A Second State Could Ban Service Taxes

More governments are looking to expand their sales tax to services like Netflix and yoga. Already, half of states tax fitness studio classes or memberships, while places like Chicago, Florida and Pennsylvania have all started taxingonline streaming services in recent years.

But there's a growing movement in conservative states to stop that trend.

The Week in Public Finance: How the New NAFTA Deal Impacts States

After President Trump threatened for more than a year to withdraw from NAFTA, auto-manufacturing states breathed a sigh of relief when he announced a renegotiated trade agreement earlier this month with Canada and Mexico.

A U.S. withdrawal from the 1994 pact would have resulted in the reimposition of tariffs on specific goods between the U.S., Canada and Mexico. The impact would have been felt most acutely by states such as Michigan that do a lot of business with the two countries.

The Week in Public Finance: States Intent on Taxing Big Pharma Over the Opioid Crisis

Lawmakers want to raise taxes on pharmaceutical companies to help pay for the cost of the opioid crisis. But success has been elusive.
BY  OCTOBER 5, 2018

Pills being dispensed.
(Shutterstock)

 

SPEED READ:

  • Minnesota's "penny a pill" bill failed in the state legislature after heavy lobbying removed a key provision. The state plans to try again in 2019.
  • An additional 10 states all tried and failed to pass opioid taxes this session. Lawmakers in those states say they will try again nex year.
  • Only New York has successfully passed legislation, but the new law is on hold thanks to a lawsuit. 
 

States haven't been very successful at taxing drug companies to help pay for the opioid crisis. But that won’t stop them from trying again next year.

Minnesota State Rep. Dave Baker, a Republican who sponsored a failed “penny a pill” bill during this year's session, has said that he plans on a different focus in 2019: pharmaceutical licensing reform. Liquor stores and bars pay thousands of dollars each year for the privilege of selling alcohol, Baker noted this week at a conference on opioids in Minneapolis, but drug companies only pay a few hundred dollars in licensing fees.

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.
BY  SEPTEMBER 28, 2018
For Sale sign outside of a home.
(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. 

The Week in Public Finance: Do Income Tax Caps Only Benefit the Wealthy?

North Carolina voters will weigh in on the rare policy in November.
BY  SEPTEMBER 7, 2018
The North Carolina Capitol (David Kidd)

For a summary of November's most important ballot measures, click here.

A proposed income tax cap in North Carolina survived a court challenge this week, leaving it to the voters to decide whether to lean in to what is a rare policy in state government.

The November ballot measure would lower the state’s income tax rate cap from 10 percent to 7 percent. That’s still above the state’s current flat income tax rate of just under 5.5 percent. But in the past, the rate has been as high as 8.25 percent for high-income earners.

Capping income tax rates is unusual. Georgia is the only other state that does so, with a 6 percent cap approved by voters in 2014.

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.
BY  AUGUST 30, 2018
(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: After Teacher Strikes, Voters Will Get a Say on Education Funding

Support for raising teacher pay is near historic highs, but is it enough for voters -- some in red states -- to approve tax increases?
BY  AUGUST 24, 2018

Teachers protested outside the Colorado state Capitol in Denver this spring. (AP/David Zalubowski)

For a summary of November's most important ballot measures, click here.

After wide-scale teacher walkouts and strikes in six states this spring, support for teacher raises is nearing an all-time high. That could be a determining factor this fall in three states where voters will be asked to approve changes to boost school funding.

Arizona, Colorado and Oklahoma all have ballot measures on education funding and saw teacher walkouts this year. According to a new poll by the journal Education Next, nearly two out of every three respondents in those states, and others with teacher strikes, favor raising teacher pay -- a 16-point jump since last year. Nationally, about half of respondents support increasing teacher pay, the second-highest it has been in the survey's 12-year history.

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.
BY  JULY 20, 2018
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: Bankruptcy Looms in Hartford, Worries About the Sales Tax and Puerto Rico's Many Defaults

BY  AUGUST 11, 2017
Hartford Mayor Luke Bronin (AP/Jessica Hill)

Bankruptcy Is On the Table in Hartford

Over the past several months, the shadow of a potential bankruptcy has loomed large over Connecticut’s capital city. Hartford is struggling to close a $50 million budget hole -- nearly 10 percent of its spending -- and has stagnant revenues. As a result, it has been downgraded into junk status.

