MuniLand

Whither prison reform?

I expect to see a lot more discussion about reform of the state and local prison and jail systems in the coming months. Some states are privatizing jails, and the U.S. Supreme Court has ordered California to release prisoners due to overcrowding. Here is an interesting paper published in the journal Criminology and Public Policy that talks about how unions can be an impediment to change. From the abstract:

An unintended consequence of mass imprisonment is the growth of prison officer unions. This article shows how successful corrections unions in states like California and New York obstruct efforts to implement sentencing reforms, shutter prisons, and slash corrections budgets. They impede downsizing-oriented reforms by generating or exacerbating fear among voters and politicians. Policy makers in key states must overcome resistance from prison officer unions to downscale prisons. Through a combination of accommodation and confrontation, policy makers can relax opposition from the officer organizations and undertake prison downsizing efforts without busting the unions.

There are no simple solutions to this problem and all angles need to be investigated.

Too low for retail

We are starting to see the classic dynamic in the bond market where bond yields go too low and then investors back away from buying. The reduced demand causes bond prices to fall and yields to rise. In this case retail investors are not finding short-term municipal bond yields appealing and are turning to other asset classes. Bloomberg reports:

The low interest rates discourage some individual investors from purchasing municipal debt, said John Hallacy, head of municipal research at Bank of America Merrill Lynch in New York.

Prisons and the social fabric

Let there be no mistake: when you produce so many criminals that you can’t afford to lock them up, you are a failed state. Virtually every important civil institution in society has to fail to get you to this point. Your homes and houses of worship are failing to build law abiding citizens, much less responsible and informed voters. Your schools aren’t educating enough of your kids to make an honest living. Your taxes and policies are so bad that you are driving thousands of businesses away.

Walter Russell Mead

Although we in America like to think of ourselves as the “land of the free,” we are actually the land of incarnation. If you study the map above you see we lead the world in the number of prisoners as a percentage of population. We jail more criminals than allegedly less developed countries like China, Russia and Mexico. We are spending so much of our scarce resources on imprisonment. What has gone wrong? Is our social fabric so frayed that criminality is increasing? Have corporate interests driven an incarceration agenda? Does America have a prison–industrial complex?

Prison population in the US has soared way ahead of population growth and is now about 240 percent higher than it was in 1980 (Graph from Wikipedia):

Muni sweeps: “Intergovernmental downloading”

“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.

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