MuniLand

Two prominent media outlets, USA Today and Governing.com, have recently run stories that trumpet increased state and local government hiring. But both outlets make crucial errors in their calculations.

Let’s start with USA Today‘s story from June 27. Its analysis used the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey to claim that 800,000-plus new jobs had been created in muniland. But this number is a “turnover” number and not surprising since the sector employs over 19 million people.

Today Governing.com ran a story that riffed on what USA Today reported and made this further claim:

More public workers were hired in the first four months of 2012 than any other year period since 2008. The 828,000 new hires are filling positions that were left open to save money during the recession. The hiring boost indicates that state budget problems have relaxed and that public-sector job growth could be imminent. It takes at least six months for a hiring boost to create a larger workforce, according to the newspaper.

In fact when you total up state and local government hires for the first four months of 2012, there were 1,084,000 new employees filling positions. But these are not new positions that have increased the overall level of state and local employment. These are hires replacing employees who left current positions. Total state and local employment is actually down year-over-year, from 19.3 million in May 2011 to 19.2 million in May 2012.

The Supreme Court’s decision to uphold the Affordable Care Act just created an unenviable task for governors across the country.

To grant healthcare coverage to all Americans, the ACA involves an expansion of Medicaid, a program jointly funded by the federal and state governments and administered by the states for the poorest Americans. Under the expansion, an estimated 18 million people who previously lacked health insurance will be swept into the Medicaid program. Even though the federal government will bear the full cost of this expansion in the first year and 90 percent of it in subsequent years, states will shoulder some of the program’s administrative costs.

Adding 18 million people to the Medicaid rolls is a challenge in itself, but it also comes amid fears that Congress will decide to cut spending on social programs like Medicaid as a way to decrease the federal deficit. Wary of unfunded mandates like this one, some governors are hinting that they will refuse to expand healthcare coverage under the Medicaid program despite the federal government’s offer to pay for nearly all of it:

This morning’s jobs report revealed that 79,000 net new jobs were created in the country in May, nearly 50 percent below the consensus forecast of 150,000. Almost immediately following the release, there were loud and insistent calls for another round of monetary and fiscal stimulus. “Job growth stumbles again, raising pressure on Fed,” the Reuters headline ran. My fellow Reuters blogger Felix Salmon called for immediate federal stimulus funded by more debt issuance. Felix’s rationale, like many others’, is that with U.S. borrowing costs so low, stimulating current economic activity is a higher priority than worrying about paying down the debt in the future. Or to put it differently, a little more debt is preferable to enduring the economic pain of the economy rightsizing itself.

However, economic weakness is concentrated in just a few regions, and the solutions that many are pushing for – additional fiscal stimulus from Congress or further monetary easing from the Fed – are too diffuse to make much of a difference or require a national constituency that is unlikely to materialize. Unemployment fell in 37 states in April, but in California, Rhode Island and Nevada, there are still massive employment problems. The National Conference of State Legislatures reports (emphasis mine):

Unemployment rates were down in 37 states, the District of Columbia, and Puerto Rico in April 2012. Only five states saw unemployment rise and eight states had no change for the month, according to figures released by the Bureau of Labor Statistics on May 18, 2012.

The $25 billion mortgage-fraud settlement that was announced yesterday came after 18 months of coordinated action by the Department of Justice, the Department of Housing and Urban Development and 49 state attorneys-general. The settlement is carved up so that homeowners and governments at the state and federal levels each receive some compensation. Given the scale of national losses, it’s a tiny penalty for banks that engaged in egregious servicing and foreclosure practices, and it will do little to repair the widespread economic damage.

More important for states, the amount they are set to receive far from covers the shortfalls they will suffer from lower property tax collections, which are pegged to property values.

A little background: Municipalities and school districts collect substantial revenues from property taxes, and they benefited from inflated housing values during the boom. With higher property tax collections, they ramped up municipal services. Starting in the first quarter of 2010, property taxes began to flatten, but property appraisals did not, as they lag behind property values by several years. We are just now starting to experience what could be a big decline in property tax collections.

This great graphic from Visually maps the public’s great discontent with the federal government using data from the Pew Research Center. It’s hard to imagine the numbers being any worse than this: 11 percent of the public is satisfied with the officials in Washington, DC.

Given Pew’s research, it’s somewhat counterintuitive that a recent poll from Gallup shows Americans pretty content with their state and local governments. From Politico:

Trust and confidence in local government has hovered around 70 percent for the past decade, and the recent gridlock at the federal level has done little to sully local impressions of government. In fact, 68 percent of respondents to a new Gallup poll on Monday said they had a “fair” or “great” deal of trust and confidence in their local governments.

Thumbs down on President Obama’s infrastructure bank

The Bond Buyer is reporting that U.S. transporation groups have given the thumbs down to President Obama’s proposed infrastructure bank. The core repayment mechanism for loans guaranteed by the proposed bank would be user fees and tolls. This contrasts to the current methods, which involve state and local governments borrowing in the municipal market to fund projects or the federal government collecting gasoline taxes to fund highway infrastructure. Given the growing opposition globally to the privatization of public assets, the core purpose of the infrastructure bank is bound to create more unease among public players and citizens. From the Bond Buyer:

American Trucking Associations president Bill Graves was skeptical.

“We’ve long advocated that roads and bridges should be paid for primarily by their users, through the most direct taxes possible: fuel taxes,” he said. “Allowing private capital to take their cut as part of an infrastructure bank, or by taxing other sectors to pay for roads and bridges, takes us further away from this core principle.”

Direct grants to state and local govts most popular part of Obama’s jobs bill