Source: S&P Global Ratings, January 8, 2019
For the U.S. states, S&P Global Ratings’ baseline economic forecast of slower growth in 2019 holds the potential for renewed fiscal strain. Although now long in duration, the economic expansion that began in mid-2009 has been shallow. One consequence of this was the persistence of narrow fiscal margins for many states and, relatedly, an uncharacteristically high downgrade-to-upgrade ratio lasting through 2017. This changed in 2018 when, along with stronger economic growth, state fiscal health and credit quality stabilized. However, the higher GDP growth rate in 2018—while beneficial—was driven in part by an infusion of late-cycle federal fiscal stimulus (tax cuts and deficit spending). As the effect of this stimulus fades, and in light of the Federal Reserve’s ongoing tightening, we expect the pace of economic growth to decelerate in 2019. A protracted federal government shutdown would only accentuate the drag on growth emanating from Washington (see “A U.S. Federal Government Shutdown Won’t Immediately Threaten State Credit Quality, But It Sets An Ominous Tone For 2019,” published Dec 21, 2018).
Furthermore, the Tax Cut and Jobs Act of 2017 may have caused some taxpayers to move income into (calendar) 2017. While this contributed to windfall tax collections in 2018, states can expect growth rates to decline in 2019 as revenues revert to trend.
Source: S&P Global Ratings, January 16, 2019
• Volatile markets could affect future pension costs and funding status.
• States might need to offload pension costs to local governments.
• Updated disclosure on reported retiree health care obligations could heighten awareness and spur reform.
• States continue to pass pension reform and sustainability measures in an effort to manage costs and improve system health.
• The combination of environmental, social, and governance obligations and retirement obligations could also stress long-term government costs.
In this economic recovery period since the Great Recession a decade ago, many state and local governments faced rising costs and risk further increases related to funding long-term pension and other postemployment benefit (OPEB) obligations. S&P Global Ratings incorporates a forward-looking view of pension risks to costs in its credit opinion and ratings approach. As we look forward to fiscal 2019, we believe there are five key trends related to pension and OPEB liabilities that could have implications for future government costs: market volatility; states’ offloading of costs to local governments; retiree health care liabilities; pension reform; and the management of environmental, social, and governance (ESG) obligations and retirement obligations.
Source: Laura Schultz, Michelle Cummings, Rockefeller Institute of Government, January 8, 2019
From the summary:
In its second year of annual analysis, the Rockefeller Institute of Government has examined the distribution of Federal Budget receipts and expenditures across the United States. This report examines where Federal funds are generated and spent, the balance of payments differential that exists between states, the primary explanations for those differences, and how these gaps may change over time.
Our annual analysis is designed to aid policymakers as they continue to discuss whether there is too much redistribution or too little, and the impact of those redistribution decisions on states. The Rockefeller Institute examined detailed revenue and spending data for Federal Fiscal Year (FFY) 2016 and developed a preliminary data series for FFY 2017, paying close attention to New York….
Source: Sara R. Collins and David C. Radley, Commonwealth Fund, December 7, 2018
Recent national surveys show health care costs are a top concern in U.S. households. While the Affordable Care Act’s marketplaces receive a lot of media and political attention, the truth is that far more Americans get their coverage through employers. In 2017, more than half (56%) of people under age 65 — about 152 million people — had insurance through an employer, either their own or a family member’s. In contrast, only 9 percent had a plan purchased on the individual market, including the marketplaces.
In this brief, we use the latest data from the federal Medical Expenditure Panel Survey–Insurance Component (MEPS–IC) to examine trends in employer premiums at the state level to see how much workers and their families are paying for their employer coverage in terms of premium contributions and deductibles. We examine the size of these costs relative to income for those at the midrange of income distribution. The MEPS–IC is the most comprehensive national survey of U.S. employer health plans. It surveyed more than 40,000 business establishments in 2017, with an overall response rate of 65.8 percent…..
• Chartpack (pdf)
• Chartpack (ppt)
• Data Brief
• State Profiles
• Press Release
Source: David Montgomery, Washington Post Magazine, January 2, 2019
Forget Trump’s Supreme Court picks. The Federalist Society’s impact on the law goes much deeper.
