Room for improvement everywhere in Volcker Alliance report cards

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The Volcker Alliance on Wednesday released report cards grading and evaluating key budgeting and transparency practices in each of the 50 U.S. states.

Building on a comprehensive, multi-year study released in 2017, the Alliance team distilled its findings to create the report cards, accessible through an interactive map.

Each report card includes grades on a state’s budget practices plus a detailed breakdown of the Alliance’s assessments. The in-depth look will be a valuable tool to help elected officials, investors, policy advocates, and residents, its makers say.

“While many states follow admirable procedures to balance their budgets, the report cards show that every state has room for improvement,” William Glasgall, senior vice president and director of the Volcker Alliance’s state and local initiatives. “Indeed, the report cards demonstrate the need for transparent and sustainable fiscal practices, especially in the funding of pensions and retiree health care benefits, as well as in the provision and governance of financial reserves.”

The report cards are the result of a multi-year study that Glasgall led in partnership with more than 50 public finance and budgeting professors and students at 11 U.S. schools of public administration or public policy from coast to coast. The report cards provide the full array of grades the Volcker Alliance gave to each state from fiscal 2015 through 2017.

The grades are based on five areas of best practices the Alliance has defined to be necessary for accurate, sustainable, and transparent budgeting:

  1. Budget Forecasting: States should use a multi-year, consensus approach to establishing single, binding estimates for revenues and expenditures before the budgeting process begins.
  2. Budget Maneuvers: States should pay for expenditures in the same year they were accrued and avoid deferring them into the future.
  3. Legacy Costs: States should consistently contribute to pension funds and health care benefits for retirees the amounts that actuaries determine to be necessary.
  4. Reserve Funds: States should enact clear policies for withdrawals from rainy day and other fiscal reserves, as well as rules for replenishing spent funds and tying the size of fund balances to revenue volatility.
  5. Transparency: States should have consolidated budget websites that provide one point of access to all information about a state’s budget, including the state’s budgeting practices, tax expenditures, and infrastructure replacement and debt service costs.

And the results are in line with what you would expect, Glasgall said, adding that some of the lower-rated states included Illinois, New Jersey, Kansas, Kentucky and Pennsylvania.

“Pennsylvania is interesting in that it’s a state that has many revenue issues -- its budget is put together with spit and bailing wire,” Glasgall said. “And they continue to look for one-time solutions to find revenue.”

He added the state is planning to sell tobacco bonds, which have been placed on a day-to-day basis, securitizing the revenue from the tobacco Master Settlement Agreement “in order to pay for yesterday’s expenses rather than for tomorrow’s.”

He added that Pennsylvania was not the only state or city to do this, citing Illinois' sale of bonds to pay off outstanding bills and Chicago’s sales tax securitization.

He pointed to Utah and Texas as states that generally play by the rules and mostly follow the straight and narrow financial path.

Access to each state’s report card is available through a clickable map on the webpage for the Volcker Alliance’s report Truth and Integrity in State Budgeting: What is the Reality?, which shows the “importance of clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability,” according to Paul Volcker, chairman of the alliance.

“It is our hope that this tool can help to prompt thoughtful debate and support meaningful improvements in state budgeting practices,” Glasgall added.

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