State and local government public services and benefits are getting squeezed. There is less money available for them because of rising costs from the past, notably under-funded and retroactively enhanced pensions for public employees who are already retired or soon to retire. In some places, as noted in the prior post on taxes, this squeeze has been exacerbated by falling taxes as a percent of personal income. The total wages and salaries of those public employees who are still working are falling as a percent of taxpayer personal income just about everywhere, as is spending on services for the needy (other than those associated with health care). And the anecdotal evidence suggests that since FY 2014, the latest year for which data is available, the squeeze has gotten worse. Despite the third biggest stock bubble in history by one measure,
which makes public employee pensions seem better funded than the really are, years of zero percent interest rates, which reduce state and local government interest costs, and a long-running economic upcycle, which has boosted tax revenues.
For nearly 30 years Americans, individually and collectively, have sold the future to live for today. In the private sector each generation of Americans since those born in the mid-1950s has been paid less on average, and yet has spent more, failing to save for retirement and borrowing to make up the difference. Corporate executives had their firms borrow, not to invest in income producing assets, but to buy back stock, temporarily increasing stock prices so they could cash in on bonuses and options. Despite future financial strains on Social Security and Medicare from the retirement of the large Baby Boom generation, the federal government cut taxes drastically in the early 1980s and again in the early 2000s, while spending with abandon on health care for older seniors, ultimately leaving behind a pile of IOUs that someone else will have to pay somehow.
At the state and local government level infrastructure investment was cut but debts were increased, leaving behind roads, bridges, water, sewer, and transit systems and schools in need of repair with no money to pay for this. And pensions for older public employees who were cashing in and moving out were retroactively increased even as pension funding was cut, leaving a financial disaster behind. The state and local government aspect of this future selling, however, varies in severity from place to place. Using an analysis of Census of Governments data from the U.S. Census Bureau, this post will rank the extent to which each state’s future has been sold by its current and past politicians and the interest groups that supported them.