MuniLand

The land of 10,000 lakes

It’s hard to imagine a more beautiful name for a state than Minnesota, which comes from a Dakota Sioux word for “sky-tinted water.” Today the state is popularly known as the “Land of 10,000 Lakes,” a nickname that conjures up images of primal forests, deep waterways and lots of summer mosquitoes.

The reasonable-looking man in the video above is Mark Dayton, the governor of Minnesota. Governor Dayton, a Democrat, has shut down the state government over an impasse with Republicans in the state legislature. Bloomberg reports:

The 12-day impasse is the longest of the nation’s six state government shutdowns since 2002 by four days, according to the National Conference of State Legislatures. It has idled about 23,000 state workers, closed agencies and stopped construction projects statewide.

This is the sixth shutdown in the Land of 10,000 Lakes since 2002? It makes me wonder if this is a sort of state holiday that Minnesotans have become used to having. There are many who rely on vital services provided by the state, so I certainly don’t mean to be flippant, but fortunately the state has created a process overseen by a judge to ensure that vital state services are maintained.

What is Governor Dayton fighting for? Dayton said this in response to a bi-partisan commission, led by former Vice President Walter Mondale [emphasis mine]:

“Unrelenting rigidity”

“Unrelenting rigidity”

It feels as though American politics has become a war. The battle is not about civil rights or women’s suffrage; it’s a war about how large a role the government should play in the redistribution of income and the support of the people. There is plenty of room to disagree on these issues.

Throughout our history, there have been Americans who have suffered, and in the current faltering recovery, there are an exceptionally high number of people suffering. This makes the current war over reducing entitlements seem especially harsh.Unfortunately, Democrats and Republicans have taken rock-hard positions and have refused to come down from their pulpits. Minnesota has shut down the state government for seven days because the Democrats and Republicans refuse to even meet to discuss a compromise. From the Minneapolis Star Tribune:

In Minnesota, it remains uncertain whether results can be expected from an ad hoc budget group formed this week by former Republican Gov. Arne Carlson and former Vice President Walter Mondale, a Democrat.

Relying on the rich uncle

State and local governments earn their “wages” primarily by collecting taxes, although states get significant “flow-throughs” from the federal government for Medicaid and other social entitlements. Every state varies in where they draw tax revenues from. For example, states that are highly dependent on tourism will see substantial revenues from hotel and sales taxes.

New York and New Jersey are two well-to do states that have historically relied on sharing in the largesse of their rich uncle from Wall Street. The Federal Reserve Bank of New York published an interesting paper last year that talked about how these two states were heavily reliant on tax revenues from the financial sector and were especially affected by the financial crisis of 2007-2009. Wall Street revenues rebounded sharply in 2009 and 2010 but are now sputtering and projected to decline going forward due to financial reform and the slow pace of recovery.

One recommendation of the Federal Reserve’s research staff was to have a reduced reliance on personal-income taxes, which fluctuate with the economy, and a greater reliance on sales taxes, which tend to be more stable. Unfortunately, sales taxes tend to be regressive and place a heavier burden on the poor, who spend the bulk of their income on consumption.

Green shoots?

Green shoots?

Reuters reports on recent data from the U.S. Census Bureau that shows how tax revenues are improving:

State and local governments brought in record first-quarter revenues this year, according to a Census Bureau report released on Tuesday that offered a sign their budget crises may be abating.

Total state and local revenues for the first quarter reached $321 billion, a 4.7 percent rise from the first quarter of 2010 and the highest level on records going back to 1988. It marked “the sixth consecutive quarter of positive year-over-year growth,” the Census said.

The infrastructure bank as political cover

If you have been around Washington much, you know that a lot of what happens is often kabuki. What may appear to be a geisha girl coyly teasing a samurai is really a young man with heavy make-up and mincing steps. It’s beautiful deception.

