, borrowing for infrastructure
, local government
, Reserve Funding
, Road Repair
, sanitary sewer
, Water Funding
, What could possibly go wrong?
Most states were doing pretty well before the 2008 recession hit, but that ended in 2009. Most states had to make extremely difficult cuts or raise taxes, which was politically unacceptable. Of course invested pension systems received a lot of attention as their value dropped and long term sufficiency deteriorated, which was fodder for many changes in pensions, albeit not how they were invested. The good news is a lot of them came back in the ensuing 5 years, but 2015 may be different. A number of states have reported low earnings in 2015 and whether this may be the start of another recession. The U.S. economy has averaged a recession every six years since WWII and it has been almost seven years since the last contraction. With China devaluing their currency, this may upset the economic engine. At present there are analysts on Wall Street who suggest that some stocks may be overvalued, just like in 1999. If so, that does not bode well states like Illinois, Kansas, New Jersey, Louisiana, Alaska and Pennsylvania that are dealing with significant imbalances between their expenses and incomes. Alaska has most of its revenue tied to oil, so when oil prices go down (good for most of us), it is a huge problem for Alaska that gives $2200 to every citizen in the state. An economic downturn portends poorly for the no tax, pro-business experiment in Kansas that has been unsuccessful in attracting the large influx of new businesses, or even expansion of current ones. California and next door Missouri, often chided by Kansas lawmakers as how not to do business, outperform Kansas.
Ultimately the issue that lawmakers must face at the state and as a result the local level is that tax rates may not be high enough to generate the funds needed to operate government and protect the states against economic down turns. There is a “sweet spot” where funds are enough, to deal with short and long term needs, but starving government come back to haunt these same policy makers when the economy dips. It would be a difficult day for a state to declare bankruptcy because lawmakers refuse to raise taxes and fees.
Last weekend I went hiking on Rocky Mountain National Park, on my way to a conference in Oklahoma City. My goal was to hike 35 miles in 2.5 days prior to the conference. Friday afternoon was a solid 7 miles, but not a difficult hike. Saturday was more interesting. I hit 10 lakes in under 10 hours, plus 4 water falls. And still saw 7 deer and a bunch of Elk. And trout. And birds. So here are the 10 lakes in order:
Lake of Glass
Sky Pond (after climbing up rocks – highest lake)
Emerald Lake ( sorry sun was directly ahead so this is washed out a little
Arrived back at Bear Lake at the end of the trek. I luckily got a parking spot as the lot was basically full at 830 am due to the unseasonal weather. It was over 80 degrees – which is warmer than the temperatures this past July when we went out. Unseasonable warm weather brought out people by the thousands to enjoy the opportunity to hike this late. And the last two years I was hiking in snow on Sept 22 and Oct 4.
Your grandma always told you to save money for a rainy day. She wasn’t really talking about rainy days, but days when you had less or no income. The press talks about the huge percentage of Americans that have little or no savings, and how compared to other countries, we are at a disadvantage during economic times. A huge problem is that the same argument can be translated to governments, which must provide services, and often more services during economic downturns. But if they have no savings, how are they to accomplish this? They do not want to raise taxes and fees in down situations, so won’t the loss of services just make things worse?
A recent PEW reports suggests that states “had about half the reserves necessary to address budget gaps during the first year of the Great Recession. The 50 states had about $60 billion set aside in the summer of 2008, but in fiscal 2009, budget gaps across the country totaled $117 billion, about twice what states had in reserve. The budget gaps continued to grow in 2010 and many states struggled with shortfalls for years afterward. Bad news, but the news really does not improve. They report that 37 states have legal caps that prevent them from saving enough to weather recessions or even enough to substantially offset revenue losses, and most of those are based on some percentage of the prior year’s revenues. Why? Short-term views? Most governments figure on keeping enough cash on hand to pay bills during tax seasons. That accounts for 60-90 days of funds. Far too little for dealing with economic impacts. Far too few state governments recognize the importance of saving, figuring that cutting taxes during time of plenty and giving back to taxpayers is a better use of funds. Then it is someone else’s issue when the next economic hiccup occurs – and it will. Unless you raise your cap now as Minnesota and Virginia have recently done.
But the issue is not just a state issue. It is a local and a utility issue as well. Local governments are closer to the ground, have less leeway in their budgets and often have far too little funding as a result of resistance to raising property taxes, user fees and over-dependence on state shared sales tax, which often drops precipitously during a recession. Same goes for sin and gas tax dependence. When people slow smoking, or as oil prices drop, so do revenues. Ask Alaska, Louisiana, Kansas, Texas, North Dakota and others that are oil rich states about their budget this past year. The legislatures were begging Grover Norquist to let them out of their no tax increase pledges. He said no of course, because he doesn’t want government to function properly. So those legislators were stuck in the either “do the right thing” or “get whacked by Grover in the next election” conundrum. You know what they did because they want to get re-elected That doesn’t help the citizens of those states. Standard & Poor’s revised its outlook on Alaska’s general obligation and appropriation-backed debt from stable to negative. That will cost them in the future. St. Louis, Moody’s downgraded the city’s credit rating one step to A1, citing “the city’s weak socioeconomic profile; reliance on earnings taxes which are due for voter reauthorization in 2016.” Diversity in industry and taxes is beneficial. Too often this gets lost in the desire to do more with less, but doing more means you need more funding! And you need to collect those savings as grandma counselled!
Teddy Roosevelt would be unhappy if he were alive today. As our initial conservationist, conserving wildlife seems to have been left out. And it’s not just hunters and developers who may not being conservative. Wildlife Services, an agency within the U.S. Agriculture Department, killed more than 2.7 million animals during fiscal year 2014, including 15,698 black-tailed prairie dogs, 3 bald eagles, 2,930 foxes, 796 bobcats, 454 river otters, 322 gray wolves, 305 mountain lions, five golden eagles, 22,496 beavers, 580 black bears, 61,702 coyotes and scores of other animals including badgers, jackrabbits, muskrats, raccoons, skunks, opossums, porcupines and 16 pet dogs deemed pests by powerful agricultural, livestock and other special interests. Umm, aren’t some of those threatened or endangered animals? And rabbits? Really? Scary attack rabbits on public property? Or maybe zombie rabbits? Wolves, coyotes and prairie dogs – were targeted and killed on behalf of livestock grazers ,but haven’t we learned that certain dogs will keep wolves away from livestock? I think Oregon has a program that provides the dogs and will reimburse ranchers if a wolf gets to the livestock. Didn’t we also learn that the ecosystem is damaged when the top predators are removed from the ecosystem? The return of wolves to Yellowstone demonstrated that the loss of wetlands and beavers was attributable to the loss of wolves, not just hunting. Haven’t we figured out the expansion of coyotes coast to coast is due to the loss of wolves and lions? Perhaps there is a better way that doesn’t just involve bullets? Just asking.
It’s hard to believe it has been 14 years since the twin towers fell! I vividly remember walking into a conference room for a meeting and seeing the second plane hit. And work just stopped after that. It took a while for us to understand what happened. The why problem still sits out there. But we should never forget those lost, or the efforts of those who tried to help