Ph.D. Public Finance Seminar and Class Overview

PUBLIC FINANCE SEMINAR PUBLIC FINANCE SEMINAR SPRING 2021, PROFESSOR YINGER SPRING 2021, PROFESSOR YINGER Introduction

PIA812: Introduction PIA812: Introduction Lecture Outline Class Requirements Governmental Organization in the U.S. Federal System Budgets in the U.S. Federal System Research Topics on U.S. Federalism

PIA812: Introduction PIA812: Introduction Lecture Outline Class Requirements Governmental Organization in the U.S. Federal System Budgets in the U.S. Federal System Research Topics on U.S. Federalism

PIA812: Introduction PIA812: Introduction Class Overview This is a class for Ph.D. students in PAIA. It covers spending, revenue, and intergovernmental decisions by state and local governments in the U.S. Ph.D. students from other departments should check with the professor to see if they have an adequate background. All students are expected to meet the highest standards for academic integrity (see http://academicintegrity.syr.edu ) and to treat other students with respect. Students who need accommodation because of a disability should contact the Syracuse University Center for Disability Services (https://disability disabilityresources.syr.edu/).

PIA812: Introduction PIA812: Introduction Class Overview, 2 The focus of the class is on training students to be scholars. Although many of the topics covered in the class have policy implications, this is not a class in designing policy. The class sessions consist of lectures, discussions, and student presentations. The lecture classes will include review questions for the class to answer (in alphabetical order). All students are expected to tune their camera on when they are asking or answering a question.

PIA812: Introduction PIA812: Introduction Class Requirements The assignments for this class consist of (1) a memo on a state s governmental system, (2) a draft research proposal, (3) a class presentation of a revised research proposal, (4) a final research proposal, and (5) a final exam. The memo should describe the governmental units in a selected state (other than New York) using the Census of Governments website: https://www.census.gov/library/publications/2019/econ/from_ municipalities_to_special_districts.html The memo should also pick one level of government in the state and indicate the sample of observations that could be used to study cost or demand functions for that level. This memo is due February 24.

PIA812: Introduction PIA812: Introduction Class Requirements, 2 Requirements (2) through (4) refer to the same research proposal. The draft is due mid-April, the presentation is at the end of the class sessions, and the final draft is due at the end of exam week. This proposal should define a topic, review the literature on that topic, develop a conceptual framework for the topic, and design an appropriate empirical method. Students are not expected to collect data for this project, but they should have real data in mind. The following weights will be used to determine each student s final grade in the course: Memo on a state s local governments: 5% Draft research proposal: 10% Class Presentation: Final research proposal: 40% Final Exam: 25% 20%

PIA812: Introduction PIA812: Introduction Class Readings Most of the required readings are recent examples of high-quality empirical research in state and local public finance. Students are not expected to master every required reading, but they should read widely and focus on topics that they want to study in depth. The optional readings provide additional examples of good recent empirical research, along with surveys or classic articles that will help students who want to study a particular topic in more depth. These readings also include recent dissertations by students in PAIA, recent articles by PAIA faculty, recent articles by well known scholars, and, in a few cases, exploratory work on topics that are difficult to study. Students are encouraged to look at the National Tax Journal, the Journal of Public Economics, the Public Finance Review, Public Budgeting and Finance, and Public Finance and Management to find other articles on topics they wish to pursue.

PIA812: Introduction PIA812: Introduction Lecture Outline Class Requirements Governmental Organization in the U.S. Federal System Budgets in the U.S. Federal System Research Topics on U.S. Federalism

PIA812: Introduction PIA812: Introduction The Federal System in the U.S The Federal System in the U.S. Broad outlines defined by constitutions Details determined by politics constitutions Units Defined by U.S. Constitution Units Defined by U.S. Constitution The Federal Government State Governments Units Defined by State Constitutions Units Defined by State Constitutions The State Government Counties and (usually) Townships Municipalities (Cities and Villages) School Districts Special Districts

PIA812: Introduction PIA812: Introduction County CountyTownship Municipality School District Township Municipality School District

PIA812: Introduction PIA812: Introduction Variation with Common Themes According to the 2017 Census of Governments, there are over 90,000 state and local governments in the United States. This extensive use of state and local governments makes the United States the most decentralized government in the world. The total number of state and local governments has not changed very much in recent decades, but the types of local governments have shifted. See: https://www.census.gov/library/publications/2019/ec on/from_municipalities_to_special_districts.html

PIA812: Introduction PIA812: Introduction

PIA812: Introduction PIA812: Introduction Variation Across States No townships in the South and West. No counties in Connecticut, Rhode Island, and the District of Columbia. DC, Maryland, North Carolina, Alaska, and Hawaii have no independent school districts. Hawaii has one state district. 16 states have dependent and independent school districts. Virginia has 1 independent and 135 dependent school systems. Louisiana has 69 independent school districts and one dependent school system. Source: Census of Governments, 2012

PIA812: PIA812: Introduction Introduction Source: Hogue (2013).

