Virginia House of delegates votes to reject health care reform.

Governor Christie creates privatization task force.

New Jersey residents debate Governor’s suggestion: Public workers to pay for parking.

As costs soar, Massachusetts looks to change health insurance rules.

States tap stimulus as assistance runs out.

Bloomberg has the scoop on a new Federal Deposit Insurance Corporation plan to encourage state employee pension funds to buy up failed banks:

Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures,” Jay Fewel, a senior investment officer at the Oregon State Treasury, said in a presentation at the fund’s Feb. 24 meeting. New Jersey’s fund may also participate, said Orin Kramer, chairman of New Jersey’s State Investment Council.

This is ridiculous. Pension systems already run significantly higher risk than would be acceptable, essentially gambling taxpayer money that should be designated for public employees’ retirement. This mocks any notion of fiscal accountability. If the gambles fail, and according to this New York Times article they likely will, taxpayers will be left holding the bag.

Risk is the enemy of retirement investments. It’s not rocket science, but state legislatures, public unions, and state bureaucracies continue to make promises they can’t afford and gamble that either a booming market or future taxpayers can cover their debts:

Oregon would invest in Community Bancorp LLC, a bank being formed by Sageview Capital LLC, according to the Oregon presentation. Sageview was founded by former Kohlberg Kravis Roberts & Co. executives Scott Stuart and Ned Gilhuly. Sageview is looking to raise about $1 billion from pension funds and similar investors, the presentation said.

While the structure makes sense, pension funds would be better off investing in existing banks, said Chris Whalen, managing director of Institutional Risk Analytics of Torrance, California. At those lenders, management will oversee details of buying failed lenders and save pension funds the time and effort needed to launch a new bank, he said.

Buying out failed banks with state pension funds is nothing more than a shell game, moving failure from private banks to public employees to taxpayers. It’s a terrible plan, and Oregon and New Jersey should soundly reject it.

Asbury Park Press reports, Monmouth County, NJ pays 336 public employees $100 K a year.

Governor Chris Christie is “stuck with 7 percent pay increase” for public sector workers.

Federal agency to investigate Los Angeles schools.

California’s College Dreamers: UC tuition tax hikes spark protests.

Deathbed bonds: Investors team up to buy bonds from the terminally-ill.

New Jersey Transit is facing a $300 million shortfall. Governor Christie plans to withhold $33 million in subsidies to help close New Jersey’s $2.2 billion budget gap. The transit agency’s response is bitter medicine for customers. Riders can expect a 2o to 30 percent fare hike.

In addition, the agency has laid off 200 people (about 2 percent of its workforce). This represents the, “deepest one-year workforce reduction in the agency’s 30 year history.” The reason it is such a drastic cut has more to do with recent history. In the past three years, transit payroll  increased 24 percent between 2006 and 2009. Crunching payroll numbers, The Asbury Park Press finds that in this three year period, the number of employees increased by 14 percent, and average total pay (including overtime) rose from $57,474 to $62,794.

Management salaries will be cut by 5 percent, for Executive Director James Weinstein, who makes $261,324 a year, the reduction will amount to a little over $13,000.

For riders who suppose the stimulus will be used as as a fare subsidy replacement. It’s too late. The money’s been earmarked.

New Jersey Transit’s $52 million stimulus funds will be used for special projects, including: $15 million to improve pedestrian walkways at Newark Penn Station, and $36 million for a new “intermodal station and parking facility” in Pennsauken, Camden County to allow light rail transfers to the Atlantic City commuter rail and bus service.

Today the Star-Ledger editorial board has put it bluntly, “Get N.J. out of horse racing”, and sell the tracks.

While the Meadowlands Race Track and Monmouth Park once attracted a robust audience willing to bet and spend. Today, they are losing $10 million a year, kept alive with subsidies and casino profits. This isn’t just a Garden State phenomenon – empty seats at the races reveal that tastes change. (One theory for dwindling interest in watching the races posits technology-induced ADD.) Of course, the same can be said for any sport, the arts, or entertainment – no matter how deep its cultural roots.  Bullfighting in Barcelona is on the decline.

