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Author Topic: Follow the money . . .  (Read 14931 times)

Kelton

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Follow the money . . .
« on: February 05, 2003, 06:24:07 pm »

This thread is for the serious discussion of money matters of the state and local governments within our candidate states, to aid in understanding that important element of governance that funds what government does.  
Let us review taxation policies, state budgets and deficits, expenditures, economic measures, funded and unfunded programs, economic cost of regulation, salaries of public officials, public employees and all factors related to money that will aid in a more thorough understanding of how to compare our states.



Money is the barometer of a society's virtue.
   -- Ayn Rand
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. . .the foundations of our national policy should be laid in private morality. If individuals be not influenced by moral principles, it is in vain to look for public virtue --The U.S. Senate's reply to George Washington's first inaugural address

Kelton

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Re:Follow the money . . .
« Reply #1 on: February 10, 2003, 05:22:39 pm »

Many state legislators both on the left and on the right live and die by their states' credit ratings, as this affects how much of the state budget will be spent on interest on both long- and short- term debt.  It affects how much can be spent on programs and how much revenue the state needs to collect on taxes.
S&P, Moody's, Fitch are three well- respected names in the bond- ratings and insurance industry.  They constantly monitor the revenue and expenditure policies of each state.  These ratings are constantly subject to change and can change quite rapidly, both for the better or worse.  Usually, however, most states are only down- or up- graded by small degrees, no more than a few grades at a time unless something drastic should occur.
The following was accurate as of Jan. 2003:
State     Fitch   Moody’s   S&P
AK         AA     Aa2        NR
DE        AAA    Aaa         AAA
ID                                 AAA
ME        AA+    Aa2         AA+
MT        NR       Aa3        AA-
NH        AA+     Aa2         AA+
ND        NR        NR         AA-
SD                                  A
VT        AA+     Aa1         AA+
WY      NR        NR          AA

It should be noted that local governments and entities of the state can have different bond ratings than the state itself.

SD, ND,MT receiving the lowest ratings as of that time.

Sources:
http://www.roncrane.com/opEd.htm
http://www.treasurer.ca.gov/ratings/current.htm
http://www.stateline.org/story.do?storyId=280657
http://qrc.depaul.edu/Excel_Files/StatisticalAbstract2001/Section8/01s0433.XLS


Information on credit ratings:
http://www.treasurer.ca.gov/ratings/fitch.htm
http://www.treasurer.ca.gov/ratings/moodys.htm
http://www.treasurer.ca.gov/ratings/sp.htm

Muni’s sold today:
http://www.investinginbonds.com/munitrades/
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. . .the foundations of our national policy should be laid in private morality. If individuals be not influenced by moral principles, it is in vain to look for public virtue --The U.S. Senate's reply to George Washington's first inaugural address

Kelton

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Re:Follow the money . . .
« Reply #2 on: February 11, 2003, 10:44:04 am »

Included in the full CATO governor report,  by Stephen Moore, and Stephen Slivinski was a table of Real per capita spending increase 1991-2000.
Here are our candidate states from that report,

1 NH 47% increase (#10 in nation)
2 ME 38%
3 ID 38%
4 MT 36%
5 ND 34%
6 SD 33%
7 VT 32%
8 DE 30%
9 WY 11% (#49 rank out of 49 states examined)
10 Alaska is excluded because of peculiarities in Alaska's budget that make interstate tax comparisons problematic
_____
Spending increases usually correlate to expanded programs and growth of government services, one of the best way to measure growth of government is growth in spending.  It is not perfect, as sometimes the cost of doing the same service increases, such as increases in teacher salaries, but over the long- run, these increases can be accounted for by adjusting for inflation.  A measurement over the course of 10 years, and even the average spending increase over ten years might tell the story better, such information has not been compiled for all of the states at this time, the above information is just a measurement of total per capita spending.

Excess capacity in the government sector would probably account for some of the excessive size of increase in North Dakota, but certainly only a very small part of that increase.  

It is important to note that this is not a measurement of revenue, but actual state spending as found in a state budget.

Another thing to remember is that spending does not tell the full story, some growth of government is unfunded by state budgets when the burden is placed squarely on the private sector through regulation.

These are figures using real per capita spending by state governments.  By 'real', we refer to adjusting for inflation.  This obviously doesn't tell the whole money story, however.  If we remember that per-capita spending means small children, babies and every living person is a part of per- capita spending.  this is another measure I wish to explore soon.

