Some two decades ago, Oregon joined more than a dozen states in passing a constitutional amendment that requires a legislative supermajority to approve tax hikes. Three years ago, the state Supreme Court and a subsequent legislative counsel opinion created what some say is a loophole. In November, voters could close it, making it harder for the state to raise revenue.
The Week in Public Finance: Amid Rising Home Prices, 2 States Take Property Tax Proposals to Voters
Ballot measures in California and Louisiana seek to protect homeowners from huge property tax spikes.
(Shutterstock)
SPEED READ:
- Voters in California and Louisiana face ballot measures that would reduce their property taxes at a time when the median U.S. home price has risen by 40 percent in five years
- California's Proposition 5 would help seniors, the disabled or people who are homeless as the result of a natural disaster.
- Louisiana's Amendment 6 would phase in homeowners’ new property taxes over four years.
Home prices have risen, but when voters in two states head to the polls in November, they could at least reduce their property taxes.
The median home price has risen by 40 percent nationwide in the past five years and is still rapidly rising. The increase is blamed largely on a housing shortage. The problem has been especially acute in California, which -- along with Louisiana -- is considering property tax reductions this fall.
While Feds Loosen Payday Loan Regulations, Colorado Voters Could Clamp Down
In a year when the federal government is dialing back financial regulations, Colorado could become the 16th state to limit the notoriously high interest rates on payday loans.
(Shutterstock)
For a summary of November's most important ballot measures, click here.
As the federal government walks back historic regulations on payday lending, Colorado voters this fall will be asked to tighten them -- a sign that strong consumer protections are increasingly being left to the states.
Short-term loans, often called payday loans because they’re due on the borrower’s next payday, have average interest rates of 129 percent in Colorado. Nationally, rates average between 150 percent and more than 600 percent a year. A ballot proposal, which was certified as Initiative 126 by the secretary of state on Tuesday, would cap those rates at 36 percent. If passed, Colorado would be the 16th state, plus the District of Columbia, to limit payday loan rates.
The Week in Public Finance: Do Supermajorities Really Stop Tax Hikes?
Republican lawmakers in Florida want voters to approve a ballot measure that theoretically would make it harder to raise taxes. But it's debatable whether supermajority requirements actually do.
A November ballot initiative would require the Florida legislature to have a supermajority to raise taxes. (TNS/Joe Burbank)
In an effort to protect conservative tax policy, Florida lawmakers are hoping to make their state the 15th with a supermajority requirement to raise taxes.
The push has drawn national attention because it comes as some are predicting a wave of Democratic victories this fall that could pull state policy more to the left. Opponents of the proposed Florida constitutional amendment -- which would require 60 percent voter approval to pass -- say Republican lawmakers put this on the November ballot to “stack the deck” against any Democrats taking office after them.
“It’s very clear that they’re getting ready for when they’re out of power,” Tallahassee Mayor Andrew Gillum, a Democrat, told The Washington Post. Gillum is running for governor on a platform of enacting "Medicare for All" and putting an additional $1 billion into education -- promises that would likely take tax increases to keep. “Everything we have proposed hinges on our ability to defeat this.”
The Week in Public Finance: Lobbying Congress on the 'Tax Perk,' Chronic Deficits and the Credit Threat in Illinois
Illinois Gov. Bruce Rauner speaks during a news conference. (AP/G-Jun Yam)
Tax Deductions Aren’t Just for the Super-Rich
As the Trump administration promotes a tax reform agenda that would take away the state and local tax deduction, government organizations are pushing back hard against the notion that the tax perk is utilized only by the uber-wealthy. A new report this week shows that more than half of the tax filers who take the deduction earn less than $200,000 per year. In fact, the largest group of filers who deduct their state and local taxes from their federal taxable income earn between $100,000 and $200,000 per year.
“Contrary to popular opinion, the deduction of state and local taxes does not exclusively benefit the wealthy, even though that argument has been used countless times in attempts to modify or repeal the deduction,” says the report, which was prepared by the Government Finance Officers Association.
The Week in Public Finance: Late Budgets, Illinois' First in Years and Risky Pension Investments
New Jersey Gov. Chris Christie walks from the podium following a news conference about the government shutdown that had closed state parks and beaches to the public. (AP/Mel Evans)
Better Late Than Never
They may be late, but both Maine and New Jersey finally have budgets for fiscal 2018 after shutting down their respective governments for three days.