The casino industry is no longer amused at having to foot the bill for the tracks.  They agreed to give $90 million over three years as a protectionist measure. In return, the state agreed to keep slot machines out of the racetracks. No matter what form they take, subsidies to entertainment are a bad deal. The state should not be in the business of deciding which sports and recreations get to live past their profitability. That decision belongs to consumers.

But it’s hard for the New Jersey Sports and Exposition Authority to let go. At a recent hearing its CEO likened New Jersey’s tracks to a profitable brand, like Coca-Cola. As Governor Christie has indicated, the state can ill-afford such handouts. And more than that, as the governor discovered, the breeders associations were using tax dollars to lobby the government.

Six of America’s richest counties outside of Washington D.C.

Low on revenues: states delay income tax refunds.

Texas, Alabama and Virginia sue the EPA over global warming ruling.

Homeowners holding the line on property taxes.

“Grocery Smackdown: Walmart vs. Whole Foods” who will save America’s small farms?

How States Manipulate Medicaid.

“Let’s Hold Hands and Jump Off the Cliff Together.” Governor Christie’s candid speech to N.J. Mayors.

Getting Serious about Atlanta’s Pension Problems.

Massachusetts House votes yes on $35 million bailout of the city of Lawrence.

“Mozart as Mind Control”.

Hawaii, Indiana, and Pennsylvania are a few of the states thinking about getting rid of the tax exemptions for non-profits. Steep declines in revenues have prompted states and counties to reconsider breaks for charities. States argue non-profits partake of government services but get a free ride on taxes, while charities claim that they are helping governments by providing services for the needy. Hawaii State Representative Calvin Say believes revoking exemptions for non-profits (as well as other tax-favored groups) could result in $500 to $750 million to help close the state’s $1.2 billion shortfall.

Revoking tax breaks is never popular. As the New York Times reports, the Payment-in-lieu-of-Taxes (PILOT) program used by many local governments evolved as a compromise. In 2005, Harvard and MIT brokered a deal with the city of Cambridge to pay $60 million over 20 years for city services in lieu of making property tax payments. (For more on PILOT programs see this 2006 Mercatus Center study by Frederic Sautet and John Shoaf).

Through tax policy, governments influence charitable activities and giving. The way exemptions are awarded or taken away can cause great controversy. For example, as states go on the hunt for revenues, some organizations, like churches, will remain exempt.

For a discussion of “The Politics of Giving”, see this month’s Reason for an interview with Adam Meyerson, President of The Philanthropy Roundtable.

Gov. Christie reins in special authorities, boards and commissions.

Is Amtrak earning a profit? Guess again.

Largest provider of residential mortgages, Fannie Mae posts a $16.3 billion loss. Asks Treasury for $15.3 billion.

Detroit’s Mayor embraces a smaller city.

House Ethics Committee clear seven lawmakers on earmarks.

William McGurn writes in this week’s Wall Street Journal about a seemingly strange political alliance. The Rev. William Meeks, a Democratic Illinois State Senator introduced a bill to provide school vouchers to 42,000 students in some of Chicago’s worst schools. In fact, the growing call for vouchers, and  charter schools has increased support from many Democrats. Those with the greatest stakes in education are the parents of children in failed districts.

The status quo tends to be guarded, not suprisingly, by those who have the most to lose from school competition and choice: the teachers unions and politicians who benefit from their support.

Reform appears to be percolating  in New Jersey. This week the New Jersey Department of Education approved the first Mandarin-English charter school in the state, bringing the state’s charter school total to 68.

Control over schools is at the heart of a recent reform in Los Angeles. This Tuesday, the state’s Board of Education voted to award control of 30 of its schools to teachers’ groups, or to charter school groups. Most went to the teachers, leading charter school groups to protest. The teacher’s unions generally oppose charters because they don’t require teachers be hired under union contracts.

