Focus on State and Local Governments

By BRUCE BARTLETT, Posted: August 03, 2010

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In an August 2 speech, Federal Reserve Board Chairman Ben Bernanke discussed the fiscal problems of state and local problems at length.

Also on August 2, the Mercatus Center released a study that argues against tax increases to deal with state budget deficits on the grounds that they will just encourage more spending.

On July 29, the Federal Reserve Bank of Chicago released a study of how to make countercyclical aid to the states automatic based on a formula that would trigger aid based on macroeconomic conditions.

On July 27, National League of Cities, United States Conference of Mayors, and the National Association of Counties released a survey of local governments. It finds that there has been an 8.6 percent reduction in full time equivalent staff positions over the previous year.

A July 26 study from the Brookings Institution examined the Census Bureau’s American Community Survey, which generates the data used to allocate a great deal of federal aid to state and local governments.

On July 22, the Mercatus Center released a study of fiscal gimmicks being used at the state level to evade balanced budget requirements.

On July 15, the Center on Budget and Policy Priorities issued a report examining state finances. It finds that the aggregate spending gap for fiscal year 2011, which began on July 1 for most states, is $121 billion or 19 percent of budgets in the 46 states that have adopted budgets thus far. A key problem is the rising cost of Medicaid.

In a July 14 paper, three Federal Reserve Bank of New York economists examined the deterioration of state budgets in New York and New Jersey. They find that their heavy reliance on the income tax has created greater volatility in tax revenues and recommend that their tax systems be reformed to be less sensitive to the business cycle.

In a July 13 commentary, Harvard economist Ed Glaeser endorses increased federal aid to the states. However, in order to prevent such aid from being a bailout for profligate states at the expense of those that kept spending under control, he suggests that it be made conditional on the adoption of reforms, just as the International Monetary Fund does.

In June, the Bureau of Labor Statistics released its National Compensation Survey for 2009. Among the findings: the average hourly earnings of a private sector worker were $20.18; those for a state and local government worker were $25.74.

I previously posted readings about state and local governments on July 8 and June 14. Visit the Bartlett’s Notations home page here.

Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He blogs daily and writes a weekly column at The Fiscal Times. Read his most recent column here. Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).

In an August 2 speech, Federal Reserve Board Chairman Ben Bernanke discussed the fiscal problems of state and local problems at length.Also on August 2, the Mercatus Center released a study that argues against tax increases to deal with state budget deficits on the grounds that they will just encourage more spending.On July 29, the Federal Reserve Bank of Chicago released a study of how to make countercyclical aid to the states automatic based on a formula that would trigger aid based on macroeconomic conditions.On July 27, National League of Cities, United States Conference of Mayors, and the National Association of Counties released a survey of local governments. It finds that there has been an 8.6 percent reduction in full time equivalent staff positions over the previous year.A July 26 study from the Brookings Institution examined the Census Bureau’s American Community Survey, which generates the data used to allocate a great deal of federal aid to state and local governments.On July 22, the Mercatus Center released a study of fiscal gimmicks being used at the state level to evade balanced budget requirements.On July 15, the Center on Budget and Policy Priorities issued a report examining state finances. It finds that the aggregate spending gap for fiscal year 2011, which began on July 1 for most states, is $121 billion or 19 percent of budgets in the 46 states that have adopted budgets thus far. A key problem is the rising cost of Medicaid.In a July 14 paper, three Federal Reserve Bank of New York economists examined the deterioration of state budgets in New York and New Jersey. They find that their heavy reliance on the income tax has created greater volatility in tax revenues and recommend that their tax systems be reformed to be less sensitive to the business cycle.In a July 13 commentary, Harvard economist Ed Glaeser endorses increased federal aid to the states. However, in order to prevent such aid from being a bailout for profligate states at the expense of those that kept spending under control, he suggests that it be made conditional on the adoption of reforms, just as the International Monetary Fund does.In June, the Bureau of Labor Statistics released its National Compensation Survey for 2009. Among the findings: the average hourly earnings of a private sector worker were $20.18; those for a state and local government worker were $25.74.I previously posted readings about state and local governments on July 8 and June 14. Visit the Bartlett’s Notations home page here. Bruce Bartlett is an American historian and columnist who focuses on the intersection between politics and economics. He blogs daily and writes a weekly column at The Fiscal Times. Read his most recent column here. Bartlett has written for Forbes Magazine and Creators Syndicate, and his work is informed by many years in government, including as a senior policy analyst in the Reagan White House. He is the author of seven books including the New York Times best-seller, Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006).