Historic Shrink of Government? States May Have No Choice

Smaller government fans may be in for a historic period.  Due to severe budget crises, state governments throughout the U.S. are “cutting budgets” i.e. shrinking in size.  Lack of money is forcing legislators, regardless of party affiliation, to shrink government spending.  In many cases states can not just raise taxes and fees enough to close the gaps.


Georgia, for example, this week, announced its revenue had shrank for the 15th consecutive month.  Revenue for February 2010 is a whopping 41.3% below February 2007.  January was down 27.3% from 2007.  Georgia legislators are faced with figuring out how to run the state on less money.  They will be forced to shrink the size of government.

 

The Tax Foundation recently highlighted Georgia’s budgetary issues in two releases, “Recession Offers Georgia Opportunity for Tax Reform”  and Georgia Cigarette Tax Hike Would Spur Cross-Border, Black Market Sales

Georgia residents pay the 16th-highest state-local tax burden in the country according to the Tax Foundation.

“There’s just no way to put a pretty face on it,” Lt. Gov. Casey Cagle said in an interview with The Associated Press. “We’ve got to cut this budget and we have to live within our means.”  (Emphasis added)

Georgia Not Alone, All States are Cutting

Georgia is not alone in facing severe cuts.

John Thomasian of the National Governors Association Center for Best Practices outlined the environment and cuts facing state governments in his paper, The Big Reset: State Government after the Great Recession

He writes, “So how must state government adjust to meet the new challenges? Already governors are grappling with this issue. Almost every state has an internal process underway to examine how to cut costs, and several states have created formal task forces or commissions to look at cost- savings and streamlining. Most efforts start by exploring the traditional tools of budget cutting: targeted and across-the-board program cuts, reductions to local aid, layoffs, benefit cuts, furloughs, and salary reductions. In today’s environment, however, states quickly find that these options do not shift the cost curve sufficiently, and they must look at actions that change the way government does business.

Additional steps that are being considered or undertaken today include:

Selling state assets (such as surplus equipment and state office buildings);

Consolidating data centers and IT functions;

Coordinating purchases across agencies;

Consolidating state real estate management into one entity and conducting a review of
real estate holdings and leasing arrangement; and

Reorganizing and combining agencies.”

Profound Changes in State Government

Thomasian writes,  “The current fiscal crisis has spawned a new round of state performance reviews, many of which will yield profound changes in the services state government delivers. This period of government downsizing and streamlining may be a protracted one, ending only when state budget health is restored. The delicate balance will be maintaining those services that help the state prosper, while eliminating those that produce the least value.”  (Emphasis added)

The challenge is that most of our legislators are reluctant to cut government programs.  Segments of the voting community also want their favored programs protected.  We may see a historic shrinking of state government if our legislators and voters reset budgets as circumstances dictate.

Those in favor of smaller government will be tested and have an opportunity to influence this process.

This “reset” of state government will affect all areas of lifestyle including education, jobs and safety. The big question yet to be answered is:  “Will people be happier with a smaller state government that taxes less and provides less services?”

Best and Worst States to Move To

What states are people moving to?  Economists would say that you can learn a lot from people “voting with their feet.”  They leave states for many reasons:  economic opportunity, lower taxes, weather, cost of living etc.

The 2009 Allied Van Lines 42nd Annual Magnet States Report  is an useful report in understanding where people are moving to.  There are some changes from last year that would suggest the economy has influenced people’s moving decisions.

Texas was the Best State to Move To in 2009.  It had the most net people moves in the US, over three times more than any other state.  It was also the most popular state to move to in 2008.  Arizona and North Carolina, which was ranked 2 in 2008, were also popular states to move to.  They were very close in net moves being separated by only 2 moves according to Allied Van Lines.

According to the annual magnet report, the Best States to Move To in 2009 were Texas, Arizona, North Carolina, Colorado and Florida.

The Worst States to Move To in 2009 were Michigan, Illinois,Pennsylvania, New Jersey and CaliforniaNew York is also an unpopular state to move to.  Both Illinois and New York have now lost population, according to the Allied study, for 33 straight years!!  California lost people in 2009.  Its 12.4% unemployment rate may have had something to do with this exodus.  See also Taxpayers Leave New York  and People Choose Best States to Live with their Feet

It should also be noted that this survey is not a definitive migration study.  Florida, for example according to the Florida Bureau of Economic and Business Research, lost population in 2009 for the first time in 63 years.  This is at odds with the Allied stats.  See

 

Political leaders in states where people are leaving should take note.  When people leave a state, something is not working for them in that state.

