universities between 2001 and 201112 and 78 percent of tuition hikes at public master’s and bachelor’s universities over the same decade. Increased spending on administration accounts for another 6 percent and 5 percent, respectively, at the two categories of institutions, and increased grant and loan aid has had a negligible effect, at most. Finally, the purported construction boom’s impact on tuition has been minimal as well, as we estimate spending on construction has accounted for 6 percent of tuition increases at both research and master’s/bachelor’s universities.

Not Just a Ferguson Problem – How Traffic Courts Drive Inequality in California

Source: Lawyers’ Committee for Civil Rights of the San Francisco Bay Area (LCCR), the East Bay Community Law Center (EBCLC), the Western Center on Law and Poverty (WCLP), A New Way of Life Reentry Project, and Legal Services for Prisoners with Children (LSPC), 2015

From the abstract:
A recent Department of Justice report found that courts and law enforcement in Ferguson, Missouri, are systematically and purposefully taking money from the pockets of poor people—disproportionately from black people—to put into court coffers. The context may be different in California, but many of the practices are chillingly similar. As a result, over four million Californians do not have valid driver’s licenses because they cannot afford to pay traffic fines and fees. These suspensions make it harder for people to get and keep jobs, further impeding their ability to pay their debt. They harm credit ratings. They raise public safety concerns. Ultimately they keep people in long cycles of poverty that are difficult, if not impossible to overcome. This report highlights the growing trend of license suspensions, how the problem happens, the impact on families and communities, and what can and should be done about it.
press release

Federal Programs and the Real Costs of Policing

Source: Rachel Harmon, New York University Law Review, Vol. 90, June 2015

From the abstract:
Dozens of federal statutes authorize federal agencies to give money and power to local police departments and municipalities in order to improve public safety. While these federal programs encourage better coordination of police efforts and make pursuing public safety less financially costly for local communities, they also encourage harmful policing. Of course, policing often interferes with our interests in autonomy, privacy, and property, and those harms are often worthwhile in exchange for security and order. Federal public safety programs, however, are designed, implemented, and evaluated without reference to the nonbudgetary costs of policing. When those costs are high, federal programs can make local policing seem cheaper for communities, but actually make it more costly in its impacts and therefore less efficient.

The coercion costs of policing are overlooked in most assessments of policing policy, not just in federal programs. Ordinarily, however, even when they are not formally recognized, those costs are accounted for, at least to some degree, in local political processes because local government officials experience public ire when the harms of policing become too great. Unfortunately, federal programs also frequently undermine this check on the intrusiveness of local policing. Internalizing the nonbudgetary costs of policing depends on public capacity to monitor harmful police conduct and on city officials’ capacity to influence police conduct. Some federal programs interfere with these conditions by clouding responsibility for law enforcement coercion and by giving money directly to departments rather than to municipalities. Thus, federal programs not only ignore significant costs of the policies they subsidize, they also interfere with the usual local mechanisms for managing those costs. Until federal public safety programs are approached with a more complete understanding of policing – one that attends to its full costs and the need for accountability – federal programs will continue to promote policing practices that do more harm than necessary and maybe even more harm than good.

Guest Post: Will Governor Rauner’s New Bankruptcy Proposal Break Chicago’s Pension Obligations?

Source: Michelle Wilde Anderson, OnLabor blog, May 1, 2015

Illinois Governor Bruce Rauner has decided that allowing his state’s municipalities to declare bankruptcy is an important arrow in his quiver to break “the corrupt bargain that is crushing taxpayers”—namely union influence and membership rates in Illinois. ….

…. So the recent big city Chapter 9’s eliminated costly health care benefits and deeply discounted capital market creditors’ debts, but nonetheless preserved most of their pension payments. Why they struck that balance is critical for Illinois voters and politicians to understand. Rationales in each city varied, but two main themes emerged.

First, the plan authors in Detroit saw that cutting their retirees’ benefits would sink many retirees below the poverty line in the city and the region. This was a painful humanitarian reality, but so too was it an economic one: a municipal debtor has to be stable enough to pay its obligations under its bankruptcy plan. More concentrated local poverty does not help. A second main argument against cutting pension benefits showed up in Stockton. Officials determined that cutting benefits and thereby being excluded from the state pension system would make the city uncompetitive for public employees, especially police. That was a hard pill to swallow for a city with a spiking homicide rate and no cash to spare on competitive wages. Many other concerns surfaced in both cities as well, but they amounted to a bottom line determination that there were vanishingly few fat cat pensioners to be found, and the municipalities would be even worse off—as a debtor, as a city—if they cut into their retirees’ payments. (Because these big cases and others have effectively settled, the legal fairness of the decision not to cut pension payments has never been tested by a higher court, but there are compelling arguments that these decisions are consistent with Chapter 9.) …..

Paying for School Bus Service

Source: Jeanette Reveles, School Transportation News, April 22, 2015

Last month, the Indiana Supreme Court ruled that school districts are not required to provide free bus service to students. The unanimous decision ended an ongoing debate about whether bus fees were constitutional. The issue is, in fact, a controversial one not only in Indiana but throughout the country, with opponents arguing that fees compromise accessibility to education. ….