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 Course Requirements The U.S. Federal System Overview of Course Topics State and Local Public Finance Lecture 1: Introduction and Overview The Federal System in the U.S. Units Defined by U.S. Constitution Broad outlines defined by constitutions Details determined by politics The Federal Government State Governments Units Defined by State Constitutions 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 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 This course examines spending and taxation in the U.S. federal system. 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 The course covers both positive and normative analysis. Positive analysis: Examines the behavior of voters, businesses, and government officials. In principle, positive statements can be tested against evidence. Normative analysis: 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 Positive Analysis, Examples (which may or may not be true) People with higher incomes vote for higher levels of local public services, all else equal. Communities with higher property tax rates have lower house values, all else equal. 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 Normative Analysis, Examples (with which you may or may not agree) Prison provision should be contracted out to private companies. A property tax is a better way to finance local public services than a local income tax. Cities should not use property tax exemptions to promote economic development. 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 Intellectual Honesty Separating positive and normative arguments may be the most difficult task in a public policy debate. Many people start with a favorite program and then cherry-pick the evidence that supports their position. This approach undermines their own objectives. 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 Class Conference 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. 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. 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 Class Conference, Cont. We are slowly coming out of a recession, and state and local governments are struggling. Their service needs are up. Their revenues are down. They need your help!!! State and Local Public Finance Lecture 1: Introduction and Overview Class Conference, Cont. You should have no trouble finding good topics. Recent examples: "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"