Early Tuesday, New Jersey Gov. Chris Christie signed a $34.7 billion budget agreement and ended a shutdown. That same day, Maine’s shutdown wrapped up when Gov. Paul LePage signed a $7.1 billion budget. The deal eliminated a lodging tax increase opposed by LePage in exchange for allocating an additional $162 million to public education.
Delaware also reached a budget deal early Sunday morning. Gov. John Carney signed a $4.1 billion budget that preserved funding for nonprofits, public health programs and schools by raising taxes on real estate transfers, tobacco and alcohol.
The Takeaway: A whopping 11 states started their fiscal 2018 this month without a budget deal, an unusually high number that reflects the growing divisiveness of tax and fiscal policy. Be it dealing with budget deficits or juggling a demand to bring funding for services back to pre-recession levels, more and more of these conflicts are resulting in statehouse stalemates.
The Week in Public Finance: Alaska Avoids Its Problems, More Health-Care Pain and Municipal Defaults Are Up
| JUNE 30, 2017
The Alaska State Capitol, right, sits near the water in Juneau. (Flickr/Jasperdo)
Alaska Avoids Fixing Its Budget Problem (Again)
Facing a $2.5 billion budget gap, Alaska lawmakers have sent Gov. Bill Walker a budget that once again relies on one-time fixes and a massive withdrawal from the state’s rainy day fund.
Walker had proposed a compromise fiscal package that included a combination of revenue-raising measures and spending cuts, reforms to the state’s oil and gas tax credit program, modifications to the income tax, and reductions to residents’ annual dividend payments from the state's Permanent Fund. Instead, the $4.1 billion general fund spending plan passed by lawmakers caps Permanent Fund payments to $1,100 and relies on a $2.4 billion withdrawal from the state’s once-robust rainy day fund.
Walker has repeatedly warned lawmakers that they can't keep relying on the state’s reserves to fund its annual spending plans. But lawmakers have consistently done so anyway, making multibillion-dollar withdrawals for the past three budgets.
Is Illinois on the Brink of a Financial Armageddon?
The state's lawmakers have until the end of the week to pass a budget -- something they haven't been able to do in years. If they don't, the consequences are dire.
“Doomsday is right around the corner,” says Illinois State Comptroller Susana Mendoza. (AP/G-Jun Yam)
For two years, Illinois has managed to operate without a budget. Unless lawmakers pass one by the end of the week, the state is likely staring at an unprecedented credit rating downgrade to junk status. But that's just the beginning of its financial Armageddon: Illinois is also projected to not have enough cash this summer to fund all of its basic services like schools.
According to State Comptroller Susana Mendoza, Illinois' flagging revenues and shrinking liquidity likely mean the state will soon be $185 million short on meeting even its basic, court-ordered obligations. “Doomsday is right around the corner,” she says. “It means any number of things: road projects stopping, pension [payments] being skipped, employees not getting paid -- which will likely make people not show up to work.”
Mendoza is not alone in voicing her concerns.
The Week in Public Finance: Kansas' Experiment Ends, Alaska Still Has No Budget and Keeping Track of Debt
Kansas is rolling back its controversial 2012 income tax cuts after the Republican-controlled legislature this week succeeded in overriding a veto by GOP Gov. Sam Brownback.
The state is facing a $900 million budget shortfall and has struggled under budget deficits since the tax cuts went into effect. With the new legislation, the state’s income taxes will increase, although most tax rates will still be lower than they were before the 2012 cuts. The increases are expected to generate more than $1.2 billion for the state over the next two years. Opponents of the action call it a $1.2 billion take hike on Kansans.
On Thursday, the ratings agency Moody's Investors Service applauded the legislature's move, calling it "a significant step" toward achieving a sustainable budget.The action comes four months after lawmakers failed to override another Brownback veto preserving a tax loophole that lets scores of business owners pay no income tax.
The Week in Public Finance: The Trump Budget Edition
Someone holds a copy of President Trump's fiscal 2018 budget at the U.S. Government Publishing Office's plant. (AP/Carolyn Kaster)
Hysteria Over Cuts
President Trump unveiled his budget this week, and while it merely expanded upon an outline he submitted in March, it was still met with near-immediate outcry from state and local government groups.
