MuniLand

It’s not short-term federal budget issues and credit rating changes that should worry muniland; these issues will require adjustments and creative solutions, but they are transitory. The real issue for states is how their budgets will sustain the increasing load of Medicaid, the federal government’s healthcare program for the poor and those who require nursing home care. This is the real elephant in the room.

Today, multiple media outlets ran stories about the oncoming terror for states from a potential downgrade of the credit rating of the United States. For example, the New York Times ran an article with the headline “Debt Ceiling Uncertainty Puts States at Risk” on their homepage. The story details a litany of possible scenarios ranging from the minor, such as Maryland having to delay a scheduled bond sale for a few days, to the more substantial worries, such as the federal government stopping payments like Social Security and state and local tax revenues being reduced.

These are transitory problems, which, like the problems that happened when the state government of Minnesota shut down for three weeks, will cause inconveniences. Ultimately, the system will find work-arounds.

Regarding the larger problem, take a look at the chart above, which was compiled by the National Association of State Budget Officers (NASBO). Thankfully, the work of NASBO is free of the hyperbole we often hear from politicians. State budget officers and treasurers focus on making sure that there are enough funds to cover commitments and that they end the year with balanced books. These are tough jobs, especially in times of declining resources.

The NASBO chart shows how states have adjusted spending from fiscal year 2011 (just ended on June 30) to the current fiscal year (2012). It says it all. In addition the new federal healthcare care requires an expansion of Medicaid coverage in 2014. The elephant in the room is growing bigger.

Are we JumboAmerica?  That is to say, has America succumbed to gluttony and sloth?

These questions, though rhetorical, are important since we have impossibly high obesity rates in this country and spend 17% of our GDP on health care. A new national system, Obamacare, will expand access to health care, but it does nothing to address the obesity epidemic among the poor.

Yesterday Phil Izzo of the Wall Street Journal reported on an important study that addressed poverty and obesity (emphasis mine):

“The American Revolution was a beginning, not a consummation.” ~Woodrow Wilson

Happy belated Independence Day to all! Step by step, the United States is transforming itself. It’s a good time to remember our founding principles:

Individual liberty
Personal responsibility
Constitutionally limited government
The rule of law

Greening the city

Many cities took a big step forward for clean air when they adopted buses fueled by natural gas. But there are other important projects that will make getting around easier, quieter and less polluting. New York City is getting ready to take a big step. From American City:

New York City has the potential to take those [bike sharing] concepts and scale them up to a size unseen on this side of the Atlantic. Mayor Michael Bloomberg, a man the transportation community has a complicated relationship with, has been dangling a transformative bike sharing program in front of alternative transportation advocates since 2009 when New York’s city planners issued an “exhaustive proposal” that included a 10,000 strong fleet of safety-equipped, GPS-ready bikes.

Economically, the deal is a victory for innovative financing because it fully absorbs the burden of maintenance, damage, and —as this is a city— theft, vandalism, and “artistic destruction.” New Yorkers would buy their memberships on weekly, monthly, or yearly bases and get an unlimited number of free rides that take less than 30 minutes; ride a little longer, pay a little more. New York has decided that an initial burst of capital will serve their purposes the best not least because of their uniqueness among American cities in terms of density and population.

New Jersey municipal employees to pay more for benefits

The Wall Street Journal is reporting that New Jersey Governor Chris Christie and the state Democratic leadership have reached agreement on reducing employee benefits:

In the face of heavy opposition from unions, the Democratic leadership of the New Jersey legislature and Gov. Chris Christie reached an agreement on major cuts to public-worker pensions and benefits…

…Democrats worked into Wednesday evening to get union support, offering weaker proposals, to no avail, a person familiar with the negotiations said. Instead, top lawmakers went ahead with a comprehensive bill submitted earlier this week that requires workers to pay more toward their pensions and new hires to work longer to reach retirement age, while eliminating annual cost-of-living increases for current and future retirees, among a slew of other changes.

Job creation or program pass-through?

The Congressional Budget Office has published a new report entitled “Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from January 2011 Through March 2011.” It makes some large claims about how many jobs stimulus funds have created:

Various recipients of ARRA funds (most recipients of grants and loans, contractors, and subcontractors) are required to report, after the end of each calendar quarter, the number of jobs funded through ARRA. The law also requires CBO to comment on those reported numbers.

During the first quarter of 2011, recipients reported, ARRA funded more than 571,000 full-time-equivalent (FTE) jobs.