[Calculations that I previously had here concerning acceleration of government size compared to population growth have been deleted because of lack of correlation with statistical analysis.]  
« Last Edit: February 12, 2003, 12:21:30 pm by exitus »
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. . .the foundations of our national policy should be laid in private morality. If individuals be not influenced by moral principles, it is in vain to look for public virtue --The U.S. Senate's reply to George Washington's first inaugural address

JasonPSorens

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Re:Follow the money . . .
« Reply #3 on: February 11, 2003, 11:25:40 am »

Exitus - If the first table is real per capita spending growth, then it already takes population growth into account.

Correction: I see, you're trying to discern whether population growth correlates with *per capita* growth of government.  In that case, the best way to do it is to run a regression equation and see which observations fall below the regression line.
« Last Edit: February 11, 2003, 11:27:50 am by JasonPSorens »
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JasonPSorens

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Re:Follow the money . . .
« Reply #4 on: February 11, 2003, 12:05:56 pm »

Excel does simple regressions pretty handily.  What you need is a Pearson coefficient and error (or residuals) calculations for each observation.  So I just put pop growth and per capita spending growth in 2 columns, then clicked Tools--Data Analysis, selected "Regression," then made gov't growth the Y variable and pop growth the X variable.

Turns out the correlation between the two is mighty weak: the X variable had a coefficient of 0.21 and wasn't even close to being statistically significant.  Accordingly, with this sample, we have no evidence to reject the hypothesis that population growth and government growth are totally unrelated to each other.  This finding might change, of course, if all 50 states were included.  (I'd have to say it's unlikely, though.)  Since there's no statistical correlation, looking at the residuals doesn't really matter.  But in any case, what we're probably looking at for FSP purposes is gov't growth, from whatever cause, not "gov't growth over what would be expected given population growth."  Looking at the latter as being important would be like saying that a state that is less socialist than it should be given that it has been governed by the Communist Party for decades (let's say) is a good candidate for us, even if it is very socialist compared to other states without Communist rule.  That probably doesn't make sense; I have a cold and am not altogether with it. ;)
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"Educate your children, educate yourselves, in the love for the freedom of others, for only in this way will your own freedom not be a gratuitous gift from fate. You will be aware of its worth and will have the courage to defend it." --Joaquim Nabuco (1883), Abolitionism

Zxcv

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Re:Follow the money . . .
« Reply #5 on: February 11, 2003, 12:54:07 pm »

I'm a little shaky with statistics, too... another thing to dig into at some point, I guess.  ???

I assume you are saying it is unfair to penalize NH (for example) for large recent government growth if it was starting from a small base in the first place, just as it would be unfair to praise another state whose growth was small if it was starting from a large government base.

That makes sense to me, but still there is something here. The existence of large recent growth even in a small base is an indication something is wrong; it is a warning signal there is something to watch out for in that state, perhaps a significant shift in outlook on government. Maybe not something that can't be rolled back, though.

As to government growth being related to population growth, there may not be a correlation but it's interesting that recently, even tax increase opponents in my state have been giving tax proponents the benefit of the doubt in this by worrying publicly about government growth above and beyond the growth in population and inflation (as if government growth at the same rate as population+inflation was automatically justified).
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Kelton

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Re:Follow the money . . .
« Reply #6 on: February 11, 2003, 06:24:02 pm »

State Rainy Day Funds: What to Do When it Rains?

http://www.cbpp.org/1-31-02sfp2.htm

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. . .the foundations of our national policy should be laid in private morality. If individuals be not influenced by moral principles, it is in vain to look for public virtue --The U.S. Senate's reply to George Washington's first inaugural address

Robert H.

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Re:Follow the money . . .
« Reply #7 on: February 12, 2003, 04:22:17 am »

I assume you are saying it is unfair to penalize NH (for example) for large recent government growth if it was starting from a small base in the first place, just as it would be unfair to praise another state whose growth was small if it was starting from a large government base.

This could partially explain why Idaho is doing so well in terms of government growth even though it is growing much faster than New Hampshire in terms of population.  Idaho currently has state income and sales taxes, therefore, there is more in the way of funding available to meet the increased infrastructure requirements posed by growth.  As new residents move into the state, their tax dollars add to the general revenue and slow the need for new measures to meet increasing demands.

New Hampshire, on the other hand, lacking both a state income and sales tax, must find other ways to fund its growth-related problems.  Personally, I would look for local government and taxation to grow first as such measures would be simpler to pass than state-wide tax increases.

JasonPSorens

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Re:Follow the money . . .
« Reply #8 on: February 12, 2003, 11:31:58 am »

Well, Idaho's not doing so well really...it had a 38% increase in government spending per capita, while NH had a 47% increase.  Neither is great.  Of course, all the states except Wyoming and NH are clumped in the 30-38% range, so it's difficult to single out "good" and "bad" states in that bunch.
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Robert H.

