Tax and Budget

Congress returned from the August break facing the challenge of having to address a long list of critical issues in the dwindling legislative year. These important issues include reaching agreement on the budget and debt ceiling; addressing the expiring highway funding authority; overhauling federal education policy; and discussing cybersecurity legislation.

The federal reimbursement rate in 2015 is 57.5 cents per mile, up 1.5 cents per mile over the 2014 rate and up 17 cents over the rate ten years before–37.5 cents per mile on Jan. 1, 2005. Thirty-three states have a reimbursement rate that is the same as the federal rate. For those 17 states whose rates differ from the federal rate, reimbursement rates range from 31 cents to 57 cents per mile. No state reimburses at a rate higher than the federal rate.

Chapter 7 of the 2015 Book of the States contains the following articles and tables:

Fiscal conditions for states were somewhat mixed in the 2014 fiscal year as state general fund revenue growth declined due to the impact of the federal fiscal cliff, while total state spending growth accelerated due to increased federal Medicaid funds from the Affordable Care Act. The number of states making midyear budget cuts remained low and states maintained stable rainy day fund levels. In the 2015 fiscal year, states are expecting both revenue and spending to grow slowly, but below the historical rate of growth. It is likely that budget proposals for the 2016 fiscal year and beyond will remain mostly cautious with limited spending growth.

Fiscal conditions for states were somewhat mixed in the 2014 fiscal year as state general fund revenue growth declined due to the impact of the federal fiscal cliff, while total state spending growth accelerated due to increased federal Medicaid funds from the Affordable Care Act. The number of states making midyear budget cuts remained low and states maintained stable rainy day fund levels. In the 2015 fiscal year, states are expecting both revenue and spending to grow slowly, but below the historical rate of growth. It is likely that budget proposals for the 2016 fiscal year and beyond will remain mostly cautious with limited spending growth.

CSG Midwest
In his home legislative district, Ohio Sen. Cliff Hite knows well the dilemma facing local agricultural producers: Their tax bills are skyrocketing (by an average of 62 percent this year), he says, while returns are declining and operational costs are rising.
But finding a legislative fix to the problem is much easier said than done.
“Discussion on use value could backfire on farmers,” says Hite, noting that Ohio, like most states, has “an increasingly urban electorate and legislature not understanding why farmers should get a tax reduction.”
In Ohio, and most other Midwestern states, farmland is appraised using a formula based on “current agricultural use value.” Based on factors such as commodity prices, soil productivity, rental rates, production expenses and interest rates, the state determines the income that a farmer can be expected to earn on his or her land.

A 2014 report by the Williams Institute at the UCLA School of Law predicts that the legalization of same-sex marriage could have a combined economic impact across all states of $2.6 billion during the first three years, primarily due to increased spending on weddings by same-sex resident couples and their out-of-state guests. In addition, the report estimates that legalization will boost state and local sales tax revenue by $184.7 million and support more than 13,000 jobs. The potential economic and fiscal impact varies across states.

As consumers continue to use the Internet to acquire goods, members of Congress are attempting to solve a quirk in tax law that is preventing states from collecting potential sales tax revenue. Bills in both the House and Senate aim to give states the authority to require out-of-state businesses selling online or through catalogs to collect taxes already owed under state law the same way local businesses do. Similar legislation failed to reach President Obama’s desk last Congress, but proponents are moving swiftly to ensure the bills remain at the top of the Congressional agenda.

Economics webcast

In the aftermath of the Great Recession, an increasing number of states, including several in the SLC region, are focused on increasing accountability and transparency in the disbursement of taxpayer dollars. Performance-based budgeting—which focuses on efficiency and effectiveness in outcomes—has emerged as a viable tool for states looking for an alternative to routinely funding government operations on a pro forma basis. This webinar provided an overview of performance-based budgeting and highlighted measures initiated in Oklahoma and Mississippi to implement this spending strategy.

 

CSG Midwest
With the adoption of Public Act 239 in the summer of 1972, lawmakers in Michigan sought to generate new revenues in support of the state’s public education system by embracing a mechanism with a storied past in American history — the public lottery. In doing so, the Wolverine State became the first in the Midwest to establish a modern state lottery, following the lead of a handful of northeastern states and helping to usher in a new wave of interest in state-sanctioned gambling across the entire country.

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