I think a little DC kabuki maybe happening with the renewed chatter around an infrastructure bank funded with corporate overseas profits. Bloomberg reports:

The Senate’s No. 3 Democrat [Senator Charles Schumer of New York] said yesterday that his caucus is exploring the potential of using the short-term revenue a [overseas profit] repatriation holiday would generate to fund an infrastructure bank. The focus on infrastructure, he said, would “guarantee” job creation and address a key line of Democratic opposition.

Muni swaps moving higher

Lisa Pollack of Markit in London sent over some interesting charts of U.S. municipal swaps. I put up this one which shows the market perception that risk is increasing again for some states, particularly Illinois and California. It is important to remember that these markets are thinly traded and that there is a large block of muni CDS written on California that is coming to market from the bankruptcy of Lehman Brothers.

National Totals of State Tax Revenue, by Type of Tax

The U.S. Census brings us these figures for taxes collected at the state level for 2010. You can see the substantial reliance on individual income and sales taxes (I left off some categories to fit the table in. Click through to the Census document to see more data): Quarter Total tax Individual income Corporate income Property tax State sales tax 2010 4Q $ 177B $ 61B $ 9B $ 4B $ 57B 2010 3Q $ 168B $ 57B $ 7B $ 3B $ 56B 2010 2Q $ 204B $ 72B $ 14B $ 3B $ 54B 2010 1Q $ 163B $ 52B $ 8B $ 8B $ 54B

 

Muni sweeps: Taxes are the fuel for public sphere

Taxes are the fuel for the government. Without taxation the state withers. Our governments have taken on so many responsibilities but have become starved for fuel. There is much debate on how much we as a country should spend on entitlements and defense, but often these arguments are made on the premise that the United States has higher taxes than other nations.

The Center for American Progress developed the following charts to help visualize the state of American taxation. If you check out “Ten Charts that Prove the United States Is a Low-Tax Country” you will see that our nation, on a relative basis, does not have especially high taxes. It also helps explain why our nation is running massive deficits and is close to defaulting on its debt. We have choked off the fuel to support the public realm.  These charts almost make the case for the need to increase taxes on the wealthiest Americans in the short term to help reduce the deficit and bring the nation to a sounder fiscal footing:

Party is approach

An excellent piece by John Gramlich in Stateline about how party affiliation is driving state agendas. Here are the money quotes:

Muni sweeps: Hack for change


Hack for Change

Attention Muniland! Do you have an idea for a public web or mobile application? Change.org is sponsoring a Hack for Change on June 18th and 19th and is soliciting ideas for their programming competition. Here are some of the ideas that have already been posted:

    A reviews site that allows citizens to rate and evaluate city government services and departments A site that makes government data more accessible and actionable An app that lists all San Francisco city legislation and allows residents to vote on it An app that notifies police of suspicious activity

Submit your idea today!

Muni Web 2.0 stars

Government Technology reports on the winners of a wonderful competition to create the best municipal Web 2.0 and social media technologies:

Rebuild America

The United States Conference of Mayors released a survey Tuesday focused on metropolitan transportation investments. Generally the take-away is that the mayors want less money spent on highways and more spent on cities’ transport needs.

From the survey:

• Ninety-eight percent of mayors point to investment in affordable, reliable transportation as an important part of their cities’ economic recovery and growth.

• Three in five mayors said they would not support an increase in the federal gas tax if federal transportation funding were allocated among programs in the same proportions that it is today.

Muni sweep

Dexia Tower, Brussels It’s a busy morning in muniland. Here are several big stories to get the day started.

Bloomberg’s Bob Ivry has written an excellent expose of why the French and Belgium bank, Dexia, borrowed more from the Federal Reserve in the financial crisis than any other institution.

Why is Dexia important for muniland? Dexia owned a bond insurer, FSA, that provided insurance and guarantees for a big swath of the municipal market. No funding for Dexia equaled no funding for many municipalities. The markets were teetering on the brink and a few semi-solvent institutions kept them afloat. Dexia was one we hadn’t heard much about until now. More to come on this big story.

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