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Government Reform

Tune into NTU's State of the Union Coverage tonight
Posted By:  - 01/25/11

Tonight at 9 p.m. EST, the National Taxpayers Union's crack government affairs and policy analysis teams will provide special online coverage of the President’s State of the Union Address, and we want you to be there and be a part of the discussion. We will be breaking down the President's proposals and what they will mean for taxpayers. Details on how you can join the conversation are below.

  • If you have a Twitter account, use the hash tags #NTUSOTU and #SOTU to link to our discussions and analyses. Hash tags are like keywords for Twitter. Just use them in each of your messages to link to the ongoing dialogue. Remember to also follow @NTU and @NTUF for all the latest commentary!
  • You can also log onto NTU’s Facebook page, where we will constantly update our newsfeed with links, comments, and memorable quotes. Be sure to join our page by clicking "Like"!
  • Even if you don’t have a Twitter of Facebook account, you can still share your thoughts and opinions by going to our special chat room. Join the chat here.
  • NTU will also be updating our blog, Government Bytes, as the night progresses. You can comment on each post as well! Just click on the “Post a Comment” link and speak your mind.

We look forward to seeing you online tonight at 9 p.m. EST!

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A Borrowing Binge: $15 Billion More on Table in Illinois
Posted By:  - 01/06/11

A deficit almost half the amount of the $26 billion general fund budget; a billion dollar backlog in unpaid bills to vendors; and billions more in missed payments to a pension system already $85 billion in the hole.

This is the fiscal reality staring Illinois lawmakers in the face as they reconvene to address a $13 billion budget deficit. Years of incurring too much debt, over taxation, and too many government promises have brought Illinois to the brink. Yet even as the state continues to spend $3 for every $2 it takes in, Governor Pat Quinn has proposed spending and borrowing more - $15 billion more.

If not there already, Illinois is a “deadbeat” when it comes to paying its liabilities. The state shares with California the lowest U.S. state credit rating from Moody’s Investors Service as a result of the widening gap between the states expenses and revenue and their failure to address a long term, structural budget deficit.

No one wants to do business with a deadbeat. Indeed, as noted by the Illinois Policy Institute, late or unpaid bills have already caused Illinois vendors to end business with the state. For example, a company that produces ammunition stopped delivering bullets because the Department of Corrections owed them money. If not addressed, Illinois will not be able to provide its core services to residents. In this instance public safety is in jeopardy.

As if the state has not already borrowed itself into oblivion, Gov. Pat Quinn has proposed borrowing $15 billion more to resolve the issue. Supporters say the outside loan would provide instant cash to schools, doctors and social welfare agencies. Also, they claim it will save the state money as the interest payments on the new debt will be less than penalties incurred by not servicing vendors. The catch is that this is only a short term fix, “solving” the problem for only a year. It’s the classic Illinois example of kicking the can down the road, saddling Illinois taxpayers with yet another loan payment.

Quinn has also proposed a plethora of new taxes – everything from a 33% increase in the state income tax, a $1 hike in the cigarette excise tax, and taxing the sales of online purchases (click here and here to read more). All would further hamper the economic outlook of a state that already ranks nearly dead last according to the ALEC-Laffer State Economic Competitive Index.  

Illinois needs to reverse its deadbeat status. That means it should not enter into unaffordable new obligations and adjust existing spending obligations downward so it can begin paying down debt it already owes. More borrowing will make the problem worse in the long term, further hurting the state’s ability to take out loans or repay vendors.  Tax and expenditure limits are another way to ensure that government outlays do not grow faster than the public’s ability to pay. The Illinois Policy Institute has been tracking  HJRCA 61and its amendments which seeks to tie spending to per capita personal income growth. More to come on this issue…

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New Jersey's leaders reach deal on arbitration reform
Posted By:  - 12/10/10

Late yesterday, New Jersey’s Governor Christie, Senate President Stephen Sweeney, and Assembly Speaker Sheila Oliver announced that they had reached agreement on a proposal to reform arbitration awards for police and fire contracts. The proposal would cap salary increases negotiated through arbitration at two percent in an effort to make the process fairer for taxpayers who have to ultimately foot the bill for salary increases by paying higher property taxes.

