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Morning Brief: Budget Crisis Bears Down on States and Cities

by Renewing America Staff
July 18, 2012

A local newspaper headline announces bankruptcy in Stockton, California on June 27, 2012 (Kevin Bartram/Courtesy Reuters). A local newspaper headline announces bankruptcy in Stockton, California on June 27, 2012 (Kevin Bartram/Courtesy Reuters).

The State Budget Crisis Task Force examined the fiscal difficulties faced by six heavily-populated states (NYT). The report pointed to an array of escalating costs: Medicaid, retiree healthcare, and underfunded pensions. Revenues are not keeping pace; income taxes have become more volatile, sales tax is increasingly avoided, and gasoline taxes are falling, all while the federal government decreases aid. The authors recommend several measures to improve state budgeting and planning. Of the six states studied, three had the lowest bond ratings of the fifty states. Many municipalities face similar stresses; the city of Compton, California, may declare bankruptcy by September (Reuters).

North Carolina’s Local Government Commission (LGC) was the subject of a recent Policy Initiative Spotlight by Steven J. Markovich. The LGC has kept North Carolina’s municipalities free of defaults since 1942, and is part of the reason that state is one of only seven to have a AAA bond rating for over a decade.

Fight Foreclosures with Eminent Domain?

California’s San Bernardino County and some of its cities formed an agency to consider using eminent domain to fight home foreclosures (AP). Median home prices are down by more than half in the past five years, leaving many homeowners in properties worth less than their mortgages. To avoid defaults, the plan calls for local governments to condemn the properties, seize them, and then restructure the mortgages. Critics believe lenders will pull away from these markets, while proponents see a way to keep homes occupied.

Debt and deficits. Read more from experts on the challenges in reducing U.S. debt.

Education and Human Capital

Public Prefers Local Control, but Common Standards

Forty years of polling data indicates that the U.S. public generally prefers local control of education through elected school boards, but also wants state and federal governments to spread funding and set common standards (Education Week). A researcher observed that “local control is not dead. People still feel it plays an important role.” The emerging Common Core State Standards that will harmonize reading and math curricula in forty-five states also fits the public’s goals: “we want schools to teach relatively the same topics and make sure kids have access to the same types of curriculum.”

The report of CFR’s Independent Task Force on U.S. Education Reform and National Security highlights the importance of the CCSS and asserts that fixing the nation’s underperforming K-12 schools is critical to economic competitiveness and national security.

Schools Use Summer Activities to Spark STEM Interest

Schools in California’s Bay Area are juggling budgets to maintain free summer school offerings, often with outside assistance (Oakland Tribune). The Bechtel and Walmart foundations have funded afternoon STEM courses—most taught by program employees, not classroom teachers. The programs not only engage students in science, math and engineering, but also help kids keep their academic skills up and avert a “summer slide.” Similar summer activities have sprouted across the nation, in places such as Green Bay, Wisconsin (Green Bay Gazette).

Education and human capital. Read more from experts discussing ways to improve U.S. education and immigration policies.

Infrastructure

United States Has 7 of Top 100 Projects

Global accountancy KPMG’s infrastructure practice placed seven U.S. infrastructure projects in the globe’s top 100. By comparison, China also had seven projects, while the United Kingdom had eight. The projects were selected based on their scale, complexity, innovativeness, and societal impact. Green Power Express, a project to rebuild the electrical grid to bring wind power from the Dakotas to the Midwest, earned a top ten ranking.

The first Renewing America Progress Report and Infographic Scorecard, provides a critical assessment of federal transportation policy, including a description of major policy initiatives and important steps policy makers must take to revitalize critical infrastructure.

Infrastructure. Read more on how upgrading the nation’s aging network of roads, bridges, airports, railways, and water systems is essential to maintaining U.S. competitiveness.

Innovation

Venture Capitalists Break Funding Records

Slate reports that U.S. venture capital (VC) firms invested $8.1 billion in 812 companies in the second quarter, the highest quarterly total since the dot-com boom. While the total number is high, prosperity is not being shared across all sectors. Mobile and internet startups are hot, but green technology continued its steady fall, marking a 25 percent decline since last year.

Policymakers and workers look to innovation and entrepreneurship for job creation. This CFR Backgrounder by Steven J. Markovich discusses how entrepreneurs create and finance startups and the ramifications of policies such as the JOBS Act.

Innovation. Read more on how the U.S. capacity to innovate could play a chief role in economic growth.

The Morning Brief is compiled by Renewing America contributor Steven J. Markovich.

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