PIA812: Introduction PIA812: Introduction Major Trends The most striking trends over time have been: A dramatic drop in the number of school districts, thanks to inter-district consolidation. This trend has slowed down in recent years.. A dramatic increase in the number of special districts. This trend has also slowed down, but the type of special districts continue to change. Since 50 states were reached, the number of counties and of townships has hardly changed at all. https://www.youtube.com/watch?v=9UE9uu9fKSg

PIA812: Introduction PIA812: Introduction Number of Governments, by Type of Government, 1952 and Number of Governments, by Type of Government, 1952 and 2012 2012 3,052 3,052 120000 16,807 16,807 100000 17,202 17,202 3,031 3,031 19,519 19,519 12,319 12,319 80000 16,360 16,360 60000 67,355 67,355 40000 37,203 37,203 20000 12,880 12,880 0 1952 2012 School Districts Municipalities Source: Census of Governments, 2012 Special Districts Counties Townships

PIA812: Introduction PIA812: Introduction Special Districts special districts: 38,542 in 2017. The U.S. has many special districts Special districts are local governments with independent taxing authority, which usually means access to a property tax. The number of special districts varies greatly by state. Special districts are used for a wide variety of public services.

PIA812: Introduction PIA812: Introduction

PIA812: Introduction PIA812: Introduction Special Districts, 2 Special district typically have a shorter lifespan and higher turnover than general purpose governments, but the difference in their counts was also relatively slim between 2012 and 2017: The 2017 Census of Governments added more than 1,500 special districts and removed roughly 1,260 that are no longer operating. Quotes from the Census of Governments, 2017

PIA812: Introduction PIA812: Introduction Special Districts, 3 States may create special districts to provide services to newly-developed geographic areas. In other cases, the special purpose activity or services already exist, but residents expect a higher level of quality. For example, a state may have fire protection services. However, the established governmental structure may not legally allow the fire district to raise enough funds to maintain the desired level of quality services. That s when a state may choose to create a special district Some districts are only active for a limited time, usually as long as it takes to pay back a debt. Quotes from the Census of Governments, 2017

PIA812: Introduction PIA812: Introduction Special Districts, 4 Between the 2012 and 2017 census, multifunction districts grew the most. Multifunction districts can collect property taxes and issue tax- exempt bonds. Legislation authorizing multifunction districts was passed in most states across the nation in the 1980s. For example: In Colorado, the 2017 Census of Governments added close to 270 metropolitan districts to the master list of local governments in the state. Metropolitan districts can provide a wide array of services, such as fire protection, street improvements, recreation, mosquito control and television relay services. These districts can collect property taxes and issue public debt. Quotes from the Census of Governments, 2017

PIA812: Introduction PIA812: Introduction

PIA812: Introduction PIA812: Introduction An Example: New York State Counties cover the state (except for NYC, where the 5 counties are not separate operating governments). City, town, and village governments have similar powers and functions but have different geography. Unlike cities and villages, towns cover the state (except in cities and in American Indian reservations). People in a village pay taxes to both town and village. School districts are independent except in Buffalo, Rochester, Syracuse, Yonkers, and NYC, where they are city departments. Fire services are provided by municipal governments or by town- village joint fire districts or by town fire districts (outside villages). Many small districts rely on volunteer firefighters. The state has many other special districts for, among other things, libraries, ports, lake shore management, and water. The state also many subordinate agencies, some of which can collect fees. My favorites are fruiting currant districts. Source: 2017 Census of Governments

PIA812: Introduction PIA812: Introduction Lecture Outline Class Requirements Governmental Organization in the U.S. Federal System Budgets in the U.S. Federal System Research Topics on U.S. Federalism

PIA812: Introduction PIA812: Introduction Budgets in the U.S. Federal System The layers of governmental authority in the U.S. lead to: Overlap and specialization in the use of various revenue sources Overlap and specialization in various spending categories. Recall that the federal government and states are constitutional units and, within limits specified by the constitution, make their own decisions about spending and revenue. Local governments are creatures of the states, however, so they have much less leeway. They levy taxes and fees authorized by their state And undertake spending as required by their state