The two percent cap, which will cover all salary items (i.e. COLAs, step increases) but not pensions or health care, will take affect next year and expire in 2014. The proposal also calls for a task force to evaluate the cap’s effectiveness. Also, arbitrators will be prohibited from awarding economic items not contained in previous contracts. Further, the proposal restricts arbitrators’ fees to $1,000 per day and $7,500 per case. Arbitrators will also be selected at random.

Police officers claim that the arbitration is not in need of reform because relatively few contracts go to arbitration, but mayors have long complained that the current arbitration process is weighted so heavily in favor of the unions that it pushes towns and cities to settle by agreeing to higher salaries. For example, New Jersey’s police officers are some of the highest paid in the nation.

Legislators, including Senator Sweeney, call this a “truly historic reform for New Jersey” and rightly so; some observers thought these leaders would agree on a cap given the interests involved, namely the powerful police and firefighters unions. This reform will help start to rein in the high costs of government that are consuming budgets and forcing higher property taxes on the backs of New Jerseyans. Over the last decade, local government spending has increased from $26.5 billion in 2001 to an estimated $44.7 billion this year, an increase of 69 percent. Recently, an arbitrator awarded firefighters in the town of Kearny a 17 percent raise over the next five years. Now, Kearny may have to lay off 16 of its employees to meet these expected higher costs. No wonder New Jersey’s state and local tax burden as a percentage of income is the highest in the United States.

There is still much work needed to be done – and soon – on reforming New Jersey’s budget and tax policies. Not only should lawmakers approve this proposal right away, but they should also approve the entire "tool kit" for local government that Governor Christie proposed back in May. But this arbitration proposal negotiated by the Governor and the General Assembly’s leaders is a good step in the right direction.

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New Jersey needs the "toolkit" to keep good times rolling
Posted By:  - 11/30/10

New Jersey appears to be on a roll. This year, the Garden State improved its ranking - moving from dead last to 48th - on the Tax Foundation's Business Tax Climate Index, the Nets got a new owner with the desire - not to mention the financial resources - necessary to rebuild what is currently the NBA's worst franchise, and Mike "The Situation" Sorrentino lasted longer on "Dancing with the Stars" than David Hasselhoff, Michael Bolton, and Margaret Cho. So how does New Jersey keep the good times rolling?

While I don't think I have the expertise to assess the chances for success of the Nets or the "Dancing With the Stars" contestants, I can tell you that for New Jersey's tax climate to continue to improve, the state needs to enact the governor's proposed "tool kit" for local government. New Jersey has the highest property taxes in the nation. To combat this, in July the Democrat-controlled legislature passed and Governor Chris Christie signed into law an annual two percent cap on local property taxes increases. The cap is lower than any previous restriction (the previous cap had a four percent ceiling) and limits to four (previously there were 14) the number of exemptions to the cap local governments can claim. The idea behind the cap is to enforce fiscal discipline by government entities, of which New Jersey has about 1,600.

But even with the cap in place, the high and growing cost of government in New Jersey places tremendous pressure on local governments to increase taxes either through an exemption or by seeking approval of voters. Therefore, it is necessary to find ways to reduce the cost of government to relieve some of the pressure for higher taxes.

To reduce the pressure, Governor Christie has proposed a tool kit for local government, which is a package of 33 bills that would give local governments powers to lower the cost of government and remain within the cap. The tool kit contains reforms to employee benefits, pensions, collective bargaining, and civil service. Among the reforms are a requirement that public employees contribute more to their health costs, an increase in the retirement age, a cap on arbitrators' awards for union contracts, and a proposal to allow government to opt out of the civil service system to consolidate services. These reforms are important steps on the road to reforming New Jersey's tax climate.

