tv Washington Journal Eileen Norcross Discusses States Fiscal Condition CSPAN July 11, 2017 11:41am-12:00pm EDT
and of course there's cruz and lee that poem say would send the cost of qualified health plans skyrocketing. host: alex bolton who covers "the hill" talking about the status of health care legislation in the senate. ou can see his writings from thehill.com. thanks for your time. guest: thanks for having me. >> the u.s. house coming into session in about 20 minutes at noon eastern here on c-span. on today's agenda, several bills transferring federal land to state and local governments. and legislation would name a post office in bakersfield, california, after circumstance and songwriter merle haggard. and the house would consider the 2015 programs and policy bills. we will have live coverage at noon. until then, more from today's "washington journal." host: a discussion on the economic condition of your state with eileen nor across of george
mason university. she serves as the state and local policy director. thanks for coming on. guest: thank you. host: what's your interest in gauging a physical condition. guest: it's important to have a metric to gauge it. that way you don't end up in a situation like we've seen in the states. host: let's start with so much the things you listed from it comes to listing. budget solvency, service level solvency. can you give us a broad definition? guest: sure. cash solvency measures how much cash do states have on hand to cover the short-term liabilities. budget solvency is do states have enough revenue to cover expenses in that year?
and then long run solvency looks to liabilities including debt, tension liabilities. service self-solvencies looks at tax, revenues and expenses are balanced. are taxes going to seat expenses? and lastly, we look at what's called trust freund solvency which wore log for liabilitys and the health care obligations o public sector workers. host: what are some hell tail signs that a state's on the right track or the wrong track to use that phrase? guest: the wrong track is easy to offensive. if you are running a structural deficit for a number of years, you've probably got a problem. if you have less than one cash solvency you're looking at not being ready for a recession. the states at the bottom have been building up large debts and
deficits and large pension liabilities over a period of decades. easy to are all flagged and it's sustained. on the positive side, the good state, these are states with stock cash reserves. these are states with revenues that exceed expenses. so they're running surpluses year-to-year. you've got very low pension liabilitys and they're not states that issue a lot of debt to cover expenses. host: if you want to cover the state's solvencies, ask eileen norcross. phones are open. 202-748-8000, 202-748-8001. eileen norcross, one of the things we heard about the last couple of weeks was the fiscal condition of illinois. give us a sense of what that state did wrong.
guest: they are a great example of poor performance. they issued debt to cover unfund pension liabilities when they were not making those full payments. so they had a habit of underfunding the pensions. issuing debt to cover it and then just not servicing their short-term needs either. so attentive got weak cash position and not enough revenue year-to-year to cover expenses. they've been building in the bills. and so much that i would go back to the usage of debt. when you're issuing debt to cover debt that's a bad sign. >> so the governor came in he incorporated was offering even tax cuts to build a business side of it. hoe talked about his fiscal condition. how did that plan play out? guest: what they decided upon was they agreed to a tax increase. they think it's going to bring in about $5 billion and they are going to issue debt to cover
bills. they've got these dish call them short-term fixes. they haven't dealt with the structural drivers. they've got a massive unfund pension bill. i calculated it's $300 billion. so they haven't dealt with the structural drivers there. nd they're sweeping funds. host: and the governor was vetoed by his own legislature on that effort. guest: correct. that was one of the points he was fighting for. host: and so, again, we'll talk about their states and look some more of this criterium. let's start with creative. how would you gauge california? guest:'s -- they are doing better. if there's recession, they're probably going to struggle. their budget was better. they balanced the books. revenues were stronger in 2015. they do have a massive unfunded pension liability but they have a strong economy.
meaning a big commitment relative to their economy, i think if they cut away at that problem, they might strengthen their position. host: this is thomas from laguna hills. hello, thomas. go ahead. thomas from laguna hills, california, hello. caller: yeah, good morning. how are you? hi? can you hear me? host: yes. caller: yeah, i was wondering to know if you can give us a rundown on the financial burden los angeles and california has because -- [indiscernible] host: ok. we got it. he said a city taking a look rather than a statewide issue. guest: the state does not look specifically at los angeles. los angeles has some serious fiscal problems though as you know. they do have a large pension problem which i don't think they've dealt with adequately. so i would say a lot of the
states in california are suffering this problem. it's either a state pension problem or a local pension problem which is underfunded and large relative to the ability to pay. so i think -- i would just leave it there i think and los angeles needs to take a deeper look at pension reform. host: because these states are offering generous pensions. they just over time can't meet easy to obligations or struggling with that? guest: i think in the case of california, it's a little bit of a mix. we've seen -- i like to back that up a little bit. in general t not because benefits aren't generous. it's because these systems have been systemically underfund due to accounting mistakes. undervaluing the true size of the benefit and not putting in enough. even if you're making the full payment, you're undervaluing what you need to pay. that's across the board. in california, we have seen some cities in case where people were maxing out their benefits, collecting very generous
enefits. and then there's the lack of discipline of skipping out on the annual payment. host: from rogers, minnesota. this is terry calling for eileen orcross of the her cueto center. go ahead, terry. caller: i notice you put the top five states on but you didn't show the bottom five. but on the graph, it looked like brown represented the bottom five. they appear to be all democratic run states. i'm wondering if that if that relates that the dem cravaack states who want to give things away for free can afford to pay or them. i'm just wondering what your thoughts are if that follows is
true. thank you. guest: i would say we don't link political party to fiscal performance in this study, a lot of states have long-term institutional and political factors that drive their fiscal performance. and if you go back to the really poorly ranked states as illinois, connecticut and new jersey, you have states that have built into the framework of their constitution -- we're going take on more debts or a political culture in some cases of spending. but i would just caution i don't try to link political party to fiscal poorments you do have to look at the long running choices over a period of years. i have legislatures and governors and these choices sometimes fall within both parties. host: the senator provides a map of the rankings across the united states. we've been showing you those .ottom states, the top states a lot of peoples a lot of
