week 8: issues in state and local public finance guest speaker: betty masuoka, assistant city...
TRANSCRIPT
Week 8: Issues in State and Local Public Finance
• Guest Speaker: Betty Masuoka, Assistant City Manager, City of Sacramento
– City revenues and expenditures
– Major financing issues facing the City
• ICMA Case Studies
• School Finance
• E-commerce
• Eight-week evaluation
Case Study -- Developing the Tax Base
Substantive Issues
• Competition for economic development, tax rates
• Strategies: annexation, attracting industry and jobs, redevelopment (tax increment financing, enterprise zones)
Process/political Issues
• Long-run v short-run benefits
• Expertise v politics; professional v political incentives
• Old v new organizational culture -- professionalism
• Ethics (of omission and/or commission)
• Political Skill to avoid untenable choices
Case Study (cont.): LeBlanc’ s Choices
1. Present his cost-benefit analysis to Board in low-key way
2. Present his analysis to Board and express concern
3. Let someone else make presentation and keep quiet or don’t attend Board meeting
4. Revise cost-benefit analysis with rosier numbers
Could he have avoided this situation?
Case Study: Estimating Revenues
Substantive Issues
• City finances are heavily dependent on state economy
• There is always uncertainty in making revenue projections
• There are more and less sophisticated ways to estimate revenues. Is more “rationality” always best?
Process/political Issues
• Politicians need to explain and communicate to citizens
• Conventional wisdom can be powerful
• There are political consequences to being right
• Ethics – when there’s no clear right or wrong
Case Study (cont.): Questions Raised
• How useful to the city manager is the consultant’s report?
• How should the manager deal with the uncertainty reflected in the range of revenue estimates?
• How should he present the information to the Council?
• What recommendations should he make with regard to layoffs and reserves?
Issues Raised by School Finance Generally
• Role of government
– promote equality -- defined as:
• opportunity/quality/outcomes/revenue per effort?
– public v private education
– local choice issues
• Accountability
– shows complexity of performance measurement
– inputs and outcomes of public education
– cause/effect knowledge
• Nature of citizen involvement in education issues
Effect of Serrano and Proposition 13 (PPIC Study)
• Decline in per pupil spending– due to end of subsidy by non-residential property owners?
• State finance has resulted in less inequality in revenue, but:– performance has declined – housing choices still reflect preferences for “better” schools
• Are problems caused by State financing of schools?– Do other factors affect performance?– Do other factors affect housing choice?
• Impact of financing v governance on school quality– disconnect between financing and governance– move to local financing or state control; not mixed
Taxation of E-Commerce
• Sales Tax and Income Tax issues• “Nexus” -- connection between state and taxpayer
– consumption v production/performance– physical v economic presence
• Reasons to support internet taxation– states have legitimate claim to revenues
• Reasons to oppose internet taxation– tax increase; hinders business climate
• Other issues– Enforcement issues– Definitional issues -- new kinds of transactions/services
Preview of Week 9
Part III: Practical Applications in Budgeting
• Back to Rubin, Ch 5 on tradeoffs and competition for $$
• Practical chapter on budgeting in local government
• Department of Finance – Budget analysis– BCPs
• In class project on budget justification/analysis
• Class notes may not get posted (I’m in St. Louis until Tuesday)