The Week in Public Finance: Jerry Maguire, Saving the Highway Trust Fund and Chicago's Big Problem
A roundup of money (and other) news governments can use.
For past editions of The Week in Public Finance column, click here.
Show me the money
Ohio is the best at providing its spending data online and California ranks last of all 50 states, according to one research group this week. The U.S. PIRG (Public Interest Research Group), a consumer advocacy organization, ranked the states based on their ability to provide “one-stop, one-click transparency and accountability for state government spending.” A total of 14 states earned an A-level grade (Ohio was the only one to earn an A+) and 18 states earned a grade in the B range. Idaho and Alaska also received an F, although California had the lowest score, earning 34 out of 100 possible points.
The March 18 report noted that all 50 states operated websites to make information on state expenditures accessible to the public and those sites continue to improve. For example, all but two states allow users to search for state spending by agency, keyword and/or vendor and 44 states provide similarly searchable data for one or more economic development subsidy programs. Many states are also disclosing new information, the report said, and are making it easier for outside researchers to download and analyze large datasets about government spending.
Still, PIRG said there are plenty of opportunities to increase transparency like improving the user-friendliness and search capabilities of websites. In addition, no state provides a comprehensive list of government entities -- like governmental and quasi-governmental corporations -- outside the standard state budget. Ideally, the report said, a central registry of all such entities would be available for public reference.
Stepping on the gas
Fitch Ratings is endorsing a hike in the federal gas tax, noting in a release this week that the “tax is the fastest and most reliable method to provide desperately needed resources to states for road and rail infrastructure projects.” The proposal, introduced earlier this month via the American Road & Transportation Builders Association (ARTBA), would raise the federal gas tax by $0.15 and offset that increase with a tax credit of $90 for families earning less than $200,000 a year. ARTBA predicts the plan would increase the Federal Highway Trust Fund by $27 billion per year over six years. Without more money, the fund is expected to run out of money by May 31.
“The six-year proposal provides needed multiyear stability to facilitate long-term infrastructure planning after more than a decade of stop-gap measures that have created an atmosphere of instability and inefficiency,” Fitch said. The ratings agency added that an even longer-term solution for the trust fund could include a combination of different funding forms such as taxes and fees and tolling of existing interstates that could be phased in over time.
In a separate analysis this week, Moody’s Investors Service noted that some states are adapting to the federal uncertainty by reducing infrastructure spending, building reserves and raising fuel taxes to increase their own resources. In December, Tennessee’s Department of Transportation said it would reduce annual project work by $250 million, a move echoed in Missouri and Arkansas. Iowa, Utah and South Dakota, which have all raised their fuel taxes recently.
Chicago vs. Detroit
Municipal credit analyst Matt Fabian, who issued a Detroit-esque warning to Chicago in a Governing article earlier this month, had a more detailed analysis this week comparing the two financially struggling cities. He noted that while Chicago and Detroit share burdensome legacy liabilities, the Windy City has more going for it than Detroit did on the brink of its bankruptcy two years ago. “Detroit’s reliance on the auto industry, persistent and severe population loss, high taxes, very weak socio‐economics, revenue raising constraints, pathological relationship with the state, and history of local corruption preceded its bankruptcy filing,” wrote Fabian, a partner at the research firm Municipal Market Analytics. “Chicago, the 3rd largest U.S. city, has a diverse economy, a relatively stable population in recent years, a well‐educated workforce, and revenue raising flexibility.”
Chicago’s problem is fairly simple: Its pension obligation is growing out of control. Still, it’s a complicated issue that’s also been tied up in legal and political battles as well as connected to credit rating downgrades that have thus worsened the city’s overall financial status. “These make the future financial course of the city uncomfortably unpredictable,” Fabian writes, “and raise the likelihood of an undesirable outcome for bondholders.”