Inside Trump's Budget: 6 Things State and Local Governments Should Know

BY LIZ FARMER | MARCH 14, 2019 AT 3:12 PM

This week, President Trump introduced his vision for the federal government’s 2020 budget. It proposes slashing domestic spending by 9 percent, including a 31 percent cut to the Environmental Protection Agency (EPA). Defense spending, on the other hand, would increase by 5 percent, or $34 billion.

Here are six things state and local officials should consider when reviewing the administration’s proposal.

These Pension Funds Invest Millions in Private Prisons

Some of the nation’s largest public pensions top a list of two dozen funds invested in private prison operators, a new report from the American Federation of Teachers (AFT) has found.

The California Public Employees' Retirement System, the New York State Teachers' Retirement System and the Ohio Public Employees Retirement System lead the list of pensions holding shares in the two largest private prison companies, CoreCivic and GEO Group. In total, AFT President Randi Weingarten says 24 funds across 20 states hold more than $75 million in stock in the two prison companies.

What Polarized Government Means for Tax Policy in 2019

State government is the most polarized it's been in recent memory. In all but 13 states, one party holds a trifecta, controlling both chambers of the legislature and the governorship.

But while one-party dominance tends to mean that legislation moves faster, that hasn't always meant better fiscal policy. “When you have a trifecta come into place there’s the ability for a state to ultimately think in a completely partisan manner," says Brian Kirkell, principal at the tax consulting firm RSM. "In either direction -- left or right -- partisan tax policy isn’t always the best policy.”

The Week in Public Finance: Shutdown Cost the D.C. Region Nearly $200 Million in Tax Revenue

As more than 1 million federal and contract employees struggle to make ends meet after missing a month of pay, the longest government shutdown in U.S. history is also starting to take a bite out of states and cities' revenue.

The Washington, D.C., region is by far the most affected. Around 400,000 federal and contract workers there are impacted by the impasse, which has entered its fifth week. All told, the region has so far missed out on nearly $200 million in tax revenue.

State Revenues Take a Hit

State tax collections took a dive in December compared to the same month a year ago. Observers are worried the dip could indicate more uncertain economic times ahead.

Lower income tax collections is the culprit, according to data compiled by Governing of the top 10 most populous states with an income tax and with recent data available. Every state except Indiana saw a December drop compared with a year ago, ranging from -3.4 percent in Ohio to -41 percent in California.

A State-Run Bank for Marijuana Money? Not So Fast.

Some form of marijuana is legal in more than half the states, but cannabis businesses -- medical and recreational -- are still running into a cash problem.

Since the drug is illegal under federal law, any bank that handles marijuana money can be charged with money laundering, which forces the industry to deal with large amounts of cash, making them targets for violent crime.

To alleviate the problem, the notion of creating a state-run public bank to handle cannabis business accounts has been floated in several states, including California, Colorado, Michigan, New Jersey and Washington.

The Week in Public Finance: The 10 States That Give More to the Feds Than They Get Back

Residents in Connecticut, Massachusetts, New Jersey and New York have some of the highest tax bills in the nation. They also pay thousands more in federal taxes than their state receives back in federal funding.

In total, 10 states are so-called donor states, meaning they pay more in taxes to the federal government than they receive back in funding for, say, Medicaid or public education. North Dakota, Illinois, New Hampshire, Washington state, Nebraska and Colorado round out the list.

Updated: Amid Shutdown, Welfare and Childcare Funding to Run Out 'Soon'

As the federal government shutdown wears on, millions of low-income families are increasingly at risk, and state and local governments may not have the resources to pick up the tab.

On Tuesday, Trump administration officials announced that food stamp recipients are guaranteed access to their benefits only through the end of February. But beyond that, funding for the nutrition program run by the now-shuttered U.S. Department of Agriculture is questionable.

The same is true for WIC, the women, infants and children program.