Although all of these tool kit bills have been introduced in either the General Assembly or State Senate and some have been enacted into law, the majority of the tool kit and most of the essential reforms, have yet to be considered. But time is running out before costs of government increase again. It would be a shame if New Jersey's roll were to suddely stop. If you live in New Jersey, the only way to keep the good times rolling is to click here to find your legislators and call or write them, and urge them to pass the tool kit.

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On Tap in Pennsylvania: Liquor Privatization
Posted By:  - 11/23/10

Many of the nation’s new Republican governors have ruled out tax hikes to address billions in collective deficits.  Proposals to cut spending are taking center stage as a way to avoid the harmful effects of tax hikes during a recession. Governor-elect Tom Corbett of Pennsylvania appears to have embraced this philosophy as he considers a budget gap that could run as high as $5 billion this year. Pledging not to raise taxes, Corbett and Republican leaders in the Legislature have booze on the brain, pondering a plan to privatize the state-run liquor industry. 

Pennsylvania joins 18 other states that impose some form of control on liquor sales, ranging from controls on both wholesale and retail markets.  H.B. 2350 seeks to change all that. Introduced by state representative Mike Turzai, the legislation would privatize liquor stores in Pennsylvania, beginning with the auctioning of 750 retail licenses and 100 wholesale licenses to the highest bidder.  

Getting the state out of the booze business is one way to reduce the public payroll, save on operating expenses and improve customer service. Also, with the sale of licenses the state is slated to collect $2 billion in up-front revenue in 2011 and an additional $350 million annually in alcohol sales tax. All could be used to help close the state’s looming budget deficit.

However, pro-control advocates cite many disadvantages of privatization. Yes, they claim, the private sector shows it can provide higher quality products at a lower cost, but reducing alcohol consumption, underage drinking, and alcohol related traffic deaths are lofty goals the profit oriented, private market cannot achieve. On the contrary, a recent study from the Pennsylvania-based Commonwealth Foundation of 48 states shows that over time there is no link between market controls and these social goals. Based on consumption and traffic data over the last four decades they find no significant reduction in any of these three areas compared with non-controlled states. As a matter of fact, they show that states which recently privatized their liquor industries experienced a significant decline in per capital alcohol consumption. 

Another fear of the pro-control folks and even The New York Times is large scale layoffs of government workers that result from privatization. This may be true, but privatization doesn’t mean liquor stores disappear. The stores will still exist and continue to require workers. Most of the state jobs will simply shift to the private sector. And as evidenced by the 31 successful cases of private liquor sales there is little justification for government liquor salesmen. Jacob Sullum of Reason sums it up well, “[H]ow seriously can we take the argument that unnecessary government jobs should not be eliminated because then there will be fewer unnecessary government jobs?”  

When state governments are experiencing shaky budgets, policy makers need to be on the lookout for any and all ways to streamline. Pulling the cork on state-run liquor sales is surely a place to start.

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Election 2010: What a night
Posted By:  - 11/03/10

Oh what a night!

 

As of this morning, Republicans won 60 additional seats and control of the U.S. House of Representatives. Also, Republicans expanded the size of their caucus by six in the Senate. These two changes that will have serious implications for a host of economic policies at the national level, including energy production, taxes, entitlements, and the debt. My colleague Jordan Forbes will have more to say about the federal results soon.

 

But for all of the dramatic change at the federal level, what happened in Congress pales in comparison to the changes that voters made at the state level. Republicans picked up nine governorships, including several in the economically important Midwestern states, and won control of 18 state legislative bodies, including chambers in North Carolina and Alabama; today marks the first time since Reconstruction the GOP has controlled those chambers. The larger number of fiscal conservatives in state legislative chambers will have a significant impact on the next round of budget negotiations, when states will have to face no easy choices to balance the budget in the midst of uncertain economic times.