retirees what are they doing right? caller: several things. they have managed to lower spending per capita since the year 2000. this is a state that is conservative in how it saves money. it's got good strong fiscal reserves. it manages its debts very well. doesn't issue a lot of debt to take on current spending. and is pension liabilities are more manageable relative to the other states. some sclarls have suggested they've got term limit asks that's a factor in their fiscal health and that it's just a well managed state. host: from wisconsin, this is martin. hi. caller: good morning and thank you for c-span. i do have to take a slight disagreement with eileen in that i do think politics has something to do with it when we take a look at some of the largest urban areas in the country and how they've been managed. that has a big part in what we're talking about on this particular topic with pensions
and other items. wisconsin, we elected scott walker and he went to bat for the private sector versus the public sector and we've started o sell some of his pension ideas like illinois, which is in horrible shape. and i do think a large part of it does tie into politics. thank you. guest: i would agree with you. i don't tie to particular political party per se because there's a little nuance there in terms of which governor and legislature. when i see institutional factors matter, that's what i'm getting, political factors. what are the choices that legislatures and governors are making to build those rules? those rules of the game in which they make budget choices, in which the make choices on how to structure and fund pensions. these are ultimately about trade-offs and value judgments. so i think you're crefpblg there is a political story here to tell. i was cautioning our story doesn't try to link that one for
one with this governor or this legislature. host: so on your map, you list just to use as an example, texas as an average state. what's it mean to be an average state in your thinking? guest: that brings me to a point of caution and that is a relative ranking. tix 23 in this ranking. they're still relatively robust. i would say the only place i would caution them is their unfund liability pension. they have to look closer to those numbers and make sure they've got a pretty right numbers. otherwise, texas seem to have a pretty good revenue collection. not big on their debt. host: kaner from ennis, texas. hi, kaner. caller: hi there. i'm looking forward to asking this. my -- i was in texas and we just received information that the pension program is back up for our police department in dallas which makes us happy. therefore, we're hoping to build
on more officers. no one's sold -- in the same sense in regards to the state, i wanted to ask about investment programs for our state and -- we like to show the state get ahead and not hold its own or get by with where it was. since my matthew is the treasurer for the state of arizona, jeff dewitt, i'm concerned am not of the same party, but my concern because politics is involved, how because of said programs could we break away and in this climate for investment, how would investment work for our state to get ahead to be able to get through the infrastructure problem? o ahead.
guest: does it have the right regulatory climate to attract business? you want to compare to it illinois and connecticut and new jersey where you have an environment that is causing businesses to flee. it's causing people to flee. various factors going on there. but i think you're getting at the notion of making it strong economic environment for texas to thrive. host: let's hear from salem,more fwafpblet this is john for our guest, eileen norcross. hello. caller: yeah. hi, eileen. i come from oregon and like hers is one area where we have things. it seems like all settled out really well. are people here that work for the state have a great retirement system? the only thing i see as an issue in oregon which is a nice state, is that we don't have sales tax. and i know people here in oregon just love that.
you know, you answer some of the questions on how you would evaluate oregon of how we're economically appeaseable? i'll take my answer off. guest: thank you. oregon does this pretty well in the fiscal rankings. i would look at the pension system more closely. i think if we are interested in having a robust well funded plan in the states, the first step there is to make sure the liability is properly measured, that there are no accounting gimmicks going on to obscure the bill. and the investments are not taking too much risk. so i would take a deeper look at the pension to ensure this things solve vent going out 30 years. as for sales tax, some states don't have incomes and sometimes raised as a point in their favor.
i think you can -- which way you go, it depends on a lot of factors. so just make sure it's broad and low. host: you mentioned pension plans several times. as far as states are concerned what, are the principles for account for that and how much do they have to reveal not only their state wide residence but other people interested in this as well? guest: this the first year that states were required to put the pension liability on the pension sheet. it wasn't there before. this year the liabilities have increased a great deal on the books. separate issue related to that is how they measure it and that gets into how they're valuing it. they're tying the value of the liability which is like a bond to a portfolio. and economies have been critical of that. you should value it like a bond. there's some issues in terms of how big they're measuring the magnitude. so there's been a real plus. host: we have a viewer on twitter who says if you can
speak about the recent reversal in kansas. twitter says, on if you could speak about recent reversal in kansas? yes, kansas is an interesting study. as you know, they passed tax reform that has not been very successful. they included a loophole in the undertook and spending increases at the same getting iousliure taxes, and increasing spending, they have weak revenue and they growing bills. i think you can contrast kansas to north carolina. undertook ina also tax reform, cut the income tax, ut the corporate tax, got disciplined about spending. they have been reducing liabilities. north carolina made huge improvement since 2013. think looking at kansas' tax reform, not successful, contract to north carolina, which did it successfully.
host: this is athens, ohio, kathleen, hi there. dayton,i'm calling from soo, where i grew up and now 19, i left and came back to take aging parents. walk around dayton, ohio, where manufacturing was alive in '60s, until 0s and national cash register and companies started leaving dayton. you walk around and you see what trump referred to in his state of the union address as tombstones of manufacturing. so now most of those tombstones wiped out, where jobs, people were making i talked to a day, retire r $17.50 gm in 1992, making an hour when she retired.