Wednesday, July 12, 2017

State Budget Issues Make Headlines

There are some good articles out there on state budget issues. We are looking at articles on budget issues in key states like Illinois, Connecticut, Texas, California and New Jersey.

State budgets are in a trouble because pension, healthcare and education budgets have continued to increase while state income tax revenues(and average state incomes) have not grown above inflation. Only the top 1-2% of income earners have seen growth. State legislators are afraid to taxes the super rich because they don't want the label of "raising taxes." The rich, who generate an lot of passive income from investments, may simply move elsewhere. State governments are caught in a grip of powerful civil service employees want pension benefits, corporations who want tax breaks and the public wants safety and aid for education.

To take a closer look, we reviewed state finances at State Credit Ratings. Some states have great ratings, but for what purpose? The don't borrow or invest much money in their own state so why keep a good credit rating. The states fall into two groups: states with low debts and pension obligations because they historically have not done much for their citizens (south, conservative west and conservative mid-west) and and states that deliver high government benefits (like education) and have good credit ratings. Minnesota seem be the best managed of the states, but Massachusetts is also up there.

Overall, it looks like tough times in northeast and liberal Midwest as growth slows. Both areas may have over promised pensions to civil servants and teachers.

In all jurisdictions (except CA and MA) there is huge pressure from White voters not to raise taxes(tea party) as a code for not helping the poor and minorities. Most articles also indicate that the top 1% (2%-5%) of income earners has done very well. 


The Atlantic: Connecticut Inequality Vol. 1
This is really good story which details why employment in the finance industry does not create middle class jobs


Illinois passed it first budget in two years and voted to increase income taxes and sales taxes


New Jersey

New Jersey Passes Budget thanks to Chris Christie's beach antics.


No news in california. The state added money for education and refinanced public pensions.

Jerry Brown signs $125 billion dollar budget

The good news

There is some good news that we frequently forget: California, New Jersey and Connecticut are among the best states for quality of life and education. For example: Where I live in New Jersey, almost all of the schools are above the national average in achievement.

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