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The Worrisome Relationship Between Population Projections and State Spending on Kids

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BY  | MAY 3, 2017

Should geography determine a child's chances for success? A new look at how much states spend per kid indicates that might be the case.

An analysis by the Urban Institute found that states that spend more per child tend to have better outcomes when taking public education, health and social services into account. At the two ends of the spectrum, Vermont spends nearly three times as much annually on children as Utah. The national average is $7,900 per child. A total of 14 states spend less than $7,000 per child and nine spend more than $10,000 each year.

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The Week in Public Finance: Trump's Tax Plan, the Tampon Tax and Calling Out the SEC

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BY  | APRIL 28, 2017

Trump Sort of Unveils His Tax Plan

President Trump unveiled his tax reform plan this week, and the massive cuts it proposes have left many wondering how the government would pay for the plan.

Much of the single-page, bullet-pointed statement, which The New York Times called “less a plan than a wish list,” contained promises Trump made on the campaign trail: a much lower corporate tax rate, the elimination of the U.S. tax on foreign profits, a reduction in the number of individual income tax brackets from seven to three, a lower tax rate, and the scrapping of most itemized deductions, including one that lets taxpayers deduct their state and local taxes from their declared federal income.

Treasury Secretary Steven Mnuchin said Wednesday that economic growth, combined with eliminating deductions, would pay for the cuts. Meanwhile, a Tax Foundation analysis of some of these key ideas shows that the plan would ultimately result in more tax revenue for state governments.

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Amid Shutdown Talk, States and Cities Seek Clues to the Future

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Whether and how Congress passes a budget this week could indicate what's to come when negotiations start for the next year, which will be the first full budget under President Trump.
BY  | APRIL 25, 2017

 

As lawmakers in Washington work to avoid a shutdown of the federal government this week, the tenor of the negotiations could provide a window for states and localities into what to expect from future budget debates on Capitol Hill.

“The big picture is how well the Republican conference gets along in terms of this run-of-the-mill budget stuff,” says Dan White, a director at Moody’s Analytics. “If they take it down to the wire, that portends some very uncertain fiscal times over the next couple months.”

The federal government has been running on a continuing resolution that funds agencies at 2016 levels. Congress has until midnight on April 28 -- this Friday night -- to agree on a spending plan for the remainder of the federal fiscal year, which ends Sept. 30, or approve another short-term resolution.

In the aftermath of the Republican party’s failure to repeal the Affordable Care Act (ACA), observers are eyeing the amount of drama it takes for Congressional leaders to agree on the budget. A political squabble now over closing out fiscal year 2017 wouldn't bode well for hopes of getting through a new fiscal 2018 budget, which must be approved by Oct. 1.

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The Emerging Strategy for Capitalizing on Women's Unprecedented Interest in Politics

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Women have mobilized in large numbers to run for office before. Women-in-politics advocates want to make sure it's sustainable this time.
BY  | APRIL 25, 2017

Jean Sinzdak could see right away that this year would be different for women in politics. For the first time in her 12 years of running a seminar for women interested in public office, she had to start a waitlist.

Registrations for the “Ready to Run” program, run by Rutgers University’s Center for American Women and Politics (CAWP), began pouring in after the presidential election. Whether it was Hillary Clinton’s loss or Donald Trump’s victory despite multiple sexual harassment accusations and a video that shows him brag about grabbing women, the election results have been a mobilizing force.

“We had a lot of women who said, ‘I never considered running myself, but this year I woke up or I realized I had to do it,’” says Sinzdak, the associate director for CAWP.

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The Week in Public Finance: Ballmer's Data Trove, Grading Pension Health and a New Muni Bond Threat

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BY  | APRIL 21, 2017

This Goes Way Beyond Open Data

You might not peg former Microsoft CEO and current owner of the NBA’s Los Angeles Clippers as a government data geek. But Steven Ballmer stepped into that role in a grand scale this week when he unveiled his privately funded, years-long project to help citizens easily track how government spends their money.