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Re:Follow the money . . .
« Reply #9 on: February 13, 2003, 04:11:51 am »

Of course, all the states except Wyoming and NH are clumped in the 30-38% range, so it's difficult to single out "good" and "bad" states in that bunch.

Wyoming's surplus would really seem to be a tremendous advantage here in terms of stemming the growth of government.  At least I'm assuming that it's the surplus that's helping it so much.

Faster growing governments are going to be harder to cap and scale back, particularly if there is a public outcry for various services that are currently in short supply.

Kelton

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Re:Follow the money . . .
« Reply #10 on: February 13, 2003, 04:25:29 am »


Wyoming's surplus would really seem to be a tremendous advantage here in terms of stemming the growth of government.  At least I'm assuming that it's the surplus that's helping it so much.

Surpluses are also a source of potential mischief, too.  I prefer the way that Colorado has it, and that is sending the money back to the taxpayers when there is a surplus.  Even in the face of incredible revenue shortfalls, states still don't know how to cut spending.  Ever since Clinton and Gore, the public has been sold this idea that government surpluses are somehow desireable, when in fact they are signs that the government is collecting more taxes than they need to. (of course, that whole federal surplus in 2000 was no such thing).  
Here's some bad news, I read somewhere that Wyoming's governor is contemplating the idea of now raising the minimum salary level to qualify for Medicare up to a level closer to the national average; but now for the good news, Wyoming is also looking into lowering the state sales tax rate because of the surplus.
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. . .the foundations of our national policy should be laid in private morality. If individuals be not influenced by moral principles, it is in vain to look for public virtue --The U.S. Senate's reply to George Washington's first inaugural address

Robert H.

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Re:Follow the money . . .
« Reply #11 on: February 13, 2003, 04:54:34 am »

Surpluses are also a source of potential mischief, too.  I prefer the way that Colorado has it, and that is sending the money back to the taxpayers when there is a surplus.  

Quite so.  This surplus is something of a different animal though because it's a deliberate set-aside as opposed to an excess in revenue over expenditures for a given fiscal year.  I believe they've been setting aside 5% of their mineral revenue since 1974 to build up to where they are today.

Whether they should be doing it or not is certainly open to question though.  For our purposes, we could use the surplus to help us incrementally scale back or eliminate certain programs or infrastructure that are currently written into the state budget.  That would allow us to reduce taxes to some degree with less chance of being accused of "risky schemes."

One good thing here though is that Wyoming has managed to not go spend-happy with the surplus since they've been accumulating it for so long.  They've been pretty frugal in that regard; a fact that seems to testify well in regard to the state government.  But then, Wyoming does well in the frugal government measurement on the Camelot indexes.

Quote
Here's some bad news, I read somewhere that Wyoming's governor is contemplating the idea of now raising the minimum salary level to qualify for Medicare up to a level closer to the national average; but now for the good news, Wyoming is also looking into lowering the state sales tax rate because of the surplus.

It'll be interesting to see how those issues fare in the legislature.

Hank

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Re:Follow the money . . .
« Reply #12 on: August 11, 2003, 03:16:52 pm »

I'd bet the reason for so few posts here is because very few of us understand this stuff.
We gonna have to understand it eventually.
Maybe we need an FSP school on "Budgets for activists"
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Kelton

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Re:Follow the money . . .
« Reply #13 on: September 03, 2003, 12:28:53 am »

Total State & Local Expenditures (Nov. 2001) From Oregon Taxes Newsletter

SD  $4,320.20  Ranks #48 per capita  :)
ID   4,573.03  Ranks #46
NH   4,709.38  Ranks #41
MT   4,965.75  Ranks #32
ND   5,125.38  Ranks #26
ME   5,126.64  Ranks #25
VT   5,238.62  Ranks #22
-    5,508.31 --U.S. Average
DE   6,023.66  Ranks #12
WY   6,565.58  Ranks #4
AK $12,439.66  Ranks #1
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. . .the foundations of our national policy should be laid in private morality. If individuals be not influenced by moral principles, it is in vain to look for public virtue --The U.S. Senate's reply to George Washington's first inaugural address

mactruk

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Re:Follow the money . . .
« Reply #14 on: September 03, 2003, 08:40:08 pm »

  Once fsp takes over this data means what?  Most will have to change for freedom anyway.  If I am free and not forced to pay taxes there will be no budget to worry about.  This thread assumes status quo?
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