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CLT UPDATE
Friday, July 14, 2017
New Report:
How our heavy tax burden is being squandered
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State government in Massachusetts has
exhibited "serious signs of fiscal distress" and in fiscal
2015 posted an overall condition that was better than only
Illinois and New Jersey, according to a new study that
compared states.
The fourth annual study ranked states based
on short- and long-term debt, unfunded pension and health
care benefits, revenues and expenditures, cash on hand and
other assets. Researchers at George Mason University's
Mercatus Center used information from audited financial
reports, and said the rankings this year were influenced by
new accounting standards that require states to report their
net pension liabilities....
States with the lowest rankings, including
Massachusetts, were flagged for "the low amounts of cash
they have on hand and their large debt obligations."
"Kentucky, Massachusetts, Illinois, and New
Jersey have three commonalities: weak levels of cash
solvency, large liabilities relative to assets, and unfunded
pension and OPEB (other post-employment benefit) liabilities
that are large relative to the income of state residents,"
the study said. "On a cash-solvency basis and using the
strictest measure of cash solvency, all four states have
insufficient cash to cover short-term liabilities. When
including less liquid forms of cash, Massachusetts and
Illinois have the weakest measures of cash solvency ... "
Total primary government debt in
Massachusetts of $28.43 billion, or 6.9 percent of personal
income, is "nearly twice the average in the states," the
study said. In other states, some debt absorbed at the state
level in Massachusetts is incurred at the county government
level.
The study pegged the unfunded public pension
liability in Massachusetts at $31.13 billion, compared to a
national average of $20.62 billion.
Researchers concluded that Massachusetts is
among a few states with budgets featuring revenues that fall
short of expenses during the fiscal year.
"Kentucky's net position moved in a positive
direction with the state reporting a per capita surplus of
$122.13," the study said. "Massachusetts, Illinois, and New
Jersey each moved in a negative direction in net position,
with per capita deficits of $319.43, $27.65, and $677.88,
respectively."
State House News Service
Tuesday, July 11, 2017
Study gives Mass. poor ranking for fiscal health
Several states, including Republican states,
have decided to raise taxes this year to cover budget
shortfalls. But a new study suggests that the states might
find themselves in worse financial shape after the money
starts rolling in.
According to the latest ranking of states by
the Mercatus Center at George Mason University, the most
fiscally sound states in the nation are all low-tax, GOP
strongholds, while the 10 least-solvent states are almost
all high-tax and heavily Democratic....
The Mercatus report doesn't include data on
the states' political leanings or tax burdens, but the
implication is clear.
Of the 25 most-solvent states, all but four
are solidly Republican. Of the bottom 25 states, all but
five are solidly Democratic.
The most fiscally sound states also tend to
have the lowest tax burdens, according to a separate
analysis by the Tax Foundation, which measures state and
local tax burdens as a percentage of state income.
The average tax burden among the 10 most
fiscally sound states is 8.5%, according to the Tax
Foundation's 2017 report. The average tax burden among the
10 least fiscally sound states: 10.2%.
Here's another way to look at it: Of the 15
least-solvent states, 10 are among the 15 states with the
highest tax burdens.
Only one of the worst performing states —
Louisiana — has a tax burden that is below 8% of income. And
not one of the best performing states has a tax burden above
9.6%.
Of the nine states that raised taxes this
year, four of them are bottom ranked — none are in the top
10.
The bottom line is that the more money the
state government takes from taxpayers, the worse it handles
it.
This should serve as a flashing warning to
any state that thinks it can tax its way out of its fiscal
problems.
Investor's Business Daily
Tuesday, July 11, 2017
Best-Run States Are Low-Tax Republican,
Worst-Run Are High-Tax Democratic, Study Finds
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Chip Ford's CLT
Commentary
On May 4th CLT issued a news release, "Tax
Freedom Day in Mass. arrives tomorrow — 12 days late; Only
NY, NJ and CT arrive later." In it we noted:
The non-partisan Tax
Foundation recently released its annual Tax Freedom
Day report. This year Tax Freedom Day nationwide
fell on April 23rd, 113 days into the year.
