Muni sweeps: “Intergovernmental downloading”

May 23, 2011

“Intergovernmental downloading”

Lisa Lambert of Reuters writes about a report issued by Fitch Ratings. From the Fitch report:

As has been the case in past times of financial strain, states are rethinking the size, cost, and role of their governments as they develop solutions to budgetary shortfalls. In many cases, this process has resulted in decreased local government funding. The extent to which local governments will feel the impact of these actions varies based on how dependent they are on state funding.

As such, Fitch Ratings believes school districts and counties will experience the greatest funding reductions. This report addresses the relationship between state and local government issuer ratings and discusses some of the main ways in which state actions can affect local government finances.

Lambert hones in on school districts and counties:

Fitch Ratings said in a report on Friday that school districts and counties will face their greatest funding reductions from states.

It said cuts in aid can result in “intergovernmental downloading,” where the financial burden for a service is shifted from a higher level of government to a lower level.

“Even if a funding source is identified, it may prove insufficient to cover the service that needs to be provided or may not grow at the rate needed to keep pace with expenditure growth,” Fitch said.

It added that local governments may not be able to cut programs states stop funding “because of the essential nature or legal requirements of some services.” Counties provide most of these services and are more susceptible to “downloading” than cities.

States seek to escape rising prison costs

States are focusing on jails and prisons as they try to close budget gaps, reports Lisa Lambert of Reuters:

In the final stretch of approving budgets for the next fiscal year, many statehouses want to save money by changing incarceration policies and closing prisons. Florida is set to bring in more private contractors to run its prisons while Ohio and Louisiana consider selling theirs.

More than 2 million people are in state and federal prisons and local jails, many in facilities funded by states. For almost all states, corrections is a rapidly growing expense.

I’ll write more about this issue. America is way out of sync with the rest of the world on incarceration.

Muni bonds: Fund flows are positive … and negative

Karen Pierog of Reuters catches the topsy-turvy numbers being reported from municipal bond funds:

The U.S. municipal bond market received some good news and bad news this week concerning flows into muni bond funds.

By the Investment Company Institute’s accounting, net inflows of $38 million broke a 26-week streak of net outflows. But Lipper late on Thursday reported that net outflows continued for a 27th consecutive week, climbing to $108 million from $94.5 million in the previous week.

“I’m fairly confused. It’s hard to tell exactly what’s going on,” Chris Mier, a market strategist at Loop Capital Markets in Chicago, said on Friday.

California AG scores big fine from medical provider

Get em Ms. Harris! From LegalNewsline:

California Attorney General Kamala Harris announced a $241 million settlement on Friday with the state’s biggest provider of medical laboratory testing.

The settlement with Quest Diagnostics, the largest recovery in the history of the California False Claims Act, is meant to recover alleged illegal overcharges to the state’s medical program for the poor. The settlement is the result of a 2005 lawsuit that alleged that the company overcharged the state’s Medi-Cal program for over 15 years and gave illegal kickbacks in the form of discounted or free testing to hospitals, doctors and clinics that referred Medi-Cal patients and other business to the labs.

“In a time of shrinking budgets, this historic settlement affirms that Medi-Cal exists to help the state’s most vulnerable families rather than to illicitly stoke corporate profits,” Harris said. “Medi-Cal providers and others who seek to cheat the state through false claims and illegal kickbacks should know that my office is watching and will prosecute.”

Mini sweeps:

Wall Street Journal: Five Reasons to Rethink the Muni Rally

U.S. News & World Report: The Real Fear for the Muni Market

New York Times: Who’s Best at Cutting State Spending?

Bloomberg: California Takes Aim at Public Pension Spiking

Huffington Post: Reducing Pennsylvania’s Unemployment Insurance ‘A Fairness Thing,’ GOP Lawmaker Says

Sunlight Foundation: Montana uses cost to clamp down on transparency

New York Times: A Doctor’s Push for Single-Payer Health Care for All Finds Traction in Vermont

New York Times: Health Reform in Massachusetts

McClatchy: Kentucky gives Ark Encounter park $43 million tax break

Farming the City: Urban Agriculture Map

Project for Public Spaces: What is the Place for Public Space in our Cities?

CoLab Radio: Socializing for Social Good: Cities That Seek Well-being for Their Residents

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