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State and Local Finances

 
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How Will Rhode Island's New Hybrid Pension Plan Affect Teachers? (Research Report)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

In 2011 Rhode Island replaced the stand-alone defined benefit pension plan it provided to state employees with a hybrid plan that reduced the defined benefit component and added a 401(k)-type, defined contribution component. Although controversial, the new hybrid plan will boost retirement incomes for most of the state’s public school teachers. Our simulations show that two-thirds of newly hired teachers will earn more retirement benefits under the hybrid plan they would have earned under the old plan. Defined contribution plans—the dominant employer-sponsored retirement plan in the private sector—can play an important role in the reform of public-sector pensions.

Posted to Web: May 30, 2014Publication Date: May 30, 2014

How Will State and County Government Employees Fare under Kentucky's New Cash Balance Pension Plan? (Research Report)
Richard W. Johnson, Benjamin G. Southgate

Kentucky recently replaced its traditional pension with a new cash balance plan for state and county employees hired after 2013. Employees who join the government payroll at relatively young ages and remain for no more than 25 years will accumulate more benefits in the cash balance plan than the traditional plan, while many of those with more years of service and hired at older ages will accumulate less. More than half of employees hired in 2014 who complete at least five years of service will fare better in the cash balance plan, which distributes benefits more evenly across the workforce.

Posted to Web: April 30, 2014Publication Date: April 30, 2014

When Do State and Local Pension Plans Encourage Workers to Retire? (Research Brief)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

Traditional defined benefit pension plans that cover nearly all state and local government employees generally penalize work at older ages. In more than three-fifths of state-administered plans, employees hired at age 25 will receive lower lifetime pension benefits if they continue working after age 57 because retirement-eligible workers cannot receive benefit checks while they remain on the job. This reduction in benefits can create strong retirement incentives, which are hard to justify as the population ages and health gains and declines in physical work enable more older people to work. Well-designed public pension reforms could eliminate these work disincentives.

Posted to Web: April 30, 2014Publication Date: April 30, 2014

How Long Must State and Local Employees Work to Accumulate Pension Benefits? (Research Brief)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

Traditional defined benefit pension plans that cover nearly all state and local government employees generally provide generous retirement benefits to long-tenured public servants but little retirement security to those with shorter tenures. Virtually every plan requires employee contributions. In half of those plans, employees must work at least 20 years before their future benefits are worth more than those contributions. Employees who separate earlier get nothing from their plan. Alternative designs like cash balance plans distribute benefits more equally across the workforce and allow employees who spend less than a full career in public service to accumulate retirement benefits.

Posted to Web: April 30, 2014Publication Date: April 30, 2014

Do State and Local Pensions Lock In Mid-Career Employees? (Research Brief)
Richard W. Johnson, Barbara Butrica, Owen Haaga, Benjamin G. Southgate

State and local pension plans often allow employees who have completed 25 or 30 years of service to collect benefits regardless of their age, instead of waiting until they reach their plan’s normal retirement age. The lifetime value of their pension surges when they qualify for early benefits. Our analysis shows that on average, half the benefits employees have accumulated by their early 50s or late 40s are earned from a single year of work. These patterns create strong incentives for mid-career workers to remain on the payroll until they realize these windfalls, including those ill-suited for their jobs.

Posted to Web: April 30, 2014Publication Date: April 30, 2014

For Many State and Local Workers Public Pensions Offer Little Retirement Security, Urban Institute Study Shows (Press Release)
Urban Institute

That shiny retirement nest egg may not be so golden for the nation’s 19 million state and local government workers, an exhaustive Urban Institute analysis of 660 state-administered pension plans shows.

Posted to Web: April 30, 2014Publication Date: April 30, 2014

State Economic Monitor: April 2014 (Series/State Economic Monitor)
Norton Francis, Brian David Moore

The latest edition of the Tax Policy Center's State and Local Finance Initiative's State Economic Monitor finds the economic recovery continues to improve slowly. No state unemployment rate increased from last year in February but long term unemployment remains a problem and is above average in most states. The Monitor reviews the health of various aspects of state economies, including employment, housing, state finances, and economic growth. This edition also reports state general fund revenue forecasts for fiscal year 2015.

Posted to Web: April 14, 2014Publication Date: April 14, 2014

The Federal New Starts Program: What Do New Regulations Mean for Metropolitan Areas? (Research Report)
Kate Lowe, Sandra Rosenbloom

On January 9, 2013, the Federal Transit Administration (FTA) published a new final rule for evaluating the applications submitted by metropolitan areas seeking major capital grants under the New Starts program. Despite the old guidelines, it appears that local characteristics, particularly local financial commitment, better explained the New Starts funding decisions between 1999 and 2011 than did Congressional influence or project justification. This new rule provides an opportunity to revisit the program’s design and grant evaluation process.

Posted to Web: April 01, 2014Publication Date: April 01, 2014

A Comparison of State Minimum Wages (Article/Tax Facts)
Norton Francis, Yuri Shadunsky

This Tax Fact examines minimum wages across states. The current federal minimum wage, which applies to almost all employees, is $7.25 per hour — unchanged since 2010. The District of Columbia and 21 states set minimum wages higher than the federal rate.

Posted to Web: April 01, 2014Publication Date: March 31, 2014

State Policy and EITC Expansion for Childless Workers (Article/Tax Facts)
Elaine Maag, Brian David Moore

President Obama and others have proposed increasing the federal earned income tax credit for workers without qualifying children. That would automatically raise state EITCs in the 23 states that calculate a state-level credit for this group as a percentage of the federal credit.

Posted to Web: March 20, 2014Publication Date: March 17, 2014

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