If a state were to liberalize its drug laws where will it come up with needed inmates?
State and local government finances have been sorely tested by the worst recession since the Great Depression. The recession’s effect on tax revenue and expenses amplified longer-term structural problems, leading to mushrooming debt loads in many jurisdictions.
Tension and concern over the possibility of municipal bond defaults were at a peak about a year ago. But over the past year, municipal bonds actually proved to be one of the best-performing asset classes in financial markets, as recession fears abated and as municipality taxing power and other resources gained greater respect.
State government financial reporting has its critics, with their concerns including rosy assumptions for future investment returns in accounting for unfunded future pension liabilities, and the use of ‘modified cash basis’ accounting methods that lead to understatements in the current expensing of growing retirement obligations.
What is good for the goose is good for the gander, and there are ways in which states and local governments have resources that aren’t reflected in their current accounting statements as well. Here in Chicago, for example, cash-strapped City Hall recently announced a plan to install new traffic cameras rigidly enforcing speed limits near schools, a move anticipated to lead to significant new revenue. This plan has been criticized, however, in part for having been sold as a way to improve the safety of children when its real motivations lie elsewhere. Read more È
