State and Local Public Finance
Spring 2013, Professor Yinger
Lecture 1
Introduction and Overview
State and Local Public Finance
Lecture 1: Introduction and Overview
Class Outline
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Course Requirements
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The U.S. Federal System
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Overview of Course Topics
State and Local Public Finance
Lecture 1: Introduction and Overview
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The Federal System in the U.S.
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Units Defined by U.S. Constitution
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Broad outlines defined by constitutions
Details determined by politics
The Federal Government
State Governments
Units Defined by State Constitutions
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The State Government
Counties and (usually) Townships
Municipalities (Cities and Villages)
School Districts
Special Districts
State and Local Public Finance
Lecture 1: Introduction and Overview
County Township Municipality School District
State and Local Public Finance
Lecture 1: Introduction and Overview
Sales taxes
provide almost
half of state tax
revenue
Most of the
federal grants
are for TANF or
Medicaid
State and Local Public Finance
Lecture 1: Introduction and Overview
State and Local Public Finance
Lecture 1: Introduction and Overview
120000
100000
67355
12884
80000
37203
60000
12340
40000
16364
17202
20000
16807
19522
3052
3031
0
1952
Counties
Special Districts
2012
Municipalities
School Districts
Townships
State and Local Public Finance
Lecture 1: Introduction and Overview
State and Local Public Finance
Lecture 1: Introduction and Overview
Special Districts by Function, 2002
Function
Total
Total single function districts
Natural resources
Fire protection
Water supply
Housing & community dev't
Sewerage
Cemeteries
Libraries
Parks and recreation
Highways
Health
Hospitals
Education
Airports
Utilities other than water
Other
Multiple function districts
Number Percent
35,356
100.0
32,157
91.0
7,026
19.9
5,743
16.2
3,423
9.7
3,413
9.7
2,020
5.7
1,670
4.7
1,582
4.4
1,314
3.7
767
2.2
743
2.1
735
2.1
530
1.5
512
1.4
485
1.4
2,194
6.2
3,199
9.0
State and Local Public Finance
Lecture 1: Introduction and Overview
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State Examples, 2012
State
Alaska
Total
Count
Town
Muni
Schl
Specl
177
14
0
148
*0
15
4,350
57
0
482
*1,025
2,786
Hawaii
21
3
0
1
1(Dp)
17
Illinois
6,968
102
1,431
2,729
905
3,232
Mass.
852
5
298
53
*84
412
Nebraska
2,581
93
419
530
272
1,267
New York
3,454
57
929
617
*679
1,172
Penn.
4,905
66
1,546
1,015
514
1,764
Texas
4,856
254
0
1,214
*1,079
2,309
497
95
0
229
*1
172
California
Virginia
* Also has dependent school districts.
State and Local Public Finance
Lecture 1: Introduction and Overview
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This course examines spending
and taxation in the U.S. federal
system.
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Determinants of local spending
Evaluating tax policies
Fiscal aspects of economic
development
Intergovernmental fiscal relations
Many of the principles apply to
the federal systems in other
countries.
State and Local Public Finance
Lecture 1: Introduction and Overview
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The course covers both positive
and normative analysis.
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Positive analysis:
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Examines the behavior of voters,
businesses, and government
officials.
In principle, positive statements can
be tested against evidence.
Normative analysis:
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Examines the best choices for
public officials to make.
Combines positive analysis with
values—yours!
State and Local Public Finance
Lecture 1: Introduction and Overview
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Positive Analysis, Examples
(which may or may not be true)
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People with higher incomes vote for
higher levels of local public
services, all else equal.
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Communities with higher property
tax rates have lower house values,
all else equal.
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Lowering a city’s property tax rate
has little impact on its employment.
School districts with more
disadvantaged students have to
spend more to achieve any given
level of student performance.
State and Local Public Finance
Lecture 1: Introduction and Overview
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Normative Analysis, Examples
(with which you may or may not
agree)
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Prison provision should be contracted
out to private companies.
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A property tax is a better way to
finance local public services than a
local income tax.
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Cities should not use property tax
exemptions to promote economic
development.
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States should give more education aid
to school districts with a high
concentration of at-risk students.
State and Local Public Finance
Lecture 1: Introduction and Overview
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Intellectual Honesty
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Separating positive and normative
arguments may be the most difficult
task in a public policy debate.
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Many people start with a favorite
program and then cherry-pick the
evidence that supports their position.
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This approach undermines their own
objectives.
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You should use the best available
evidence to determine which
programs best meet your objectives.
State and Local Public Finance
Lecture 1: Introduction and Overview
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Class Conference
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At the end of this class, you will
present your proposals for reform in
state or local public finance; many
of them will be more sensible than
what is actually being discussed in
state legislatures.
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After this class, some of you will be
able to implement your proposals or
develop other ones when your work
in state and local governments.
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My hope is that your proposals will
be at least a little better because
you took this class!
State and Local Public Finance
Lecture 1: Introduction and Overview
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Class Conference, Cont.
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We are slowly coming out of a
recession, and state and local
governments are struggling.
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Their service needs are up.
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Their revenues are down.
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They need your help!!!
State and Local Public Finance
Lecture 1: Introduction and Overview
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Class Conference, Cont.
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You should have no trouble finding
good topics. Recent examples:
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"The Costs and Benefits of a Casino in Prince
George's County"
"Maryland’s Enterprise Zone Program"
"Buying Lottery Tickets Online – A Bet Maryland
Should Not Wager"
"Recommendations on Enforcement of U.S.
Online Sales Tax Collection for States"
“A Land Bank for Syracuse”
"New York City Traffic Development Plan"
"Indian Health Care: Increasing Health Services"
"Soft Drink Taxes in New York State"
"Should New York State Create a Virtual High
School?"
"Recommendation for the Homestead Tax Option
in the New York State"