Economics and Finance

“Sin taxes” are often viewed as budget savers, despite their rather small role in the state budgets. In fiscal year 2016, states raised $25 billion in tax revenues from the two most commonly taxed so called “sins,” like tobacco and alcohol, which represented slightly over 2.7 percent of total state tax revenues. States are more likely to raise taxes on tobacco products than on alcohol, even though both pose a significant public health threat. Since 2000, 48 states increased cigarette tax rates about 130 times, while very few states increased tax rates on alcohol. Despite the increases in tax rates on tobacco, inflation-adjusted tobacco tax revenues declined by 0.8 percent between fiscal years 2008 and 2016. The opposite is true for alcohol taxes. Despite the relatively stable tax rates on alcoholic beverages, inflation-adjusted alcohol tax revenues grew by 12.2 percent over the same period. Tobacco tax revenues declined because declines in consumption more than made up for higher tax rates. The growth in alcohol tax revenues is largely attributable to growth in alcohol consumption.

How do states develop and manage their budgets, and how does this process vary across states? The latest edition of NASBO’s Budget Processes in the States report provides self-reported data from all 50 states and the District of Columbia on many aspects of state budget practices, such as: the budget calendar, revenue forecasting, gubernatorial budget authority, balanced budget requirements, tax and expenditure limitations, debt restrictions, approaches to budget development, rainy day funds, tools to monitor and control expenditures, and the use of performance measures.

Overall, state fiscal conditions weakened in fiscal year 2016 compared to the prior year. Both revenue growth and total state spending experienced a slowdown due to numerous factors. In addition, the number of states making mid-year budget cuts was historically high outside of a recessionary period. In fiscal 2017, it is projected that both state general fund spending and revenue will grow moderately. However, since the start of the fiscal year, over half the states have had to revise their revenue projections downward due to weaker-than-anticipated tax collections. Looking forward, states are not only contending with slow revenue growth and constrained spending, but also federal uncertainty in a number of areas.

Chapter 7 of The Book of the States 2017 contains the following articles and tables:

In Christie v. National Collegiate Athletic Association New Jersey Governor Chris Christie argues that because the Professional and Amateur Sports Protection Act (PASPA) prohibits the state from repealing laws restricting gambling it amounts to unconstitutional commandeering. The State and Local Legal Center (SLLC) filed an amicus brief supporting Christie.

PASPA, adopted in 1992, makes it unlawful for states and local governments to authorize gambling.

In Christie v. National Collegiate Athletic Association New Jersey Governor Chris Christie argues that because the Professional and Amateur Sports Protection Act (PASPA) prohibits the state from repealing laws restricting gambling it amounts to unconstitutional commandeering. The State and Local Legal Center (SLLC) filed an amicus brief supporting Christie.

PASPA, adopted in 1992, makes it unlawful for states and local governments to authorize gambling.

According to data from the U.S. Travel Association, travel – both domestic and international – has a big impact on economic growth and job creation in the states. In 2015, domestic travelers took almost 2.2 billion trips and 77.5 million international visitors traveled to the U.S. These travelers combined generated $2.1 trillion in output for the U.S. economy and provided jobs for 15.1 million Americans, or one in nine private sector jobs. In addition, travel generated a total of $67 billion in state and local tax revenue.

CSG Midwest
When the North American Free Trade Agreement took effect in 1994, it created the largest free trade area in the world at that time. By increasing trade and investment, reducing tariffs and addressing non-tariff barriers, the leaders of Canada, Mexico and the United States hoped to grow their countries’ economies and raise living standards across the continent.
“NAFTA worked, fundamentally shaping North American economic relations, driving integration between Canada and the United States’ developed economies and Mexico’s developing economy,” says Colin Robertson, vice president of the Canadian Global Affairs Institute and a former Canadian diplomat.
More trade with neighbors
In many measurable ways, NAFTA has been a major success. U.S. trade with its two neighbors has grown at a faster rate than its economic activity with the rest of the world. The value of U.S. exports to Mexico reached $231 billion last year, with Michigan ranking third among all U.S. states ($12 billion), and for the Midwest, the cross-border relationship with Canada is especially valuable. Canada serves as the largest export market for nine of the 11 states in this region (Kansas and Nebraska are the lone exceptions).
In states such as Michigan and Ohio, much of this cross-border trade centers on the automotive industry, where cars and their various parts are built via supply chains that send components across the border multiple times on their way to completion.
In fact, intermediate goods (not-yet-completed products) from Canada and Mexico accounted for half of all total imports from these countries. Free trade is essential to preserving these cross-border supply chains. According to the Canadian Embassy, trade with Canada supports close to 9 million jobs in the United States. The Mexico Institute estimates that nearly 5 million jobs in the U.S. depend on trade with Mexico.
But from the start, the three-nation agreement has failed to fully recognize how changes in North American trade would negatively affect certain workers and industries, says Christopher Wilson, deputy director of the Mexico Institute.
CSG Midwest
With a $20 million appropriation in the state’s new biennial budget, Indiana lawmakers once again affirmed their belief in a public-private partnership designed to further develop one of the state’s existing economic strengths — its life sciences industry.
“The jobs in this sector are high-paying, and the capital investments by businesses create large benefits to our economy,” says Sen. Mark Messmer, chair of the Indiana Senate Commerce and Technology Committee. The Indiana Bioscience Research Institute began four years ago with $50 million in funding. The state provided half of that start-up money, with the rest coming from the state’s universities and private firms.
The institute provides a collaborative environment for private industries and academic researchers; the state’s hope is that this public-private research results in the commercialization of new ideas, as well as advances in areas such as heart disease, diabetes and nutrition.
CSG Midwest
Eight years have now passed since the Great Recession rocked state finances, and since that time, state policymakers have had to settle for a modest recovery and still deal with a difficult fiscal environment. In a July presentation to state legislators, John Hicks, executive director of the National Association of State Budget Officers, detailed just how different — and more challenging — this period has been compared to other post-recession eras.
Since 2011, year-to-year revenue growth in the states has never reached the historic annual average of 5.5 percent, and for fiscal year 2018, the nation’s governors were recommending an increase of only 1.0 percent (and just 0.17 percent in the 11-state Midwest).
“That’s a notable item eight years into a recovery, and it isn’t because we’re cutting taxes and having to balance our budget as a result,” Hicks said during his presentation at the Midwestern Legislative Conference Annual Meeting’s Fiscal Leaders Roundtable. Instead, this slow rise in state spending reflects a “new normal” in tax collections, the result of only moderate increases in gross domestic product and, on top of that, a gap between changes in U.S. gross domestic product and the taxes being collected by states.

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