The Week in Public Finance: Amen for NYC, Watching Illinois and Payback in Kentucky
This week's roundup of money (and other) news governments can use.
So by “county,” we really mean New York City
The state of New York reported a 2.3 sales tax collection increase across its localities for the first half of 2014, but a deeper dive by Moody’s Investor Service shows the improvements are much more limited. New York City accounts for a whopping 97 percent of the reported increase, collecting 4.8 percent more in sales taxes than it did a year earlier. A few other counties outside the Big Apple also reported increases but for the most part, county-wide tax collections were “anemic,” as Moody’s put it. More than half of New York’s counties recorded minimal growth or declines, including Nassau County, which had the state’s largest year-over-year drop, of 8.3 percent.
New York City sales tax growth was largely due to strong employment growth, which in turn, encouraged consumer spending. Private sector employment in May was more than 7 percent higher than its pre-recession peak. Add in the fact that the region hosted the Super Bowl in February and the city has been experiencing record levels of tourism, and it’s no wonder that spending in the city jumped. Taking out New York City and four counties that raised their sales tax rate, median growth statewide was 1.7 percent, according to Moody’s. Nasseau’s big year-over-year decline had a lot to do with the fact that it saw a lot of spending in 2013 from the rebuilding effort following Hurricane Sandy and 2014's figures are not keeping pace with that. “The county’s budget included a 2 percent increase in sales tax collections,” Moody’s noted, “but the 8.3 percent decline will make achieving that target difficult.” Nassau is estimating a sales tax shortfall of $50 million for 2014.
Putting the “ill” in Illinois
Standard and Poor’s rating agency has joined the chorus of naysayers against Illinois’ 2015 budget and this week put the state on a negative credit watch. Before the budget was finalized, Moody’s in early June said the state’s failure to extend an income tax increase was a credit negative. Now that it’s enacted, S&P on July 23 took the slightly stronger tactic of putting the state on watch. If Illinois continues to struggle with its 2015 revenues, it could mean a downgrade for the state. Illinois is already the worst-rated state, holding the lowest credit rating on the “A” tier.
Sticking it to Seven Counties
The state of Kentucky apparently doesn’t take kindly to those who don’t want to play ball. This spring, a federal judge ruled on May 30 that Seven Counties Services, a health services provider, could leave the state’s pension system because it qualified as a nonprofit corporation rather than a government entity. (The Kentucky Retirement System is appealing the ruling). This month, state legislators decided to drop the nonprofit’s $3.7 million contract that delivers foster care services in the Louisville area by providing counselors that help families in crisis keep their children at home or reunite them with parents. The contract runs out on Oct. 31. A government contract review committee rejected the proposal to renew the deal for two more years after lawmakers cited concerns over Seven Counties' high-profile bankruptcy case, the Louisville Courier-Journal reported.
Kentucky has the worst-funded retirement system in the country, only holding roughly only 23 percent of the money it has promised to pay its current workers and retirees in retirement benefits -- most pension system have between 60 and 80 percent of their liabilities covered. The Kentucky system, not including police and fire employees and teachers, has $8.7 billion in unfunded liabilities, according to the most recent actuarial report. About $91 million of that is attributed to Seven Counties and the retirement system would have to cover that cost if the agency is actually allowed to exit.
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