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Low-income workers in Ohio will get additional tax relief as the result of changes made in June to the state’s biennial budget. Following last year’s creation of an earned income tax credit, the legislature chose to expand it — from 5 percent of the federal credit to 10 percent.
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When the Great Recession began to hit states, they had a total of $59.9 billion in reserves. A year later, total budget gaps were nearly double that figure, $117.3 billion.
“States found themselves woefully short in terms of the amount of savings they had to offset the budget shortfalls created by the crisis,” Robert Zahradnik of The Pew Charitable Trusts told lawmakers at the Midwestern Legislative Conference Annual Meeting. “A lot of that is because savings is not the highest priority when it comes to making state budgets.”
The fiscal crisis is over, but it has opened new questions about budget planning and management. Prior to the Great Recession, for example, a fiscal reserve of 5 percent of the total budget was considered a sound target. Now, Zahradnik said, the preferred goal tends to be between 8 and 10 percent.
Part of the reason is that state revenue sources have simply become more volatile, thus the need to better plan for more-extreme “rainy days.”
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Most states in the region have a private license system for the sale of alcoholic beverages. Private enterprises, including liquor and grocery stores, apply for a license to sell alcohol. The licenses are granted at the discretion of the licensing authority in the state.
Three states in the region — Iowa, Michigan and Ohio — are called control states. None of these states operates retail liquor stores, but they do control the sale of distilled spirits at the wholesale level.

The fiscal skies are clearing, but states still have some tough decisions to make.

Experts shared strategies states can use to improve their standing in a number of areas, including rainy day reserves, pensions and international trade, during Sunday’s session, Fiscal and Economic Outlook for 2015.

According to Mary Murphy of the Pew Charitable Trusts, state shortfalls outstripped savings nearly two-to-one during the Great Recession. Post-recession, however, state tax revenues are showing overall improvement.

Smuggled tobacco comes with many challenges and costs, and it’s not just lost tax dollars for states, speakers at the session, “Smuggled Tobacco: Straining States’ Bottom Lines,” said Sunday.

“The amount of money that become involved is enormous,” said G. Stewart Petoe, director of legal affairs for the Virginia State Crime Commission. “You make absolute fortunes trafficking black market cigarettes.”

As one dealer noted in a recording...

This session explored what’s in store for your state in 2015 and beyond as experts forecast fiscal and economic trends for states and the nation. The discussion focused on the most significant fiscal and economic issues facing states—such as public pensions, tax reform and ways to foster entrepreneurship—and included insights about how states are tackling similar concerns.

States are losing billions of dollars each year from smugglers moving untaxed cigarettes across state lines—and the problem is growing. This roundtable discussion explored how states are cracking down on smugglers and what your state can do to combat the problem of black market tobacco sales.

For every two packs of cigarettes sold in New York, at least one has been illegally smuggled into the state. That’s according to research by the Mackinac Center for Public Policy, which also reports that cigarette smuggling cost states an estimated $5.5 billion in lost revenue in 2012. “The significance of the problem cannot be overstated in high-tax states,” said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center.

Economic recovery from the Great Recession has been slow and painful and for many states, revenues are only now getting back to pre-recession levels. While the recession took states on a fiscal roller coaster ride, it also helped reveal the importance of planning for hard times long before they arrive and having a strategy in place to manage volatility. A new series of reports by The Pew Charitable Trusts aims to provide state policymakers with a roadmap to help manage fiscal ups and downs and uncertainty. The first report in the series, "Managing Uncertainty," looks at volatility across the 50 states, noting that the drivers of economic and revenue volatility vary widely.

Cigarette smuggling across state lines is a serious problem, costing states billions in lost revenue each year and creating challenges for law enforcement. 

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