Called USAFacts, the website contains federal, state and local aggregated data on revenue and spending, as well as on debt, population, employment and pensions. Want to know about pension debt? Two quick searches reveal that unfunded liabilities in state and local retirement systems have more than quadrupled since 2000. At the same time, the median age in the country has increased by 2.5 years.

As a businessman used to the corporate world, Ballmer wants to make government financial reports more readable. To that end, the site has introduced the first government "10-K report" -- the private sector's version of an annual financial report. It aggregates data from all U.S. governments and gives progress reports on government programs, provides financial balance sheets and gives data on key economic indicators.

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As the Clock Ticks, Senate Stalls on State-Run Retirement Plans

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Congress could overturn a rule that allows states to create private-sector retirement programs. But it only has a limited time to do it.
BY  | APRIL 19, 2017

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 Week in Public Finance: Pay to Play, High Investment Fees and the Small Business Credit Crunch

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BY  | APRIL 14, 2017

Pay to Play? Hardly.

Pennsylvania is going with passive funds. That was the message this week from State Treasurer Joe Torsella, who says he plans to move the state’s $1 billion in actively managed public equity (stock) funds over to index funds within six months.

Index, or passive, funds are known for their lower fees and lower volatility. Rather than managed by a trader, these funds are built using computer models that are designed to mimic the performance of stock indexes like the S&P 500. Torsella expects the shift to save at least $5 million a year in fees.

The treasurer’s announcement is part of an effort to return faith in the office after his predecessor left in disgrace amid a pay-to-play scandal. Former Treasurer Rob McCord pleaded guilty in 2015 to federal charges that he used his office to influence future investment deals and other contracts as a way raise cash for a failed gubernatorial bid.

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The Week in Public Finance: States Warned of 'Profound Shift' in Finances, Hurting in Illinois and More

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BY  | APRIL 7, 2017

State Finances to Experience a 'Profound Shift'

Some states might soon be facing a come to Jesus moment. That was the sobering message this week from a senior analyst at S&P Global Ratings, who warned that a “profound shift” is occurring in state finances pressured by pension debt, slow revenue growth and demographic changes.

Gabe Petek noted Illinois, Kentucky and New Jersey are particularly vulnerable as they have persistently struggled to balance budgets during one of the longest economic expansion periods in modern U.S. history. But they’re not the only ones who should be put on notice. "This long period of relative calm may have lulled some people into complacency when it comes to state finances," he wrote in an editorial for The Hill. "It shouldn’t have."

In addition to slower revenue growth, declining worker-to-beneficiary ratios in state retirement systems and rising Medicaid enrollments "have meant that fiscal stress is no longer confined to recessionary times," he wrote.

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This Infrastructure Program Ended Up Costing Governments Millions. Trump Might Bring It Back.

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States and localities are wary of the president's support for the Build America Bonds program.
BY  | APRIL 6, 2017

A popular Obama-era infrastructure financing program may get revived this year as President Trump moves forward on his pledge to invest $1 trillion in infrastructure. But this time around, state and local governments might not be as excited about it.

The program, Build America Bonds (BABs), was created in 2009 as one of many recession-era initiatives aimed at jump-starting the economy. Unlike tax-exempt municipal bonds, BABs are taxable, and, as a result, open up the municipal market to new investors, such as pension funds or those living abroad. But BABs are also more expensive for governments. So to defray the added cost, the federal government offered a direct subsidy of 35 percent of state and local governments' interest payments on BABs.

But the program became a casualty of sequestration: cutbacks in federal subsidies promised under the program left state and local governments scrambling to fill the void. A recent estimate by the Institute of Government and Public Affairs at the University of Illinois found that so far Illinois and its localities have had to pay out a collective $70 million to offset the higher costs of BABs.

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How to Beat Teacher Burnout: With More Education

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A continuing education program for teachers has the power to reduce attrition rates, but it's having trouble catching on.
BY  | APRIL 3, 2017

When mathematician John Ewing started lobbying state governments to adopt a new model for keeping top teachers in the classroom, he anticipated all the usual pushback over funding and resources. One thing he didn’t anticipate was a resistance to the idea in general.

In education right now, “the focus is on everything that’s not working," he says. By contrast, his model "invests in teachers that are doing a really good job.”