In the budget, the president proposes diverting more than $54 billion from various federal agencies to boost defense spending. He also cuts $260 billion over 10 years in expected discretionary spending, a move that critics say drastically reduces federal funding and grants for vital state and local programs that create jobs, raise wages and protect low-income Americans. In total, Trump’s proposal would cut federal spending by more than $3.6 trillion over the next decade.
U.S. Conference of Mayors CEO Tom Cochran issued a statement saying that mayors across the country were "deeply troubled by President Trump’s brazen attack on the very people he promised to protect."
The Takeaway: Trump’s budget included so many drastic changes that even Republicans in Congress were uncomfortable with parts of it. It’s unlikely to pass as is, but it still has state and local governments worried.
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As the Clock Ticks, Senate Stalls on State-Run Retirement Plans
Congress could overturn a rule that allows states to create private-sector retirement programs. But it only has a limited time to do it.
The U.S. Capitol (FlickrCC/Geoff Livingston)
Late last month, Congress voted to overturn an Obama-era rule that cleared the way for cities to create retirement programs for private-sector workers that didn't have one through their employer. But a similar resolution targeting the rule as it applies to states is stuck.
For the past three weeks, that resolution has lingered in uncertainty as the Senate stalls on taking an up or down vote. Many believe that signals an opportunity. "Based on the conversations we've had with staff and colleagues working on this," says Cristina Martin Firvida of AARP, which supports the Obama-era regulation, "I think there are a number of senators who still have a lot of questions about the state rule."
The rule, which was issued by the Department of Labor, reaffirmed cities' and states' legal right to help support private-sector savings programs for small businesses. Seven states are implementing such programs, while another dozen states and cities are considering them.
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The Cost of 'RepubliCare'
Congressional Republicans this week revealed their replacement plan for the Affordable Care Act. Fiscally, the plan does what the GOP promised: If passed, it is expected to make health-care spending less expensive for the federal government (pending the assessment from the Congressional Budget Office.) States, on the other hand, will have some tough decisions to make regarding Medicaid.
Under the proposed plan, Medicaid allotments would be capped based on the program's per-capita enrollment in that state. Currently, Medicaid has an open-ended funding structure based on matching whatever a state spends.
While the plan doesn't repeal the Medicaid expansion, it starts to ramp down that population beginning in 2020 by discontinuing the federal subsidy for any new expansion enrollee. It also works to pare down the population by disqualifying any participant who lets their enrollment lapse and requiring states to redetermine enrollee eligibility every six months.
The Week in Public Finance: Oil State Woes, Why 401(k)s Might Not Be For All and More
| MARCH 3, 2017
Oil State Woes
Oklahoma's credit rating was downgraded this week, making it the third oil state in just one month to suffer such a blow. S&P Global Ratings pushed Oklahoma's rating down to AA, citing the state's chronically weak revenue. The downgrade comes as news broke this week that the state is facing a nearly $900 million shortfall.
"Collectively the state's financial position has deteriorated to a point that further precludes the state from building up reserves in subsequent fiscal years,” says S&P credit analyst Oscar Padilla, who adds the state is now more vulnerable to regional or national economic weakness.
This is Oklahoma's third consecutive year with a deficit, and the second straight year of a so-called revenue failure, when collections fall more than 5 percent below estimates.
The action follows downgrades in two other oil states last month: Moody’s Investors Service downgraded West Virginia and Louisiana one notch each. States that rely on oil and energy for significant portions of their economy have had to grapple with revenue shortfalls since the price of oil dropped drastically a year and a half ago.
The Week in Public Finance: Pensions Protest Bathroom Bills, a Billion-Dollar Showdown in Kansas and More
| FEBRUARY 24, 2017
Pension Funds Mess With Texas
The country’s largest public pension systems and investors are pressuring Texas officials not to approve a so-called bathroom bill introduced in January. The legislation targets transgender individuals by requiring them to use the public restroom that aligns with the gender on their birth certificate.