In Massachusetts it arrives
12 days later, tomorrow on May 5th — ahead of only
New York (May 11), New Jersey (May 13), and
Connecticut (May 21).
According to the Tax
Foundation, this "is a significant date for
taxpayers and lawmakers because it represents how
long Americans as a whole have to work in order to
pay the nation’s tax burden."
Taxpayers of Massachusetts
ranked 47th-latest in how long Americans as a whole
have to work in order to just pay their federal,
state, and local tax burdens....
Massachusetts taxpayers will
work 125 days just to pay their taxes — 12 days
longer than the national average.
This again proves that
Massachusetts does NOT have a revenue problem.
Beacon Hill has an
INSATIABLE SPENDING ADDICTION.
The Legislature's recent
obscene $18 million pay grab is clear and undeniable
evidence.
Taxpayers in Massachusetts and only three other states
were still paying toward their Tax Freedom Day
when
taxpayers
in
all other states in the nation but ours were done
satisfying
their personal tax burdens.
Our Tax Freedom Day arrived at least twelve days
later than the rest of the nation.
This week a
new study — the fourth
annual study of overall fiscal conditions in all fifty
states — was released by
George Mason University's Mercatus Center.
Massachusetts now has the distinction of not only having
the fourth-latest Tax Freedom Day, but also of being
the third-worst fiscally managed, insolvent state in
the nation,
ahead of only Illinois and New Jersey.
Why does this not surprise me?
I'll repeat what we said in our Tax Freedom Day news
release:
This again proves that Massachusetts does
NOT have a revenue problem.
Beacon Hill has an INSATIABLE SPENDING ADDICTION.
The Legislature's recent obscene $18 million pay
grab is clear and undeniable evidence.
We thought you ought to know.
The Investor's Business Daily conclusion
from this report sums it up succinctly:
The bottom line is that the more money the state
government takes from taxpayers, the worse it
handles it.
This should serve as a flashing warning to any
state that thinks it can tax its way out of its
fiscal problems.
Massachusetts is a living, still-breathing
demonstrable example of that —
and Beacon Hill hopes to tax and spend even more unless we
can stop them.
More news for comparison, perhaps of interest:
The Fiscal Times
Monday, June 12, 2017
Could Illinois Be the First State to Go Bankrupt?
By Eric Pianin
Illinois has long been the poster
child for a dysfunctional state fiscal policy.
The state’s Republican governor, a
formerly wealthy businessman, and the
Democratic-controlled legislature have been
perpetually locked in a race to the bottom as the
Land of Lincoln has repeatedly flirted with
near-bankruptcy and junk-bond level credit
ratings....
Unlike city and county governments,
states cannot legally declare bankruptcy as a means
of shedding debt by forcing creditors, bondholders,
and government retirees to absorb some of the loss.
The last time a state declared bankruptcy was in
1933, in the throes of the Great Depression, when
Arkansas defaulted on its debts....
The New Jersey Star-Ledger
May 7, 2017
Editorial:
As Christie flees, we're left in budget crisis.
By now, most people know New Jersey
has the second lowest bond rating in the nation -
aside from being wrongfully mocked as "the armpit of
America," it's our least honorable distinction.
The bond rating is not just a
letter. It means we can't pay our bills unless we
make painful changes, and the pressures are more
urgent in New Jersey than in any other state, save
Illinois.
It's a fantasy to think this can be
solved with spending cuts alone, as some
conservatives hope, or with tax increases alone, as
some liberals hope. Time to put aside those
ideological reflexes, and face the daunting math.
New Jersey needs both....
USA Today
May 22, 2017
How much to address Kentucky's pension crisis?
That's the $700 million question
By Tom Loftus
Kentucky needs to boost its pension funding about
$700 million a year to responsibly tackle its
crisis, state budget director John Chilton said
Monday.
