From the annals of state austerity budgets…

To the Editor:

Thank you for your editorial about Illinois and Kansas as examples of states where policy makers do more harm than good (“Sorry Tales From Two Statehouses,” April 25).

Illinois’ record 10-month budget impasse is eroding much of its educational and social service systems. According to a poll of 444 Illinois social service providers, 85 percent are scaling back on the number of clients they serve.At least 3,200 homebound seniors have lost home-delivered hot meals.

Service agencies have laid off experienced and talented staff members, perhaps never to get them back. Lutheran Social Services of Illinois, the state’s largest social service provider, announced that it would cut 43 percent of its work force.

And all 29 Illinois agencies serving sexual assault survivors have instituted furloughs or left unfilled positions vacant, leaving survivors without essential services.

The damage is permanent, not easily or perhaps ever remedied. Even when funding is restored, we won’t simply return to business as usual. Ours is a real-life example for governments considering a similar path.

JOHN BOUMAN
President, Sargent Shriver
National Center on Poverty Law
Chicago

Source: Drastic Cutbacks in Illinois – The New York Times

States fighting the minimum wage

What rights to cities have to regulate the conditions under which their residents work? If some state legislatures had their way: none.

With federal efforts to increase pay for the lowest earners stalled by Republican opposition, a slew of states, cities and towns across the country have hiked the local base pay on their own. But other states are doing the opposite, in some cases passing laws prohibiting cities and towns from changing workers’ pay and benefits on their own.

Recent weeks have seen the continuation of a substantial pushback to efforts in cities and towns around the country to raise the minimum wage. Utah and Alabama are the latest examples of states either defeating measures to increase minimum pay or overriding local efforts to hike pay.

Read: States rush to block local efforts to hike minimum pay – CBS News

Of course these states argue that minimum wage policies destroy jobs (a claim successfully debunked by many, including the great researchers at UC Berkeley’s Labor Center, where I work). Here’s an Alabama senator parroting that argument:

But even if state legislatures believe this, what are the implications of denying cities the power to pursue these policies and risk the consequences? Presumably, if wage policies are such a job killer, those firms will locate elsewhere in the state (a natural experiment in minimum wage policy). Are state legislatures really more concerned about urban workers than their own local representatives? Or are cities likely to pursue policies that might benefit the city but somehow damage the state’s economy in the long run?

I think it’s important not to just dismiss the Red-Blue political divide that pits state legislatures against their own city governments (although that is important terrain to expose, and certainly fundamental to Flint’s crisis, among other debacles). There is also an argument being implied about the proper power and economic relationship between cities and states, one that deserves real attention, both by activists and researchers. Remember that powers in our federal system often gravitate to one branch or another, and can be calcified there. What’s at stake here is the question of who has the power to implement economic policy.

When universities go bankrupt…

LSU and many other public colleges in Louisiana might be forced to file for financial exigency, essentially academic bankruptcy, if state higher education funding doesn’t soon take a turn for the better.

Louisiana’s flagship university began putting together the paperwork for declaring financial exigency this week when the Legislature appeared to make little progress on finding a state budget solution, according to F. King Alexander, president and chancellor of LSU.

“We don’t say that to scare people,” he said. “Basically, it is how we are going to survive.”

Being in a state of financial exigency means a university’s funding situation is so difficult that the viability of the entire institution is threatened. The status makes it easier for public colleges to shut down programs and lay off tenured faculty, but it also tarnishes the school’s reputation, making it harder to recruit faculty and students.

Lawmakers have yet to move any revenue-raising measures — either a tax hike or tax credit rollback — during the session. A Senate Finance Committee is scheduled to take up an inventory tax repeal Wednesday afternoon (April 22) that would produce additional revenue for the state, though passage is far from certain.

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The Glitch in Colorado’s Weed Experiment – NYTimes.com

To be filed under the “be careful what you wish for” category of fiscal policy. Colorado scrambles to avoid having to refund all of the revenue from marijuana sales, because, well because SMALL GOVERNMENT!

As an April 1 report in The Times explained, Colorado’s tax revenues have recently surged, thanks in part to the booming construction, oil and gas industries, in addition to some $58 million from the marijuana taxes. But not only revenues but overall state spending this year are expected to end up higher than the state estimated back when the marijuana tax was on the ballot. Under Tabor — which some in Colorado have likened to a fiscal straitjacket or a statutory version of the crazed space computer HAL 9000 — the state is therefore required to refund the marijuana money.

It will be interesting to see how this turns out. Legislators are trying to pass a law that would get around this, but the constitutional amendment still stands, until voters agree to repeal it.

Read: The Glitch in Colorado’s Weed Experiment – NYTimes.com.

News of the unsurprising: tax cuts lead to budget deficits

November 18, 2014 – RALEIGH, N.C.