 

Voters also weighed in on hundreds of state and local ballot measures that affect tax and budget policies. There were several setbacks for taxpayers yesterday. It appears as though voters rejected efforts to reduce taxes income and property taxes in Colorado and sales taxes in Massachusetts. Additionally, California passed a measure that would allow the legislature to enact a budget with a simple majority vote, which will likely open the door to more tax hikes. Unfortunately, Californians also rejected an effort to repeal a costly cap-and-trade emissions program in the state. However, at the same time, Californians voted to require supermajority votes on fees and to prevent the state from raiding funds for local government.

 

But taxpayers did score several important victories. Despite rejecting a broad reduction in the sales tax, Massachusetts approved a cut in the sales tax on alcoholic beverages. Washington voters resoundingly rejected an effort to enact a new state income tax and approved a measure rolling back a tax on soda, candy, and bottled water. Washingtonians also voted for a measure to require a supermajority in the legislature for any tax increase. Missourians voted overwhelmingly to require votes on local earnings taxes. Meanwhile, Indiana approved a measure to enshrine caps on property tax increases in the state’s constitution.

 

Elsewhere, Arizona and Oklahoma approved measures that projected the right to choose a health care plan from the individual insurance mandate in Obamacare. Several states, including Oklahoma, South Carolina, and Virginia approved measures to increase the size of their rainy day funds to weather bad economic times. Other states also approved measures that would provide property tax exemptions, impose term limits, and improve government accountability.

 

Of course, these are just a sample of the hundreds of measures that NTU is analyzing for its report showing how taxpayers fared at the ballot box yesterday. Stay tuned.

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Happy Election Day!
Posted By:  - 11/02/10

Happy Election Day!

Don't forget to vote!

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NTU Joins with Liberal Group to Identify $600 Billion in Waste
Posted By: Andrew Moylan - 10/28/10

Today, NTU joined with the liberal group U.S. PIRG to release a report called "Toward Common Ground: Bridging the Political Divide to Reduce Spending." This report debuts a list of $600 billion worth of specific federal spending reductions. With all the talk about debt and deficits, we saw an opportunity to put together a true left-right coalition in order to begin the conversation about the difficult choices we’ll have to make as a nation. We thought it would be useful to reach across the ideological divide to identify specific items that we could cut from the federal budget without reducing the quality of government services or neglecting the government's basic commitments.

The U.S. PIRG and NTU study identifies 30 specific, actionable items to cut in federal spending, including:    

  • $62 billion in savings by eliminating wasteful subsidies to farmers and large corporations.
  • $354 billion in savings from reforming inefficient contract and acquisition procedures.
  • $77 billion in savings by improving execution of existing government programs as well as eliminating unneeded programs.
  • $108 billion in savings from ending low-priority or unnecessary weapons systems, along with rightsizing other programs.

While we're under no illusions that every group or individual on the left and right will agree with our list, we think that it can serve as something of a consensus document from which Congress and the President's Fiscal Commission can work. Simply stated, we can't continue to kick the can down the road on reducing the size of the federal government.  In order to head off a debt crisis like that facing Greece today, we need to begin scaling back our unsustainable spending habits.  This list can help to do that without starting a political food fight.

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New Jersey abandons toothless reforms
Posted By:  - 10/27/10

What a difference a day makes!

On Monday, I blogged about New Jersey's General Assembly taking up a toothless reform to public employee pay and benefits. The measure, AB 3393, would have required arbitrators to consider but not actually limit costs of benefits to government in determining their awards.

The General Assembly was poised to take up the bill, but dropped it after a caucus meeting of the Democrats, who have a majority in the chamber, revealed that there were not enough votes in support of the plan. According to the Ashbury Park Press, lawmakers from Essex County complained, rightly so, that AB 3393 would not do enough to control costs faced by local government. Two of the strongest critics of AB 3393 have been the New Jersey League of Municipalities and Joseph DiVincenzo, the Essex County Executive. The measure in its current form appears to be dead. All sides in the debate are taking about going back to the drawing board and finding a compromise.

For the sake of New Jersey taxpayers, let's hope they come up with something better than toothless reforms...and soon.

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