That sort of increase would be on top of a huge
boost for pensions provided in 2016 for the current
state budget. And it would force lawmakers to
consider a list of unpopular options to deal with
the pension systems' needs including spending cuts
for other state programs and tax increases.
Chilton's comments about the grim pension funding
outlook came at a meeting of the legislature's
Public Pension Oversight Board and were based on the
findings in a new report by the PFM Group, a
consulting firm hired by the Bevin administration to
study the pension crisis.
The report analyzed the reasons why Kentucky's
pension problem has become one of the worst –
perhaps the worst – among all 50 states.
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Chip Ford
Executive Director |
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State House News Service
Tuesday, July 11, 2017
Study gives Mass. poor ranking for fiscal health
By Michael P. Norton
State government in Massachusetts has exhibited
"serious signs of fiscal distress" and in fiscal
2015 posted an overall condition that was better
than only Illinois and New Jersey, according to
a new study that compared states.
The fourth annual study ranked states based on
short- and long-term debt, unfunded pension and
health care benefits, revenues and expenditures,
cash on hand and other assets. Researchers at
George Mason University's Mercatus Center used
information from audited financial reports, and
said the rankings this year were influenced by
new accounting standards that require states to
report their net pension liabilities.
Mercatus Center at George Mason University’s
“Ranking the States by Fiscal Condition”
https://www.mercatus.org/statefiscalrankings
The state's with the strongest overall fiscal
condition, in order of ranking, were Florida,
North Dakota, South Dakota, Utah and Wyoming.
States with the lowest rankings, including
Massachusetts, were flagged for "the low amounts
of cash they have on hand and their large debt
obligations."
"Kentucky, Massachusetts, Illinois, and New
Jersey have three commonalities: weak levels of
cash solvency, large liabilities relative to
assets, and unfunded pension and OPEB (other
post-employment benefit) liabilities that are
large relative to the income of state
residents," the study said. "On a cash-solvency
basis and using the strictest measure of cash
solvency, all four states have insufficient cash
to cover short-term liabilities. When including
less liquid forms of cash, Massachusetts and
Illinois have the weakest measures of cash
solvency ... "
Massachusetts has long issued short-term debt to
meet its cash needs, paying off that debt before
the end of each fiscal year. Credit rating
agencies over the years have cited a high debt
load as a negative factor in Massachusetts,
contrasting that with the state's high median
income and stable economic base.
Total primary government debt in Massachusetts
of $28.43 billion, or 6.9 percent of personal
income, is "nearly twice the average in the
states," the study said. In other states, some
debt absorbed at the state level in
Massachusetts is incurred at the county
government level.
The study pegged the unfunded public pension
liability in Massachusetts at $31.13 billion,
compared to a national average of $20.62
billion.
Researchers concluded that Massachusetts is
among a few states with budgets featuring
revenues that fall short of expenses during the
fiscal year.
"Kentucky's net position moved in a positive
direction with the state reporting a per capita
surplus of $122.13," the study said.
"Massachusetts, Illinois, and New Jersey each
moved in a negative direction in net position,
with per capita deficits of $319.43, $27.65, and
$677.88, respectively."
With super-majorities in both branches,
Democrats in the Legislature have long
controlled the state's finances, which are
managed on a day-to-day basis by governors and
the executive branches. The study covered a
fiscal year during which Gov. Deval Patrick was
in charge for the first six-plus months before
giving way to Gov. Charlie Baker and Lt. Gov.
Karyn Polito, who took office midway through
fiscal 2015.
"The Baker-Polito Administration is committed to
continuing the progress we have made to get the
Commonwealth's fiscal house in order, starting
with eliminating the structural deficit we
inherited to invest in critical priorities like
public education, transportation and combatting
the opioid epidemic without raising taxes on the
people of Massachusetts," Sarah Finlaw,
Executive Office of Administration and Finance
spokeswoman, said in a statement.
