California

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The Week in Public Finance: Amid Rising Home Prices, 2 States Take Property Tax Proposals to Voters

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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. 

States Get Creative on Pension Funding

The latest plans in California and New Jersey have observers asking: creative solution or accounting gimmick?
BY  | JULY 19, 2017
New Jersey Gov. Chris Christie
Gov. Chris Christie has hailed the lottery legislation as a foolproof way to immediately boost the health of the pension fund. (AP/Seth Wenig)
 

Most states have enacted some type of reform over the past decade to shore up their pension funds for the future. But such changes have typically done little to make a dent in the liabilities that governments already have on the books.

As those liabilities increase, states and localities are turning to more creative solutions to ease the burden.

California and New Jersey are moving forward with plans that would boost respective pension assets, dramatically decrease unfunded liabilities and reduce payouts for the immediate future. But critics of the plans say the two states are doing nothing more than moving numbers around on paper.

In New Jersey, the state is pledging its lottery -- which an outside analysis determined was valued at $13.5 billion -- as an asset to state pension funds. The action would reduce the pension system's $49 billion unfunded liability and improve its funded ratio from 45 percent to about 60 percent, according to State Treasurer Ford Scudder. The roughly $1 billion in annual lottery proceeds, which currently go to education and human services, among other programs, will now be divvied up among state pension funds. The largest share -- nearly 78 percent -- will go to the teachers' pension fund.

Although unions grumbled about the plan, it passed with little public debate as lawmakers were preoccupied by budget negotiations. Gov. Chris Christie and Scudder have hailed the lottery legislation as a foolproof way to immediately boost the health of the pension fund. But others have been less enthusiastic about the plan.

Municipal Market Analytics' Matt Fabian dubbed it an accounting scheme, noting it also places a roughly $970 million burden on New Jersey's general fund budget to pay for the programs formerly covered by the annual lottery proceeds. "We believe that, at best," Fabian wrote, "this transaction delays honestly confronting the pension liability problem."

No 401(k)? No Problem. States Have You Covered.

Several states are preparing to offer a retirement plan that helps private-sector workers -- and taxpayers -- save money.
BY  | FEBRUARY 8, 2017

This July, Oregon will become the first state to offer a retirement plan to part- and full-time private-sector workers who don't have access to one through their employer. The program is ultimately expected to cover nearly one million workers in the state.

Six other states -- California, Connecticut, Illinois, Maryland, New Jersey and Washington -- are also planning to roll out similar programs within the next five years. When that happens, the seven states will cover nearly one-quarter of the nation's private-sector workers without an employer-sponsored retirement plan.

Called Secure Choice, these programs have been catching on since California in 2012 decided to study the feasibility of creating one. They aren't pensions but instead independently managed and pooled retirement accounts. The programs pay for themselves through fees, so states aren't liable for the cost. In addition to the seven states that have approved a program, at least eight other states -- including populous New York -- have or are considering legislation to launch their own.

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The Week in Public Finance: Repealing Obamacare, How a California Ruling Threatens Pensions and More

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A roundup of money (and other) news governments can use.
BY  | JANUARY 6, 2017

How Much Will Dismantling Obamacare Cost?

As leaders in Congress kick off the 115th session by assuring the public they will repeal the Affordable Care Act (ACA) in full by the end of this year, a newly released estimate puts the cost of a total repeal at roughly $350 billion through 2027.

According to the nonpartisan Committee for a Responsible Federal Budget, repealing the law's Medicare-related cuts and its tax increases -- such as the "Cadillac tax" on high-cost insurance plans -- could cost the government more than if it left the ACA in place.

But the report found that lawmakers could save money if they just repeal parts of the law. For example, if Congress only does away with the ACA's coverage provisions (mainly the Medicaid expansion), it could save $1.55 trillion through 2027.

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To Prepare for the Next Recession, States Take Stress Tests

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No government can be fully prepared for every economic twist and turn. Still, some are trying.
BY  | DECEMBER 12, 2016

The Great Recession was uniquely devastating for states and localities because it hit all three major tax revenue sources: income, sales and property. It was a scenario that few, if any governments, were really prepared to absorb. As a result, governments were forced to make massive budget cuts.

Now, as the recovery trudges on longer than most, a growing number of states are making sure they aren’t blindsided by the next downturn.

Enter stress testing. The idea, which was borrowed from the U.S. Federal Reserve, essentially throws different economic scenarios at a state budget to see how revenues would be impacted.

“We’re in an environment where everyone is starting to think about the next downturn and what that’s going to look like,” said Emily Raimes, a Moody’s Investors Service analyst. “A stress test is a tool for states to think about what types of programs they should commit to and how much to save now.”

Arkansas, California Voters Approve Spending on Mega Projects

In an anti-debt climate, voters in the two states cleared the way for spending on major economic development projects.
BY  | NOVEMBER 9, 2016

In the post-recession era, "debt" is a four-letter word. State debt levels as a whole have been stagnant in recent years and, in 2014, actually recorded the first decline in the 28 years Moody's Investors Service has been tracking them.

It's in this climate that voters in Arkansas and California have cleared the way for more spending on mega projects that could be economic development boons in those states.

In Arkansas, voters overwhelmingly passed a ballot initiative that eliminates the state's current 5 percent cap on debt related to economic development projects. Proponents of Arkansas’ Issue 3, who included Gov. Asa Hutchinson, want the cap lifted so the state can be more competitive in attracting new corporations by helping fund mega projects. Voters easily approved the measure, 65-35.