Best States for Sunshine

Sunshine is an under appreciated dimension when thinking about where to live.  It can improve your health and happiness.  Yet rarely do we hear people say they picked a state for its sunshine.  They think more about weather temperature, jobs, taxes, cost of living etc. Sunny states generally qualify as Best States for Retirement and are Happy States according to recent happiness studies.

The Best States for Sunshine are Arizona and Nevada.  Phoenix and Las Vegas each have 310 sunny days a year or 85% sunshine.

The Top 5 States for Sunshine, in addition to Arizona and Nevada, are California, New Mexico and Hawaii. Florida, the Sunshine State, is ranked 7th of all states.

The Worst State for Sunshine is Alaska with only 41% sunny days.  Anchorage has only 150 days a year of sunshine half of Phoenix and Las Vegas.

The 5 Worst States for Sunshine are Alaska, Washington, Oregon, Vermont and Ohio.  All 5 states have sun less than 50% of the time.
The List of Sunshine for all U.S. States is published below.

Rankings of  Sunshine by State

If you are considering what are the Best States for Weather, study the Best States for Sunshine.  You may just end up with happier choices.

50 States 50 Laboratories, More on the Best and Worst States

We found the recent Economist article, California vs Texas: America’s Future  a positive contribution to the debate on Best and Worst States.

The article points out the marked differences between states and helpsmake the case that the lower tax, less government intrusion model of Texas is winning over California.  This is a case we have long advocated. The Economist also notes the work that this writer has developed overthe last 5 years on Chief Executive’s Best and Worst States for Business.  (Texas is #1 and California is #50 according to CEOs.)

We also would like to make note of a recent blog written by Kurt Brouer titled California or Texas: Which Model is Working Best?  Kurt’s Fundmasteryblog.com is getting it right by making the low tax, more personal freedom case.

With all 50 state governments under severe fiscal pressure, it is only a matter of time that the next phase of recovery will be focused on growth.  You can not spend your way out of a problem.  The severity of this budget crisis may lead finally to a rethinking of attitudes towards business. My list of states that need major rethinking would start with the 10 most broke states.  They are:

1. California: $53.7 billion shortfall or 58 percent of its budget
2. Arizona: $4 billion shortfall or 41 percent of its budget
3. Nevada: $1.2 billion or 38 percent of its budget
4. Illinois: $9.2 billion or 33 percent of its budget
5. New York: $17.9 billion or 32 percent of its budget
6. Alaska: $1.35 billion shortfall or 30 percent of its budget
7. New Jersey: $8.8 billion or 30 percent of its budget
8. Oregon: $4.2 billion or 29 percent of its budget
9. Vermont: $278 million or 25 percent of its budget
10.  Washington: $3.6 billion or 23 percent of its budget
10.  Connecticut: $4.1 billion or 23 percent of its budget

Source:  ABC News

The Top Ten Broke States tend to have the most taxation and most are run by liberal oriented governments.

All 50 states will be politically pressured to increase opportunities and jobs for their populations in the coming years.  Being attractive to business will be the obvious choice.  The wonders of our American system are our many state laboratories.  High Tax States, Low Tax States, Business Friendly States and Business Unfriendly States.  Those states early to adopt policies that encourage business will recover and grow faster than those who are slow.  We are glad to see more publications like The Economist contributing to the debate.  Hopefully we will start to see more low tax, business friendly policy changes in our many laboratories get enacted.

Best States for Gardening Weather

Farmers Almanac has recently published a fun list on the Best States for Gardening Weather.

The Best State for Gardening Weather is North Carolina. Kentucky was ranked 2nd Best.

While it does not appear to be a scientific poll, the survey strikes a chord about old fashioned values.  Good gardening and good neighbors seem to go together. Go to Farmers Almanac to see some of the comments on why states were selected.

If you are looking for a places to live where the gardening weather is good, this may be helpful.

Best State Weather for Gardening
Rank State % Vote
1 North Carolina 20%
2 Kentucky 13%
3 Texas 11%
4 California 11%
5 Florida 11%
6 Missouri 8%
7 New Jersey 7%
Source: Farmers Almanac

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Best and Worst States for Car Insurance: Does Safety Matter?

Insurance.com publishes a monthly listing of car insurance rates.  We thought you might like to see March results.

We also thought it might be interesting to see if safe drivers as measured by the annual GMAC driver safety study had a measurable benefit in insurance rates.

The Best State for Car Insurance is Vermont with an estimated annual premium of $1,304.  It ranks 18 in the GMAC Safe Driver Study.  The 4 other Best States for Car Insurance, i.e. the lowest premiums, are Ohio, Iowa, Wisconsin and Idaho.  The safest state of the top 5 according to GMAC is Idaho with a safe driver rank of 4.  The safest driver state, Kansas, ranks 22 in car insurance premiums.