In 2009, fellow mathematician and philanthropist Jim Simons called and asked Ewing to help him take over his fledgling nonprofit to provide continuing education for K-12 math teachers in New York City. But the organization, called Math for America (MfA), eventually evolved into a larger fellowship program aimed at cultivating and keeping top science, technology, engineering and math (STEM) teachers in public schools.

It’s an appealing concept at a time when keeping good teachers is becoming harder and harder.

On average, one-third of teachers leave the profession within five years. Burnout is blamed for the short tenure. A recent report from the Robert Wood Johnson Foundation found that 46 percent of teachers say they feel daily stress on a level that’s shared by doctors and lawyers.

When teachers are that stressed, the report notes, it not only compromises their health and quality of life but also adversely impacts their teaching performance. That, in turn, can harm students' academic performance and behavior. The report recommends mentoring programs, social emotional learning and mindfulness as proven ways to improve teacher well-being and student outcomes.

That's where MfA comes in.

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The Week in Public Finance: Bad Balancing Acts, Best Taxpayer ROI and Double Taxation

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BY  | MARCH 31, 2017

Race to the Bottom?

New Jersey’s pension problems and Illinois’ lack of a budget continue to dog their reputation in the eyes of creditors.

In New Jersey, Moody's downgraded the Garden State one-notch this week to A3, citing the state’s “significant pension underfunding, including growth in the state's large long-term liabilities, a persistent structural imbalance and weak fund balances.”

It’s the 11th downgrade by a credit rating agency during Gov. Chris Christie’s more than seven years in office. Overall, New Jersey’s credit rating has fallen four notches under Christie’s watch, from what’s considered high investment grade to borderline medium grade. Meanwhile, the state's unfunded pension liability has climbed to $136 billion, which mean it has less than half of what it needs to pay its retirees down the road.

For its part, Illinois is the only state rated lower than New Jersey.

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The Week in Public Finance: Detroit's Big Pension Plan, Debating the Pension Crisis and Counties Under the Gun

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BY  | MARCH 24, 2017

Detroit Hops on Pension Bandwagon

Detroit is joining Oklahoma and Kentucky in establishing a pension reserve fund. The fund essentially acts like a savings account; it's a place for governments to set aside money to help with increasing pension costs. In Detroit’s case, the fund will help the city plan for 2024, when pension costs are expected to skyrocket from $20 million annually to $200 million a year.

Thanks to Detroit's exit plan from bankruptcy in 2014, the city isn't paying the full cost of its pensions right now. A charitable foundation and the city's water and sewer system are shouldering much of those costs until 2023.

The Takeaway:  Pension reserve funds are still largely experimental. The idea is that they will help buffer a pension system from reduced government payments during times of fiscal stress. Of course, a lot depends on how these reserve funds are cultivated. To be truly effective, they must grow to total much more than the government’s annual pension payment.

States Go Old School to Fight Tax Fraud

D.C. and more than a dozen states are shunning paperless refunds to avoid being conned out of hundreds of millions of dollars.
BY  | MARCH 22, 2017

As fraudsters go high-tech to scam governments for tax refunds, some states are employing decidedly low-tech ways of stopping them.

In 15 states and the District of Columbia, tax returns that are flagged as unusual are issued as a paper refund check. The old-school method comes as tax filers are more susceptible to having their identity stolen. "When there's a suspicious situation, we send paper checks because that has to go to a physical person," says D.C. CFO Jeff DeWitt.

Things that could flag a return include the filer having a new mailing address or using a bank account from previous years.

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The Week in Public Finance: Trump's Budget, the CBO on Health Care and Accounting for Higher Ed

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BY  | MARCH 17, 2017

Trump’s Budget Cuts

This week, President Trump proposed his budget and, as expected, it focused federal spending cuts on a narrow area that impacts state and local governments the most: discretionary spending. The cuts come by way of diverting more than $54 billion from various federal agencies to defense spending.