The tension between charter schools and the teachers unions has been a major challenge in the school reform movement. For more, see the recent documentary, The Cartel.

Reliance on fiscal gimmicks and stimulus funds have done no favors for state budgets. FY 2010 promises to be worse than last year. The National Governors Association reports states face budget deficits amounting to $134 billion over the next three years. Bob Williams writes only three governors appear to showing leadership on the issue: Indiana Governor Mitch Daniels, Virginia Governor Bob McDonnell, and New Jersey Governor Chris Christie. The reverse can be said for California. Governor Arnold Schwarzenegger has praised the stimulus for creating 150,00 new jobs in his state. As Veronique de Rugy points out, those are primarily taxpayer supported public sector jobs. For economic recovery to occur jobs must be created in the private sector. And there has been very little of that. California’s unemployment rate remains at 12.4 percent.

Los Angeles, CA to cut 3,000 city jobs.

Nuclear-powered neighborhoods coming soon?

Reason on the Trillion Dollar public pension gap.

The Mt. Laurel Decisions’ legacy: N.J. judge puts Gov. Christie’s plans to suspend COAH on hold.

Eight Maryland counties declared federal disaster zones.

Across the country, budget cuts are hitting school districts. Outside Providence, Rhode Island 100 teachers and staff will be fired from Central Falls High School. School Superintendent Frances Gallo cites the “callous disregard” of the union which refused to accept other cost-saving measures presented by the school that would have avoided firings. The union claims the school needs a complete overhaul.

In Woodbridge Township, N.J.  Governor Christie’s state school aid cuts have led school officials to announce $10 million in proposed cuts to its $185 million budget. The proposed staff cuts are telling. They include eliminating several positions: two middle school librarians ($173,000), one plumber ($106,000), two social workers ($195,000), and one attendance officer ($70,000). Additionally, the proposed cuts include the closure of two empty school buildings for a savings of $133,957.

The budget belt-tightening prompted the school district to ask voters to call Trenton and ask for more aid to avoid the measures.

Interestingly, Woodbridge Township officials appear to be considering an alternative plan should no aid appear, including seeking private sponsors to fund elementary and middle school sports. Corporate sponsorship is not without precedent in the township: Woodbridge High School’s football team relies on private funds for its website, with excess donations used to help fund the team’s apparel and equipment purchases.

Court Mandates on School Funding Decline.

The Great Lakes versus the Asian Carp.

Proposed public sector pension reforms in N.J. touch off debate.

School choice legislation in the New Jersey legislature.

Stimulus money for iPods nixed in Florida.

The Executive Director of the Passaic Valley Sewerage Commission (PVSC) in New Jersey is resigning his $313,000 a year position. Bryan Christiansen, former four-term mayor of Edgewater, has held the post since 2004. His salary, according to Governor Christie, is inflated at the expense of disadvantaged ratepayers. Though the entity is quasi-public with an annual budget of $164 million, the PVSC with a decades long reputation as a patronage machine for both parties, answers to no one. Former Governor James McGreevey had to file Open Public Records Act requests to get basic information on the agency.

Mr. Christiansen is not only a case study in the opacity of special authorities, but in New Jersey’s politically-manipulated public pension system. He is entitled to $140,o00 a year upon retirement, the result of a special deal between the PVSC and the state, on top of that he may exit his position with a $600,000 lump sum payment.

The resignation comes after Mr. Christie announced he plans to dig into PVSC’s payroll and outside consultant contracts. A total of 86 of the authority’s 600 employees earn over six-figure annual salaries.

Snow Mountain, Washington D.C. a.k.a Lot 25 on the Anacostia River.

Snowfalls have, “little political upside.” DC’s second major blizzard in a week tests mayors and municipal governments.

Maryland Governor O’Malley, “lowers plowing expectations.”