The Worst State for Car Insurance,( we put DC in a world of its own), is Louisiana with a premium of $2617 more than double that of Vermont!!!  It also ranks 44 on the GMAC Safe Driver Study.  New Jersey the Worst State for Safe Driving in the US has one of the highest car insurance rates rate just below Louisiana.  Rounding out the Worst States for Car Insurance are Delaware, Rhode Island and Pennsylvania.  All these state rate below average in the GMAC study.

Of the popular retirement states Tennessee is best rated for low premiums at 11.  Arizona at 25 and Florida at 36 are more middle of the pack

Car Insurance rates have dropped over the last 6 months yet are still higher than a year ago.  From a look of the list it appears that drivers who know the rules of the road benefit from safer roads and lower car insurance premiums.  It may be beneficial for insurance companies to offer discounts to drivers who take a car exam annually that demonstrates they know the rules of the road.

State Premium $$ Change % Change Safe Rank
1 VT $1,304 $47 3.70% 18
2 OH $1,320 $1 0.10% 26
3 IA $1,335 ($32) -2.30% 9
4 WI $1,348 ($28) -2.00% 12
5 ID $1,396 $14 1.00% 4
6 ME $1,406 $59 4.30% 31
7 NH $1,504 ($64) -4.10% 30
8 IN $1,528 $25 1.70% 11
9 SD $1,550 $97 6.70% 6
10 IL $1,559 $19 1.20% 32
11 TN $1,563 $1 0.00% 33
12 MT $1,573 ($39) -2.40% 15
13 NC $1,577 ($42) -2.60% 22
14 OR $1,586 ($23) -1.40% 8
15 AL $1,611 $29 1.80% 15
16 CO $1,611 ($28) -1.70% 15
17 NE $1,625 $91 5.90% 3
18 GA $1,626 ($46) -2.70% 47
19 MO $1,629 $5 0.30% 14
20 SC $1,638 ($24) -1.50% 39
21 VA $1,667 ($78) -4.50% 40
22 KS $1,668 $4 0.30% 1
23 ND $1,722 $58 3.50% 21
24 MN $1,728 $97 5.90% 5
25 AZ $1,739 ($93) -5.10% 36
26 CA $1,813 ($15) -0.80% 33
27 NM $1,845 ($16) -0.90% 22
28 UT $1,864 ($35) -1.90% 13
29 WA $1,882 $34 1.80% 9
30 OK $1,900 $54 2.90% 22
31 TX $1,921 ($55) -2.80% 18
32 AR $1,929 $17 0.90% 6
33 WY $1,934 $16 0.90% 2
34 MS $1,953 $19 1.00% 46
35 KY $1,984 ($52) -2.60% 29
36 FL $2,015 $8 0.40% 28
37 MI $2,076 ($49) -2.30% 18
38 CT $2,095 ($56) -2.60% 33
39 WV $2,095 $76 3.80% 43
40 NV $2,142 ($40) -1.90% 36
41 MD $2,144 ($48) -2.20% 42
42 PA $2,248 $65 3.00% 36
43 RI $2,356 ($32) -1.30% 41
44 DE $2,520 $11 0.40% 26
45 NJ $2,556 $14 0.50% 51
46 LA $2,617 $3 0.10% 44
47 DC $2,862 ($18) -0.60% 50
48 NY n/a 49
49 MA n/a 48
50 HI n/a 45
51 AK n/a 6

Source:

Best and Worst States for Income. Is highest the best?

Best and Worst States for Income in 2008

Connecticut is the Best State for Per Capita Income in 2008 with an average of $63,160.  It is followed by Massachusetts, New Jersey, New York and Wyoming.

The Worst State for Income is Mississippi with an average income of $31,836.  The next Worst States are West Virginia, Arkansas, Kentucky and South Carolina.

Higher income does not necessarily correlate to better lifestyle.  Connecticut, for example, is the Worst State for Taxes with the highest tax burden in the country.  Generally the highest income states have the highest tax burdens and higher cost of living index. See: Cost of Living by State

You could spend a lot more for the same house and have a lot less disposable income to enjoy life