Pointing to North Carolina, which lost hundreds of millions in business from canceled sporting events, concerts and conventions after its bathroom bill became law last year, the group warned in a letter that Texas could meet the same fate. Already, the National Football League and the NCAA have said that the siting of future events in Texas would be jeopardized if lawmakers move forward.
The more than 30 signatories on the letter include comptrollers, controllers and treasurers of California, Connecticut, New York, Oregon, Rhode Island and Vermont, as well as major firms such as BlackRock and T. Rowe Price. Collectively, the group represents more than $11 trillion in assets.
The Takeaway: Threats like these aren't new. Called social divesting, stewards of major pensions have increasingly urged corporate boards in recent years to make policy changes, such as pressuring energy companies to move away from fossil fuels.
The Week in Public Finance: Diverging County Economies, Treasurers Talk Trump and Sanctuary City Threats
| FEBRUARY 17, 2017
County Recoveries Coincide With Political Shifts
The nation's economic recovery accelerated in 2016, with more than 1 in 4 counties reporting a full recovery to pre-recession levels on four key economic indicators. That portion is a huge jump from last year when 1 in 10 reported fully recovering counties, according to the National Association of Counties (NACo).
The four indicators are: job totals, unemployment rates, economic output (GDP) and median home prices. Two-thirds of the nation’s more than 3,000 counties have recovered on at least three of the economic indicators.
Most of the counties that have fully recovered are in Kentucky, Iowa, Minnesota, Missouri, Nebraska, South Dakota, Texas and Wisconsin. In addition, the mid-Atlantic, the Northeast and the West Coast have many nearly-to-fully recovered counties. Large counties (more than 500,000 residents) had the highest rate of full recovery at 41 percent. In contrast, more than three-quarters of small counties (fewer than 50,000 residents) still had not reached their pre-recession peaks in any of the indicators by the close of 2016.
The Takeaway: Both the acceleration of the economic recovery and the fact that it’s mostly happening in very populated areas is widening the gap between the municipal haves and have nots. It also partly explains shifting political allegiances in some mid-sized counties in 2016.
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A Curious Battle Over Retirement Security
Congressional Republicans this week made a move to block states’ efforts to expand access to retirement savings to all citizens. Michigan Rep. Tim Walberg and Florida Rep. Francis Rooney have introduced a resolution that would overturn a Department of Labor (DOL) rule last year that reaffirmed states’ legal right to help support private-sector savings programs for small businesses.
Walberg, chairman of the Subcommittee on Health, Employment, Labor, and Pensions, said the DOL rule created a “loophole” that undermined the retirement security of working families because it could discourage small businesses from setting up their own retirement program. “Our nation faces difficult retirement challenges," he said, "but more government isn’t the solution."
The resolution comes as seven states are in the midst of and more than a dozen states -- and even some cities -- are considering establishing such programs. Called Secure Choice, the programs require most employers that don’t currently offer a pre-tax retirement savings program to automatically enroll employees into one. The programs are run independently from the state and employees can opt out at any time.
The AARP issued a swift and harsh rebuke of the resolution, noting that 529 college savings programs give states precedent for creating independently managed, pre-tax savings accounts. Overturning “this rulemaking will have a significant chilling effect on states, sending the political message that state flexibility is not a priority,” wrote AARP Executive Vice President Nancy A. LeaMond.
The Takeaway: The facts upon which this political gamesmanship are based are, well, weak.
Despite Budget Shortfalls, Some Governors Call for Tax Cuts
In addition to new tax breaks, some states are also considering raising gas and sin taxes.
Nebraska Gov. Pete Ricketts speaks during a news conference. (AP/Nati Harnik)
About half of the states are facing budget shortfalls this fiscal year, but many governors are still pushing to cut taxes in their proposed 2018 budgets.
The proposals vary in scope but generally fall within two categories: comprehensive and targeted.
Nebraska Gov. Pete Ricketts' proposal is of the comprehensive variety and may be the most aggressive call for tax cuts so far. He is asking for property and personal income tax cuts to be phased in beginning in 2019 -- even as the state faces a $900 million budget gap. Property taxes would be reduced via a new valuation formula and income tax breaks would kick in incrementally and only in years when state revenue grows by more than 3.5 percent.
On the whole, most of the comprehensive proposals are part of ongoing efforts.