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    Friday
    Apr072017

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

    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.

    Click to read more ...

    Friday
    Apr072017

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

    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.

    Click to read more ...

    Monday
    Apr032017

    How to Beat Teacher Burnout: With More Education

    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.

    Click to read more ...

    Friday
    Mar312017

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

    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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    Friday
    Mar242017

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

    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.

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