State Income Per Capita Rank
Conn. $63,160 1
Mass. $56,661 2
N.J. $56,116 3
N.Y. $55,032 4
Wyo. $53,163 5
Md. $52,709 6
Nev. $49,371 7
Wash. $48,574 8
Colo. $48,300 9
N.H. $48,033 10
Calif. $47,706 11
Va. $47,666 12
Ill. $46,693 13
Hawaii $46,512 14
Fla. $46,293 15
Minn. $46,106 16
Del. $44,889 17
Alaska $44,872 18
R.I. $44,463 19
Pa. $43,796 20
Tex. $42,796 21
Vt. $42,626 22
Wis. $40,953 23
Kans. $40,784 24
Nebr. $40,499 25
N.D. $39,612 26
Ore. $39,444 27
Mich. $39,273 28
La. $39,116 29
S.D. $39,103 30
Ohio $38,925 31
Iowa $38,636 32
Okla. $38,415 33
Maine $38,309 34
Ariz. $38,174 35
Tenn. $38,090 36
Mo. $38,084 37
Ga. $37,850 38
N.C. $37,508 39
Ind. $37,279 40
Mont. $36,793 41
Idaho $36,492 42
Ala. $36,372 43
N.M. $36,031 44
Utah $35,971 45
S.C. $35,419 46
Ky. $34,339 47
Ark. $33,395 48
W.Va. $32,145 49
Miss. $31,836 50
U.S. $44,254
D.C. $70,730
Note: See table 38 for average people per household by state.
Source: Tax Foundation Special Report, No. 163, “State-Local Tax Burdens Dip as Income Growth Outpaces Tax Growth.” The income measure used adds the following to Bureau of Economic Analysis’s personal income measure: capital gains realizations, pension and life insurance distributions, corporate income taxes paid, and taxes on production and imports less subsidies. It subtracts from personal income the fungible portion of Medicare and Medicaid, estimated Medicare benefits that are provided via supplementary contributions, initial contributions to pension income and life insurance from employers, and the annual investment income of life insurance carriers and pensions that is included in personal income.

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Best and Worst States for Individual Taxes, Maryland Worst, 6 States Best

The Tax Foundation has recently published its 2009 ranking of the Best and Worst States for Individual Income Taxes.

The Best States for Individual Taxes are Alaska, Florida, Nevada, South Dakota, Washington and Wyoming all rated a 10.0 in their Index.

The Worst State for Individual Taxes is Maryland.  Rounding out the bottom 5 Worst States in order are California, New Jersey, Ohio and Iowa.

If you want to keep more of the money you earn, pick a low tax state.  This list is useful.

Individual Income Tax Index, 2009
State Score (a) Rank
Alaska 10 1
Fla. 10 1
Nev. 10 1
S.D. 10 1
Wash. 10 1
Wyo. 10 1
Tex. 9.44 7
Tenn. 7.64 8
N.H. 7.55 9
Ill. 6.97 10
Ind. 6.72 11
Pa. 6.61 12
Utah 6.59 13
Colo. 6.41 14
Mich. 6.41 15
Mass. 6.41 16
Ala. 5.36 17
Miss. 5.35 18
N.M. 5.29 19
Va. 5.24 20
Kans. 5.2 21
Mont. 5.15 22
Ariz. 5.14 23
La. 5.09 24
Conn. 5.07 25
Okla. 5.01 26
Mo. 4.96 27
Del. 4.95 28
S.C. 4.93 29
Ga. 4.91 30
Ark. 4.87 31
Idaho 4.86 32
Nebr. 4.85 33
Ore. 4.84 34
N.D. 4.78 35
Ky. 4.78 36
N.C. 4.46 37
Hawaii 4.38 38
Minn. 4.34 39
Maine 4.33 40
W.Va. 4.33 41
R.I. 4.32 42
N.Y. 4.22 43
Wis. 4.21 44
Vt. 3.81 45
Iowa 3.7 46
Ohio 3.22 47
N.J. 3.18 48
Calif. 2.51 49
Md. 2.06 50
U.S. 5
D.C. 4.4
(a) The index is a measure of how each state’s tax laws affect economic performance.
The higher the score, the more favorable a state’s tax system is for business. All scores are for fiscal years.
Source: Tax Foundation Background Paper, No. 58, “2009 State Business Tax Climate In

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Cost of Living by State, Tennessee the Best, Hawaii Worst

The Missouri Economic Research and Information Center (MERIC) has some valuable information on the the cost of living for each State.

The Best States for Cost of Living are Tennessee, Oklahoma, Nebraska, Missouri and Arkansas.

The Worst States for Cost of Living are Hawaii, DC, California, New Jersey and Alaska.

Map below for cost of living is courtesy of MERIC.

The Best States for Housing Costs are Oklahoma, Tennessee, South Dakota, Texas and Missouri.

The Worst States for Housing Costs are Hawaii, DC, California, Maryland and New Jersey.

If you are looking for the Best State to Retire, the cost of living is a very important consideration.  If you want to stretch your dollar, look to the Southeast and Midwest and stay away from the North East.  Hope this helps.

Cost of Living Annual Map

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