The Takeaway: Paying for all these cuts would mean many programs beneficial to states and localities would be targeted. Under the plan, grant funding -- which accounts for 31 percent of state budgets and 22 percent of state and local spending combined -- takes an enormous hit. Specifically, Trump would eliminate the $3 billion Community Development Block Grant program, which was started by President Nixon as a way to provide direct federal assistance to city projects.

In transit, the president calls for a half-billion cut from the wildly popular TIGER grant program. He would also cut $175 million in subsidies for commercial flights to rural airports, eliminate funding for many new transit projects and discontinue support for long-distance Amtrak trains.

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The Week in Public Finance: Paying for Repeal and Replace, SEC's New Disclosure Rule and the Online Sales Tax Fight

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BY  | MARCH 10, 2017

 

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.

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How Refinancing Debt Can Help Pensions

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North Carolina wants to use existing low rates to shore up retiree pensions and health-care debt.
BY  | MARCH 8, 2017

In the low interest rate environment, states and localities have been saving billions by refinancing old debt. In most cases, the savings have benefited the general fund balance. But in North Carolina, State Treasurer Dale Folwell is making a push to instead use those savings to pay down pension and retiree health-care debt.

Starting this spring, Folwell plans to refinance “every dollar we possibly can.” He'll ask the General Assembly to divert the savings to the treasurer’s office, where he'll then divvy up the extra dollars: 15 percent goes into the pension fund and 85 percent goes toward retiree health-care debt, which has a larger unfunded liability.

The approach has garnered rave reviews, but some question just how big a dent any such savings can make in an unfunded liability that in North Carolina totals nearly $38 billion between retiree pensions and health care.

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The Week in Public Finance: Oil State Woes, Why 401(k)s Might Not Be For All and More

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BY  | 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.

How Libraries Are Fighting Fake News

Fake news is as old as Bigfoot. But social media and the president have fueled its recent proliferation.
BY  | FEBRUARY 28, 2017

Less than seven miles from the White House, where President Trump has popularized the term "fake news," residents in a suburban Maryland library gathered recently to learn how to not be duped themselves.

“Social media is a common theme here because you see things being shared over and over again,” Ryan O’Grady, media producer and director of the Maryland State Library Resource Center, told the audience. “Just because something is popular doesn’t make it true.”

The program, which O’Grady is running at several libraries in Maryland’s Montgomery County, is in response to the recent explosion of unverified, unsourced and sometimes untrue information that purports itself as news. The program aims to educate residents about how to spot fake news.

While it's not a recent phenomenon -- the Bigfoot myth goes back centuries, and fabricated stories abounded when emailing was new, for example -- fake news played a prominent role in the 2016 presidential election and continues to do so in the new administration. Sites like Facebook and Twitter give fake news outlets a platform to reach more people than they would otherwise be able to. Once the misinformation is out there, it can spread quickly, often before users even read or verify a story

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The Week in Public Finance: Pensions Protest Bathroom Bills, a Billion-Dollar Showdown in Kansas and More

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BY  | 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 Real Price of College

Most states don't keep track of how much they give to students and their families in tax breaks. That could be hurting their ability to make college affordable for all.
BY  | FEBRUARY 23, 2017

How much does higher education cost? Surprisingly, that's a question most states can't answer.

Every state, of course, knows what it plans to spend on higher ed each year, which generally accounts for about 10 percent of a state's budget. But few places track what they give up in tax breaks to help defray the cost of college for taxpayers, according to a new Pew Charitable Trusts report. Since many states default to the federal government's qualifications for these tax breaks, most don't know how vulnerable they are to changes at the federal level.

Phillip Oliff, one of the report's authors, says states should be regularly looking at both sides of the equation -- tax breaks and direct spending -- when considering how they pay for and promote education policy. "Then they can think about whether the full package of support is being used as effectively as possible to promote their policy goals," he says.

In a review of the 41 states and the District of Columbia that tax personal income, just nine states and the district assess their higher education-related tax expenditures. These expenditures include special deductions, tax credits and exemptions that allow tax filers to reduce their declared taxable income. California, for instance, spent $10.8 billion on higher education in 2014, the year for which Pew has comprehensive data. But its estimated foregone revenue from higher education tax expenditures nudges the state's total cost up to $11.2 billion.