Hartford officials have already cut the budget to the bone, and with one of the highest property tax rates in the state, Mayor Luke Bronin says he won't raise them more. So now the question is, will the financially beleaguered state -- which already pays for half of the city's budget -- step in with more aid? Connecticut, which is facing a two-year, $3.5 billion deficit, has yet to pass a budget more than one month into the fiscal year.

Meanwhile, the city is likely trying to restructure its debt with bondholders. But if that is unsuccessful, it could seek permission from Gov. Dannel Malloy to file for Chapter 9 bankruptcy. Either way, things are coming to a head with a $3.8 million debt payment due in September and another $26.9 million payment deadline in October.

The Hidden Wealth of Cities

To find it, a new book says, localities need look no further than their roads, airports and convention centers.

BY  AUGUST 9, 2017
Downtown San Diego, with a view of the convention center.
Downtown San Diego, with a view of the convention center. (Shutterstock)

In the years since the Great Recession, there’s been a lot of effort made to ensure a government is sharing its complete fiscal picture. In many cases, this transparency push has resulted in a government’s bottom line going from a surplus to a shortfall thanks to the introduction of things like pension and retiree health benefit liabilities to annual balance sheets.

But some think governments are still leaving a few things off the ledger. Dag Detter and Stefan Folster, co-authors of the new book The Public Wealth of Cities, say localities are failing to realize the true value of the public assets they own, such as airports, convention centers, utilities and transit systems, just to name a few. “The public sector owns a lot of commercial assets,” says Detter, a Swedish investment advisor and expert on public commercial assets.

But, he adds, it doesn’t manage the risk of increased costs associated with those assets very well. Then, “the inclination is to give [management] away to the private sector,” he says. “But when you do that, you also have to give away the upside.”

The Week in Public Finance: Tardy State Budgets, Philly's Soda Tax Sputters and Raising the Debt Ceiling

BY  AUGUST 4, 2017
Connecticut state Sen. Majority Leader Bob Duff, left, holds a GOP budget alongside state Democratic President Pro Tempore Martin M. Looney. (AP/Jessica Hill)

And Then There Were Three...

It's been one month since the fiscal year began and three states still don't have a signed budget. Meanwhile, Rhode Island just enacted its budget Thursday night.

Gov. Gina Raimondo signed Rhode Island's new budget almost immediately. The $9.2 billion plan includes a $26 million cut in the car tax, free community college tuition and an increase in the minimum wage, among other policies. The agreement means the governor now has to find $25 million in savings across state government.

The three remaining states without a budget are Connecticut, Pennsylvania and Wisconsin. In Connecticut, the legislature recently approved a new collective bargaining agreement with public employees that’s projected to cover $1.5 billion of the state's estimated $5 billion budget deficit over the next two years. The deal may now help move along negotiations on how to address the rest of the budget gap.

Pennsylvania lawmakers have approved a spending plan, but have yet to address the state’s revenue problems. Key in the coming days will be whether the state’s House approves the Senate’s revenue package that includes several tax increases and expansion of legalized gambling.

Pension Plans Had a Great Year, But Retirees Likely Won't Benefit From It

One good investment year isn't enough to fix struggling systems' problems.
BY  AUGUST 3, 2017
A trader works on the floor of the New York Stock Exchange.
A trader working on the floor of the New York Stock Exchange. (AP/Richard Drew)

Public pension plans are reporting double-digit investment returns, and some are even finishing with record highs this year.

The high earnings are due to a robust stock market and are welcome news after two straight years of below-average returns for most pension plans. But finance experts say the investment boost likely won’t translate into an equally impressive reduction in pension debt because of the increasing cost of pensions.

"Government contributions tend to be insufficient to reduce unfunded liabilities -- even if the plans meet their target," says Tom Aaron, vice president and senior analyst at Moody's Investors Service.

Pension plans rely heavily on investment earnings because annual payments from current employees and governments aren’t enough to cover yearly payouts to retirees. As it stands, roughly 80 cents on every dollar paid out to retirees comes from investment income.