Testing a “lifetime of bad driving skills” in Marlyand, DC, and Virginia.

Roof collapses on Smithsonian storage facility.

Russ Roberts at Cafe Hayek: Look for claims that the snow will stimulate the economy.

The biggest source of Berkeley,California’s budget collapse is the loss of $4 million in recycling revenues. Berkeley is one of the few cities in the US with its own garbage and refuse pickup program.With the recession, people are buying less and building less. The result is a decreased need for trash pickup. And not only is there less garbage, Robert Reed of Recology Sunset Scavenger notes in the SFGate, “the nature of garbage changes.” Construction debris revenues are down 15 percent, in spite of a 10 percent rate hike. Residents switching to smaller trash bins (the city charges for the size of the can) leading to an 8 percent reduction in recycling revenues.

Also affecting the program: the value of ‘recycling commodities‘ has also declined. Aluminum is down from $1,908 a ton to $1,200 a ton.

While the decline in trash pickup may hurt the city’s budget, Berkeley’s residents are changing their behavior.They are recycling more at home and reusing materials. They are buying less. While there is less trash in landfills, according to University of Chicago Ph.D student Alexi Savov, less trash is also a good proxy indicator of less economic consumption.

Massachusetts legislators are debating if the state should award $35 million to stabilize the finances of bankrupt Lawrence, a city of about 70,000 on the Merrimack River. The city faces a budget deficit of $25 million and the current mayor has come under criticism for holding two public sector jobs while the city faces insolvency. Lawrence would remain under state control until it pays back the loan.

It’s not the first time the state government has taken over a locality in fiscal distress. In 2004, Springfield, Mass. received a $50 million bailout, giving control of its finances to a state-appointed panel. It’s unclear if the measure dealt with root causes. A second bailout was considered last January,while the oversight board was abolished in June. The state will forgive Springfield this year’s $11 billion loan repayment.

Another such case is Camden, New Jersey.The state’s 2002 takeover of the city’s finances, (which included $175 million in extra aid to spur economic revival), ended two weeks ago. The verdict: while Camden now enjoys an Aquarium on the Delaware River, the city’s neighborhoods remain impoverished.

Hoboken denied stimulus funds for the Lackawanna Cut-Off rail.

Pennsylvania Gov. Rendell proposes 5% wellhead tax to drill for natural gas.

The U.K. has suburbs too. Randal O’Toole reviews Paul Barker’s “The Freedoms of Suburbia.”

New Jersey school districts worry over state aid: 75 percent of Linden’s budget for salaries and benefits.

Washingtonians get some “snow respect.” But, “sidewalk snow etiquette” is lacking.

Last year’s $787 billion stimulus included $100 billion for education meant to cushion state and school district budgets. As anticipated, state and local revenues haven’t rebounded and federal funds will be spent at the end of the school year. An analysis done by Rutgers University shows the “largest-ever federal infusion of education money” will leave states in the same boat as last year, forced to choose some mix of tax hikes and spending cuts.

When faced with unpalatable options states may find they are open to innovation: allowing more competition through charter schools and vouchers to bring down public school spending.

Interestingly, there is a mix of opposition to the next federal infusion of $4 billion in “Race to the Top Funds” (RTTT).

Some teachers’ unions oppose RTTT because funds require states institute more charter schools and “pay for performance” requirements. Texas Governor Rick Perry rejects Race to the Top for different reasons. Federal money (whatever its intent) means more federal rules, higher costs, and less state and local autonomy to set education policy. Texas likes its state education standards and the state would be penalized for not adopting the federal rules that come with accepting RTTT grants.

For RTTT to be an improvement over the top-down standards of No Child Left Behind, funds must not prop up the status quo, but be used to foster real competition and variety in the provision of education.

(2/9/10 Update: For more on the subject of education and competition see our recent Mercatus on Policy with Jerrod Anderson and Johan van der Walt.)