The Week in Public Finance: Diverging County Economies, Treasurers Talk Trump and Sanctuary City Threats

A roundup of money (and other) news governments can use.
by | February 17, 2017

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County Recoveries Coincide With Political Shifts

The nation's economic recovery accelerated in 2016, with more than 1 in 4 counties reporting a full recovery to pre-recession levels on four key economic indicators. That portion is a huge jump from last year when 1 in 10 reported fully recovering counties, according to the National Association of Counties (NACo).

The four indicators are: job totals, unemployment rates, economic output (GDP) and median home prices. Two-thirds of the nation’s more than 3,000 counties have recovered on at least three of the economic indicators.

Most of the counties that have fully recovered are in Kentucky, Iowa, Minnesota, Missouri, Nebraska, South Dakota, Texas and Wisconsin. In addition, the mid-Atlantic, the Northeast and the West Coast have many nearly-to-fully recovered counties. Large counties (more than 500,000 residents) had the highest rate of full recovery at 41 percent. In contrast, more than three-quarters of small counties (fewer than 50,000 residents) still had not reached their pre-recession peaks in any of the indicators by the close of 2016.

The Takeaway: Both the acceleration of the economic recovery and the fact that it’s mostly happening in very populated areas is widening the gap between the municipal haves and have nots. It also partly explains shifting political allegiances in some mid-sized counties in 2016.

Many of the approximately 200 mostly Midwestern mid-sized counties that voted for President Obama in 2008 and 2012, voted for President Trump in 2016. According to NACo’s analysis, these swing counties have experienced weaker job recoveries compared to the national average with more than half of them still below their pre-recession job peaks.

“While there’s a national storyline on the economy, it often plays out differently at the local level,” says lead report author Emilia Istrate, managing director of NACo Counties Futures Lab. “The wide variation in local conditions underlines the need for a strong federal-state-local partnership on providing economic opportunity for residents of communities of all stripes.”

Treasurers, Trump and Twitter

The new Trump administration was a dominant topic at this week's National Association of State Treasurers' conference in Washington, D.C. While some of the subjects were expected -- tax reform and infrastructure spending, for example -- a surprising amount of time was spent discussing President Trump’s Twitter habit and relationship with the media.

A panel during the conference that was billed as a discussion on what state treasurers can expect under the new administration covered topics ranging from Trump’s popularity on Twitter, to how to deal with a boss who tweets at-will, to whether the late night show Saturday Night Live was going too far. Republican Arizona Treasurer Jeff DeWit noted that Trump’s frequent tweeting gives him an open line of communication that allows him to lead the daily narrative. Between that and his flurry of executive orders, DeWit thinks that Trump has been gaining support among more traditional members of his party for his take-charge approach. “The liberal side is freaked out because he’s been so effective,” DeWit said.

The Takeaway: The fact that a discussion about the new administration focused so much on Trump’s personality and his relationship with the media is another sign that partisan politics is becoming increasingly difficult to escape.

More Pressure on Sanctuary Cities

A debate in Texas could prove a greater threat to sanctuary city funding than Trump’s executive order denying federal funding to such cities. The Texas House of Representatives is taking up a bill already passed by the state Senate that aims to ban sanctuary cities. In Austin, for example, newly elected Travis County Sheriff Sally Hernandez has been in a standoff with Gov. Greg Abbott over her decision not to detain any unauthorized immigrants.

The bill, which is largely expected to pass, would fine jurisdictions and college campuses that don’t comply with federal immigration law, allow for criminal charges on elected or appointed officials who knowingly violate these rules, and deny state grant funds (except for grants involving money for body armor) to the jurisdiction.

The Takeaway: While state aid to cities is declining, many jurisdictions are vulnerable to significant changes. And, whereas there are many questions over the legality of a federal intervention into sanctuary cities, there are none in states. They can preempt local actions. So a defunding threat on the state level could make cities more inclined to buckle.

A lot depends on how reliant cities are financially on their states. Municipal analyst Matt Fabian notes that local aid levels are generally low in Texas, so the impact may be minimal. Austin, for instance, reported to the Senate that it has received $9.8 million in state grants in 2017 -- a small portion of the city’s $1 billion general fund budget. Still, Fabian writes, “the net effect of state bans like these are likely to worsen state-local relations. In the context of near-certain federal aid cutbacks to the states over the next 10 years, a higher level of antipathy now only implies deeper pain to locals when cuts arrive.”

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