In California, which has one of the highest taxpayer debt burdens in the country, the results were much closer. Voters narrowly rejected a proposal, 51-49, that could have derailed two of Gov. Jerry Brown's legacy projects. Prop. 53 would have limited the state's ability to issue debt for major projects by requiring voter approval to issue more than $2 billion in revenue bonds.

Bilingual Education Will Make a Comeback in California

The state, which has more English-language learners than any other, restricted bilingual education in the '90s. Voters are bringing it back.
BY  | NOVEMBER 9, 2016

Nearly two decades after voters made California one of the most restrictive states for bilingual education in public schools, residents on Tuesday reversed that decision.

In California -- which has the nation's highest rate of students who speak a non-English language at home -- fewer than 5 percent of public schools now offer multilingual programs. But by approving Proposition 58, school districts can now offer regular dual-language programs.

In 1998, voters approved Prop. 227, a law passed amid anti-immigrant fervor that said students whose first language isn't English can only take one year of intensive English instruction before transitioning to English-only classes. Parents who wanted bilingual classes for their kids beyond that had to sign a waiver each year.

Prop. 58 essentially repeals the waiver system but keeps intact the part of the law requiring proficiency in English. It cruised to victory Tuesday night by a nearly three-to-one margin.

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To Limit Debt or Make It Limitless? 2 States’ Voters Will Decide.

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In an anti-debt climate, one state aims to rein it in while another tries to uncap it.
BY  | OCTOBER 27, 2016

In the post-recession era, "debt" is a four-letter word. State debt levels as a whole have been stagnant in recent years and, in 2014, actually recorded the first decline in the 28 years Moody's Investors Service has been tracking them.

It’s in this climate that voters in two states are considering nearly opposite proposals on debt.

California, which has one of the highest taxpayer debt burdens in the country, will decide whether to limit lawmakers’ ability to issue debt for major projects. Prop. 53 would require voter approval to issue more than $2 billion in revenue bonds.

In Arkansas, a ballot initiative proposes making it easier for the state to incur more debt. Issue 3 would eliminate the state's current 5 percent cap on debt related to economic development projects.

Each state's history with bond debt has a lot to do with these conflicting proposals

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The Week in Public Finance: Wells Fargo's Punishment, a Surprising Study and Kansas' Forecasting Blues

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BY  | OCTOBER 7, 2016

Governments Punish Wells Fargo

Some governments are temporarily cutting ties with Wells Fargo thanks to a scandal involving thousands of unauthorized accounts.

This week, Illinois and the city of Chicago announced they're joining California and suspending their relationship with the bank for at least one year. Meanwhile, Massachusetts, Oregon and the city of New York are reviewing their business ties with the firm.

In California, the Battle Over Bilingual Education Is Back

The state has more English-language learners than any other and also some of the country's most restrictions on bilingual education. November could change that.
BY  | OCTOBER 6, 2016

As research shows the benefits of a bilingual education, dual-language immersion programs are becoming more popular and not just for English-language learners. But in California -- which has the nation's highest rate of students who speak a non-English language at home -- getting a bilingual education is harder than in most states.

That could change in November, though, as voters have a chance to repeal a 1998 law that passed amid anti-immigrant fervor and severely limited access to bilingual education in the state. If approved, Prop. 58 would allow school districts to offer regular dual-language programs.

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The Week in Public Finance: Troublesome Sports Arenas, Buying Muni Bonds and California's Tenuous Recovery

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BY  | SEPTEMBER 23, 2016

Nebraska Town Hit With 'Superdowngrade'

The tiny town of Ralston, Neb., was surprised by a seven-notch "superdowngrade" this week when its arena bonds were sent hurdling into junk rating territory. S&P Global Ratings said it moved the rating from A+ to BB because of the financial strain the building is placing on the city of roughly 6,000 people.

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The Week in Public Finance: Pensionomics, Hidden Bank Loans and Private Equity Fees

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BY  | SEPTEMBER 16, 2016

Do Pensions Help the Economy?

A new study on how pensioners spend their money will likely give a boost to those who want to keep traditional, defined benefit pension plans in the public sector.

Published this week by the nonprofit National Institute on Retirement Security (NIRS), the analysis on pension retiree spending in 2014 estimates it resulted in $1.2 trillion in total economic output. The total is based on about a half-trillion in benefits paid to public and private pensioners in 2014. State and local pension benefits account for about half ($253 billion) of those benefits.

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The Week in Public Finance: Muni Credit Trends, the Next Round of Tax Reforms and More

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A roundup of money (and other) news governments can use.
BY  | MAY 20, 2016

What’s Going on With Muni Credits?

The trend of local governments only seeking out one credit rating for bonds is growing. Now, one in five bonds issued in the municipal market has just a single credit rating assigned to it, according to data from Municipal Market Analytics (MMA).

This can be attributed to several factors. For one, fewer individual investors -- the biggest users of credit ratings information -- are directly purchasing muni bonds, so the demand for multiple ratings has lessened. Also, agencies are increasingly giving different ratings to the same bond, which “undermines the notch-by-notch value of individual rating assignments," said MMA analyst Matt Fabian.

Along with this trend is another one: A significant portion of municipal issuers are worse off than they were at the end of the Great Recession. By the measure of PNC Capital Markets analyst Tom Kozlik, 20 percent of state and local governments have seen their underlying credit quality decline -- some significantly so.

Kozlik blames this on one key fact: governments' inability to balance their revenue and spending to live within their means. “Also,” Kozlik adds, “some state and local governments still have not grasped the scale, costs and risk that pension liabilities and other post-employment benefits still pose to credit quality and fiscal balance.”