The Williams Report: December 2018
After paying $275 million in late interest payment fees, Illinois still owes third-party financers $327 million in late fees. During the 2012 budget crisis, private firms bought more than $5 billion in state debt and collected as much as 12 percent interest in exchange for debt payment in the form of state goods and services.
Poor verification procedures and lack of oversight led to Louisiana spending nearly $85 million on ineligible Medicaid recipients. House Speaker Taylor Barras believes increasing spending efficiency will help the state avoid tax increases in the future.
The Montana economy is projected to see modest growth of between 3 and 4 percent over the next few years. Despite revenue projections indicating no budget problems, lawmakers are approaching the budget cautiously in case tax projections prove overly optimistic.
Despite revenues increasing 5 percent from last year, Oregon is still projected to have a massive budget shortfall due to spending growth. Medicaid expansion is a primary reason for increased obligations, as the federal government is scheduled to cover a smaller percentage of new enrollees in 2019. Ballot initiatives passed in 2016 mandating increases in education spending will also hamstring the legislature.
While some are calling for putting the increased revenue towards new spending, Governor Henry McMaster campaigned on tax cuts and will likely look to keep that promise. Despite passing tax reform in October, South Carolina’s personal income and sales tax rates are still among the highest in the Southeast.
Elected on a promise to balance the budget without raising taxes, Governor Phil Scott delivered on that promise and won re-election this past November. Gov. Scott called for $15 million for a new clean water initiative which will be paid for within the current budget rather than tax increases.
The Illinois Supreme Court ruled unanimously that the state constitution protects a pension spiking provision available to certain public sector union leaders. The Chicago Tribune found the cost of 23 spiked pension accounts exceeds $56 million.
Kentucky Retirement Systems Director David Eager admitted that pension funding is in danger, challenged by an increasing number of retirees coupled with declining contributions. ALEC’s annual Unaccountable and Unaffordable pension report found that in 2017 Kentucky’s retirement system was the second-worst funded at an abysmal 20.9 percent and liabilities per capita amounted to $25,100.As it stands, KRS nonhazardous is the worst-funded pension plan in the country. Without any contributions and no investment income, the plan will be insolvent in two years.
Maryland is the richest state by average per capita income in the nation, yet has massive unfunded pension obligations. Assuming a 6 percent annual rate of return, used by JPMorgan Chase in their pension analysis, Maryland would need to spend 20 percent of its revenue yearly, amounting to a 7 percent increase in taxes, 7 percent reduction in spending, or doubling required employee contributions in order to close the pension funding gap.
The Investment and Pensions Oversight Committee endorsed a plan to the New Mexico legislature to increase the state’s pension integrity. Among the committee’s recommendations are increasing employee contributions by 50 percent, increasing the minimum age of retirement from 55 to 58, and decreasing benefits to teachers who have worked fewer than 10 years.