North Carolina lawmakers are likely enjoying some downtime after the legislative session and midterm election, but experts predict a tough session waiting for them on their return to Raleigh. A report from the Office of the State Controller indicates tax revenues are down by almost $400 million compared with this same time last year – a six percent drop in revenue. Alexandra Sirota, director of the North Carolina Budget and Tax Center, says it’s not a problem the State Assembly will be able to ignore in January.

“This is a serious issue,” she says. “It’s self imposed in that policymakers chose to reduce our revenue. Now they’re going to have to make choices about some pretty deep cuts.”

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Kansas cuts taxes, guess what happens next?

There may be even bigger challenges coming. In addition to the likelihood the state will face another unpleasant revenue surprise in the spring, a pending court decision could obligate the legislature to add hundreds of millions of dollars a year to state aid to school districts. And bond rating agencies, which already downgraded the state’s debt this year, could be expected to react negatively to both of those events.

The tax cuts were the leading issue in the Kansas governor’s race this year, and in addition to re-electing Governor Brownback, voters expanded the Republican supermajority in the state’s House of Representatives. This was a clear mandate for the policy of deep tax cuts. What remains to be seen is how the legislature, once the rainy-day fund is exhausted, will deal with the spending pressures they have created.

Read: Kansas Announces Big Budget Gap; True Gap May Be Even Larger – NYTimes.com.

Michigan has nearly $1B more than expected for budget | Crains Detroit Business

State budgets have been rebounding much faster than most city budgets (for many reasons: spending cuts achieved through attrition are finally appearing on the balance sheet, income taxes have begun to recover faster than housing values, etc.). Accordingly, states that were experiencing “fiscal emergencies” just a few months ago are now facing surpluses as they begin to budget for the coming fiscal year. As could be expected, tax cuts are first on the table (despite the fact that it wasn’t tax increases but spending cuts that contributed most to the surplus).

LANSING — Gov. Rick Snyder and lawmakers have nearly $1 billion more than expected when crafting Michigan’s next budget.

The Snyder administration and economists today agreed the state will take about $975 million more in tax revenue from last fiscal year through the next budget year than was forecast eight months ago.

The debate now will ramp up over what to do with the surplus. Tax cuts, more road repairs and extra money for education are on the table.

Read: Michigan has nearly $1B more than expected for budget | Crains Detroit Business. (January 10, 2014)

Report: Detroit bankruptcy caused by state cuts, shrinking tax base, not long-term debt | Detroit Free Press | freep.com

While we wait for the federal judge to rule on Detroit’s petition for bankruptcy, a Demos report enters the fray:

WASHINGTON — A New York-based think tank released a report today questioning Detroit Emergency Manager Kevyn Orr’s assertion that the city’s long-term debt is responsible for its fiscal problems, or that pension contributions are at major hurdle for the city’s finances.

Instead, the report by Wallace Turbeville, a senior fellow at Demos, a public policy organization, said Detroit’s decline into bankruptcy was caused by a steep decline in revenues partially due both to a shrinking tax base and deep cuts in state revenue sharing with the city.

“By cutting revenue sharing with the city, the state effectively reduced its own budget challenges on the backs of the taxpayers of Detroit,” Turbeville wrote. “These cuts account for nearly a third of the city’s revenue losses between (fiscal year) 2011 and FY 2013. … Furthermore, the Legislature placed strict limits on the city’s ability to raise revenue itself to offset these losses.”

It says a lot about what’s at stake in Detroit that Demos, an organization committed to reducing political and economic inequality, chose to question the factors that have been blamed for Detroit’s struggles for decades, but especially in the past few years: unions and an “addiction to debt” (Orr’s words). I haven’t had a chance to read the report yet, but I hope it’s able to break some of the conservative grip on the narrative about urban fiscal crisis in Detroit and elsewhere.

Read: Report: Detroit bankruptcy caused by state cuts, shrinking tax base, not long-term debt | Detroit Free Press | freep.com.

States budget cuts leave poor in a fix – SFGate

California has apparently “fixed” its budget deficit, but at what cost? One of the fallouts from the unfolding budget crises in cities and states has of course been cuts to social programs. But the scale of those cuts often gets masked by the noise of political fighting. One could be forgiven for not being able to keep track of the dismantling of many programs, and the continual backward slide in funding for things like schools and healthcare. Is the damage done? Have we arrived at a “new normal” in which cities and states just don’t pay for these things anymore?

Social service advocates say the damage from billions of dollars in cuts over several years has already been done and in some cases will get worse. Cash grants to welfare recipients have been cut by 12 percent over the past three years, according to the Western Center on Law and Poverty in Sacramento, which advocates for low-income Californians.As of this month, the maximum cash grant is $638 for a family of three, the organization said – which is 40 percent of the federal poverty line.”For the families who have been dealing with the cuts, nothing has changed – theyre still being denied services,” said Michael Herald, a legislative advocate for the group. “Its nice that the budget is balanced, but it doesnt mean a lot to them.”

via States budget cuts leave poor in a fix – SFGate.