Tag Archives: Idaho

New Edition of Rich States, Poor States out this Week

The fifth edition of Rich States, Poor States  from the American Legislative Exchange Council is now available. Utah took the top spot in the ranking of states’ economic competitiveness, as it has every year the study has been produced. Utah excels in the ranking system because it is a right-to-work state, it has a flat personal income tax, and no estate tax, among other factors considered in the study.

The other states that round out the top ten for Economic Outlook include South Dakota, Virginia, Wyoming, North Dakota, Idaho, Missouri, Colorado, Arizona, and Georgia. On the bottom end of the ranking, the states with the worst Economic Outlook are Hawaii, Maine, Illinois, Vermont, and New York at number 50 for the fourth year in a row.

Several measures of economic competitiveness offer supporting evidence that these states have some of the worst policies for business including Mercatus’ Freedom in the 50 States and the Tax Foundation’s State Business Tax Climate Index.

The authors of Rich States, Poor States, Arthur Laffer, Stephen Moore, and Jonathan Williams demonstrate Tiebout Competition in action. They find a strong correlation between the states that have high Economic Outlook rankings with the states that are experiencing the highest population growth through domestic migration. Likewise, the states that experienced the largest losses due to out-migration include Ohio and New York, ranking 37th and 50th respectively.

The study draws attention to the role that unfunded pension liabilities play for states’ future competitiveness, as this debt will require difficult and unpopular policy decisions as current tax dollars have to be used to fund past promises. Laffer, Moore, and Williams draw a comparison between Wisconsin’s recent reforms that put it on a more sustainable path compared to its neighbor Illinois:

In stark contrast to Wisconsin’s successes, the story in Illinois is not so uplifting. Over the last 10 years, Illinois legislators have continuously ignored the pension burden in their state—so much so that Illinois has one of the worst pension systems in the nation, with an estimated unfunded liability ranging from $54 billion to $192 billion, depending on your actuarial assumptions. Furthermore, the official state estimates do not include the $17.8 billion in pension obligation bond payments that are owed. In addition, Illinois policymakers have spent beyond their means, borrowed money they don’t have, and made promises to public employee unions that they cannot fulfill. Not only did Illinois face significant unfunded pension liabilities, but also lawmakers had to confront large deficits and potential cuts to state programs.

While the policies that improve state economic competitiveness are clear, the path to achieving them is difficult after voters grow accustomed to programs that their states cannot afford. However the bitter medicine of reform is worthwhile, as we know that economic freedom is not only better for business, but evidence shows it also improves individuals’ well-being.

Tightening Municipal Bankruptcy Laws

There have been 629 municipal bankruptcies in the US since 1937. Some of the most recent include: Vallejo California, Central Falls Rhode Island, Boise County Idaho, and as of last week, Harrisburg Pennsylvania.

As a result of these recent filings, municipal bankruptcy, or Chapter 9 of the U.S. Bankruptcy Code, has become an increasingly important topic in the policy community and a few states have taken action towards tightening up and/or clarifying their municipal bankruptcy laws.

Rhode Island passed legislation earlier this year that:

takes the decision to file for receivership out of the hands of the community and gives it to the state Department of Revenue. It also replaces the existing state budget review commission system, set up in the 1990s, with a new three-step process of increasing oversight

Just last week, California Governor Jerry Brown signed legislation that changes how cities file for bankruptcy:

After the law takes effect in 90 days, municipalities in the most-populous state will have to submit to a neutral review of their finances, or demonstrate a fiscal emergency, before seeking Chapter 9 bankruptcy protection in federal court.

Given that future municipal bankruptcies are imminent, legislative actions aimed at tightening up and clarifying the current bankruptcy laws may be beneficial. However, Chapter 9 should not be seen as the solution or as an easy way out of a tough situation. As Michael Viscount and Josh Klein rightly argue:

Chapter 9 is a tool for a municipality to restructure its finances in an orderly fashion — but it is not a substitute for political will, which is required to tackle the difficult fiscal problems surrounding us…. Municipal bankruptcy will not eliminate any of the hard choices that must be made to restructure governmental obligations successfully.

Waiting until a municipality is on the brink of bankruptcy is fiscally irresponsible. Politicians and policy makers need to stop waiting until it is too late and begin taking the necessary steps towards creating policy environments that promote fiscal stability.

 

 

 

Boise County, Idaho files for bankruptcy

Boise County, Idaho filed for bankruptcy this week. In this case, the county is not struggling to pay its bondholders, but was found by a court to be in violation of a federal law.

The county owes a housing developer $6.2 million after a court found the local zoning commission put too many restrictions around a building project for a treatment facility for troubled teens. In December a federal judge ruled the action constituted discrimination under the Fair Housing Act and found in favor of the developer. Boise County (which is, despite its name, not home to the state’s capital) with a budget of $9.4 million has recently raised sewer fees, and claims the debt will need be paid off over a 20 year period but needs federal bankruptcy protection to come up with a plan to pay it. That plan will involve higher taxes, a county official notes, “every property tax owner in the county will have to pay a share of this debt.”

The project in question, Alamar Ranch, was the subject of alot of local discussion when it came before the Boise County Planning and Zoning Commission. Some residents were in favor of the facility because it was shown that it would create jobs. In addition, the facility’s mission is to help troubled teens, a project with many positive benefits for society. Other residents worried that the facility would lead to local crime, introduce traffic, and constitute another expense for the local government. Opponents to the facility, it is claimed in legal documents, swayed the local zoning commission to block construction. Residents interviewed see it differently.

(h/t http://edwardweinhaus.com/)