…. The conservative and libertarian society for law and public policy studies has reached an unprecedented peak of power and influence. Brett Kavanaugh, whose membership in the society dates to his Yale Law School days, has just been elevated to the Supreme Court; he is the second of President Trump’s appointees, following Neil Gorsuch, another justice closely associated with the society. They join Justice Clarence Thomas (who said last spring he’s “been a part of the Federalist Society now since meeting with them … in the 1980s”), Chief Justice John Roberts (listed as a member in 1997-98) and Justice Samuel Alito (a periodic speaker at society events). The newly solidified conservative majority on the court will inevitably decide more cases in line with the society’s ideals — which include checking federal power, protecting individual liberty and interpreting the Constitution according to its original meaning. In practice, this could mean fewer regulations of the environment and health care, more businesses allowed to refuse service to customers on religious grounds, and denial of protections claimed by newly vocal classes of minorities, such as transgender people.
But having allies on the highest court of the land is just the top layer of the Federalist Society’s expanding sway. For one thing, there is the judicial nomination process itself. When Trump was campaigning in 2016, he made the shrewd and unorthodox move of publicizing a list of 11 conservative legal stars that he promised to draw from if he got a chance to pick a Supreme Court justice. Leonard Leo, executive vice president of the Federalist Society, played a key role in suggesting the names, along with Trump’s future White House counsel, Don McGahn (also a society member), and the conservative Heritage Foundation. The list was expanded twice to include Gorsuch, Kavanaugh and others. Leo took a leave from his job at the Federalist Society to advise the White House on the confirmation process for Gorsuch and Kavanaugh — reprising a role he played for the George W. Bush White House in putting Roberts and Alito on the court.
The next most important segment of the judiciary — the federal appeals courts — is also filling up with Federalist Society members: Twenty-five of the 30 appeals court judges Trump has appointed are or were members of the society ….
Source: Tim Henderson, Stateline, January 2, 2019
More states plan to count state prisoners as residents of their home communities, rather than residents of the places where they are incarcerated — a change that would shift political power away from conservative rural areas to more liberal cities during legislative redistricting.
Many inmates hail from neighborhoods in or near cities, but most are incarcerated in small towns and rural areas. Counting prisoners as residents of their hometowns would, for the most part, boost the legislative representation of Democratic-leaning urban areas with large minority populations while diminishing the power of Republican, mostly white rural areas…..
Source: Marsha Mercer, Stateline, December 31, 2018
For decades, cities and states have tried to create jobs and boost their economies by luring out-of-state employers. Now some areas are trying to attract workers — one worker at a time.
Starting in January, programs in Vermont and Tulsa, Oklahoma, will pay people to relocate to those places if they work remotely. Other resident recruitment strategies in Florida, Kansas, Maine, Michigan, Minnesota and Vermont include weekends that tempt tourists to stay, discounted rent, student loan assistance and free land…..
Source: Sanghee Park, OnlineFirst, Compensation & Benefits Review, Published December 28, 2018
From the abstract:
Although researchers have long discussed the mixed results regarding the effectiveness of pay for performance (PFP), compensation research has not fully captured the complexity of the current PFP environments. Using individual data gathered from diverse organizations through an online survey, this study shows the current status of PFP environments that employees now face within an organization. The theoretical and practical implications for understanding the complex environments in current organizations regarding the effectiveness of PFP plans are discussed. Suggestions for future compensation research are also provided.
Source: Daniel L. Morrell, Kristie A. Abston, Compensation & Benefits Review, OnlineFirst, Published January 7, 2019
From the abstract:
Millennials are currently the largest generation at work and will reach an estimated 75% of the labor force by 2025. Studies have shown that millennials hold slightly different attitudes toward work when compared with previous generations. They more readily change jobs and are generally less committed to their organizations, with an estimated 66% of millennial employees planning to leave their current company within 5 years. These differences in work values necessitate changes in current approaches to compensation and benefit packages that would better align with these changing values. The goal of this article is to review recent empirical data on Millennials as compared with previous generations and then offer suggestions for what changes might improve retention.
Source: John G. Kilgour, Compensation & Benefits Review, OnlineFirst, Published January 7, 2019
From the abstract:
In recent years, student loan repayment programs have emerged as the hot new employee benefit. However, their growth has been restricted by their lack of favored tax status. On August 17, 2018, the Internal Revenue Service issued a private letter ruling approving a proposal to create such a program within a 401(k) plan. In a deft piece of reasoning, the private letter ruling provides relief from the so-called “contingent benefit prohibition.” This article examines student loan borrowing, the private letter ruling and its likely consequences and limitations.