Communicating on background, a Baker
administration official said the study had not
taken into account the long-term impacts of the
state's well-regarded education system and its
workforce and did not adjust adequately for low
levels of local government debt. The official
also said the state's major health care and
education sectors are better equipped than other
industries to handle recessions.
The state budget on Gov. Baker's desk calls for
a roughly $100 million deposit into the state's
rainy day fund, which would bring its balance up
to $1.4 billion.
Rating agency officials have urged Massachusetts
to shore up its reserves, but freeing up funds
for major deposits has been difficult since the
state's tax collections grew by less than 1.5
percent over most of last fiscal year. The $40.2
billion annual spending bill approved by the
Legislature last week required major spending
reductions - compared to the bills worked on all
spring - to line up with a downwardly revised
estimate of tax revenues.
Investor's Business Daily
Tuesday, July 11, 2017
Best-Run States Are Low-Tax Republican,
Worst-Run Are High-Tax Democratic, Study Finds
By John Merline
Several states, including Republican states,
have decided to raise taxes this year to cover
budget shortfalls. But a new study suggests that
the states might find themselves in worse
financial shape after the money starts rolling
in.
According to the latest ranking of states by the
Mercatus Center at George Mason University, the
most fiscally sound states in the nation are all
low-tax, GOP strongholds, while the 10
least-solvent states are almost all high-tax and
heavily Democratic.
The rankings in the fourth-annual "Ranking of
the States by Fiscal Condition" report, which
was released this morning, are based on a review
of audited financial statements for 2015
covering five measures that gauge the states'
ability to pay bills, avoid budget deficits, and
meet long-term spending needs and cover pension
liabilities.
Cash solvency, for example, measures a state's
ability to pay immediate bills. Budget solvency
focuses on whether states will end the year with
a surplus or deficit. Service-level solvency
gauges a state's ability to meet a demand for
increased spending. Long-run solvency looks at a
state's ability to meet longer-term spending
commitments. Trust-fund solvency looks at the
states' unfunded pension liabilities and state
debt.
There were several changes in the rankings from
last year. Florida moved from sixth place to
first, while Alaska dropped from first place
last year to 17th this year, driven mainly by
the fall in oil prices. Idaho moved into the top
10.
At the bottom of the heap, Louisiana and West
Virginia both dropped down in the 10-worst list,
while Hawaii greatly improved, going from 45th
place last year 27th this year. Connecticut,
Maine and New York also climbed out of the
bottom 10 list. But New Jersey fell to dead last
from last year's 48th place.
The report also includes rankings for each
individual measure of fiscal solvency, in
addition to the overall ranking. Some states do
well on some measures, and bad on others. New
Jersey, for example, is last on long-run
solvency and second to last on budget solvency,
but ranks 24 on service-level solvency.
Nearly bankrupt Illinois is in the bottom in all
but one of the five individual measures —
service-level solvency.
The Mercatus report doesn't include data on the
states' political leanings or tax burdens, but
the implication is clear.
Of the 25 most-solvent states, all but four are
solidly Republican. Of the bottom 25 states, all
but five are solidly Democratic.
The most fiscally sound states also tend to have
the lowest tax burdens, according to a separate
analysis by the Tax Foundation, which measures
state and local tax burdens as a percentage of
state income.
The average tax burden among the 10 most
fiscally sound states is 8.5%, according to the
Tax Foundation's 2017 report. The average tax
burden among the 10 least fiscally sound states:
10.2%.
Here's another way to look at it: Of the 15
least-solvent states, 10 are among the 15 states
with the highest tax burdens.
Only one of the worst performing states —
Louisiana — has a tax burden that is below 8% of
income. And not one of the best performing
states has a tax burden above 9.6%.
Of the nine states that raised taxes this year,
four of them are bottom ranked — none are in the
top 10.
The bottom line is that the more money the state
government takes from taxpayers, the worse it
handles it.
This should serve as a flashing warning to any
state that thinks it can tax its way out of its
fiscal problems.
The entire Mercatus Center report can be found
here.
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NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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