The Week in Public Finance: Taxes, Chi-Town, and Rock and Roll
A roundup of money (and other) news governments can use.
A recent Pew Trusts research project took a look at where taxpayers filed for the most federal tax deductions and concluded that there is wide variation across the states, “indicating that changing federal tax expenditures likely would change the geographic distribution of federal tax benefits.” Pew defined a tax expenditure as special exclusions, deductions, credits, and other provisions that allow people or businesses to reduce their income taxes. The geographic distribution of such “expenditures” was influenced by differences across states in income, other demographic characteristics, economic conditions and state tax structures, Pew said in the Sept. 4 report.
States that tend to have higher taxes rank among those whose earners file itemized tax returns most often. Maryland has the highest rate of claims, with nearly 47 percent of filers filed for a deduction. Connecticut and New Jersey follow behind at 43 and 42 percent, respectively, while the national average is about 32 percent of filers. View the state-by-state breakdown of specific types of deductions and credits here.
Pew estimated that all federal tax expenditures in 2014 totaled about $1.2 trillion, rivaling total federal discretionary spending that Congress allocates annually to areas such as defense, education, and transportation. Itemized deductions have been identified in various proposals under discussion in Washington as a target for tax reform. Itemized deductions total about $211 billion in forgone revenue in 2014.
Who’s guilty in Illinois?
A report released Sept. 5 by Moody’s gave a detailed overview of Illinois’ current pension woes and how the state got there. The conclusions of the report aren’t ground breaking; the state’s pensions got this way from a history of chronic underfunding. But the report did single out some of the pension system’s biggest culprits. According to Moody’s calculations, Illinois’ adjusted net pension liability totals more than $186 billion. (That number is higher than the $93 billion unfunded liability the state reported because Moody’s used more conservative assumptions in calculating unfunded liabilities.)
Illinois teachers’ plan is responsible for a full 40 percent of that liability, according to Moody’s calculations, far and away the largest chunk of the pie. Among locals, Chicago’s pension plans also drag down the average. Combining the city’s plans for its municipal employees, schools, police and fire, Chicago is responsible for 18 percent of the state’s total adjusted net pension liability.
Not shaken by the rattle and roll
Standard & Poor's said there will be “no immediate rating impact” to the Napa, Calif., area’s water and sewer utilities as a result of the Aug. 24 earthquake. The 6.0 magnitude earthquake struck the southern Napa Valley region, with the epicenter about 5 miles southwest of Napa. S&P noted that although Napa's city-owned water system and the Napa Sanitation District's sewer system sustained some damage, “we believe the damage and required repair work are manageable.” S&P added that the utilities also have enough cash reserves to pay for repair costs and utilities are expecting reimbursements from either state or federal emergency aid.
The sanitation district has more than $21 million in cash on hand and submitted a preliminary cost estimate to the governor's Office of Emergency Services that falls within the $2.1 million it district budgeted for emergency reserves this year. Napa Water’s ultimate cost of repairs is still unknown but management reported that it has ample cash ($15.1 million in unrestricted funds) to cover anticipated expenses.