PIA812: Introduction. State and Local Expenditure, 2018 PIA812: Introduction. State and Local Expenditure, 2018 United States Total Description State & local government 3,813,912,992 State Local government 2,412,046,683 government 1,977,786,460 Expenditure By character and object: Intergovernmental expenditure Direct expenditure Current operations Capital outlay Interest on debt Insurance and subsidies Direct expenditure by function Education services: Higher education Elementary & secondary Other education + Libraries Social services and income maintenance: Public welfare Hospitals Health Transportation: Highways Air transportation (airports) Public safety: Police protection Fire protection Correction Environment and housing: Natural resources Parks and recreation Housing and community devt Sewerage Solid waste management 3,280,506 3,810,632,486 2,880,148,285 378,522,646 127,286,969 424,674,585 3,810,632,486 562,398,270 1,849,648,413 1,308,717,569 135,313,220 48,517,907 357,099,717 1,849,648,413 16,802,386 1,960,984,073 1,571,430,716 243,209,426 78,769,062 67,574,868 1,960,984,073 301,849,447 687,847,646 69,255,279 258,430,143 7,255,935 56,985,534 43,419,304 680,591,711 12,269,745 718,127,952 199,311,768 101,840,889 658,766,759 88,563,497 44,225,184 59,361,193 110,748,271 57,615,705 186,751,947 28,417,878 111,641,536 2,383,605 75,110,411 26,034,273 118,800,031 52,044,155 81,271,621 16,099,464 102,700,567 52,044,155 30,552,812 0 50,718,809 32,283,978 45,767,313 53,889,451 58,770,336 26,039,250 21,762,318 5,742,593 9,046,726 1,324,149 1,145,642 10,521,660 40,024,720 44,842,725 57,446,187 24,893,608 Governmental administration: Interest on general debt 148,270,278 111,279,049 62,968,016 45,900,748 85,302,262 65,378,301

PIA812: Introduction. State and Local Expenditure Shares, 2018 PIA812: Introduction. State and Local Expenditure Shares, 2018 United States Total Share of Direct Expenditure State & local government State Local government government Direct expenditure by function Education services: Higher education Elementary & secondary Other education + Librar. Social services and income maintenance: Public welfare Hospitals Health Transportation: Highways Air transp (airports) Public safety: Police protection Fire protection Correction Environment and housing: Natural resources Parks and recreation Housing & community devt Sewerage Solid waste management Governmental administration Interest on general debt 7.9% 18.1% 1.8% 14.0% 0.4% 3.1% 2.2% 34.7% 0.6% 18.8% 5.2% 2.7% 35.6% 4.8% 2.4% 3.0% 5.6% 2.9% 4.9% 0.7% 6.0% 0.1% 3.8% 1.3% 3.1% 1.4% 2.1% 0.9% 0.0% 2.7% 5.2% 2.7% 1.6% 0.8% 1.2% 1.4% 1.5% 0.7% 3.9% 2.9% 1.2% 0.3% 0.5% 0.1% 0.1% 3.4% 2.5% 0.5% 2.0% 2.3% 2.9% 1.3% 4.3% 3.3%

PIA812: Introduction PIA812: Introduction State and Local Expenditure State and Local Expenditure State governments spend on higher education; local governments spend on elementary and secondary education. States spend a lot on social services, especially TANF and Medicaid; local governments spend on hospitals. Highways are a surprisingly low share of spending (6% for states; 4% for locals) Spending on public safety is a local function. Numbers come from 2018 Census of Government Finance,

PIA812: Introduction. State and Local Revenue, 2018 PIA812: Introduction. State and Local Revenue, 2018 United States Total United States Total Description Description State & local government 4,081,253,658 3,289,962,114 739,661,986 739,661,986 State Local government 2,630,221,402 2,097,993,695 688,153,027 670,563,806 government 2,011,656,652 1,752,592,815 612,133,355 69,098,180 543,035,175 Revenue General revenue Intergovernmental revenue From Federal Government From State government From local governments General revenue from own sources Taxes Property Sales and gross receipts General sales Selective sales Individual income Corporate income Motor vehicle license Other taxes Charges and miscellaneous gen.l revenue Current charges (e.g. higher ed, hosp.) Miscellaneous general revenue (e.g. int.) Utility revenue (e.g. water, elec.) Liquor store revenue Insurance trust revenue (e.g. retirement) 0 0 0 17,589,221 1,409,840,668 1,022,783,253 17,457,845 480,462,523 315,929,835 164,532,688 390,002,949 47,647,798 27,861,201 59,350,937 387,057,415 235,935,966 151,121,449 14,018,753 8,498,997 509,709,957 0 2,550,300,128 1,761,402,148 547,038,543 611,372,264 411,011,843 200,360,421 425,715,869 56,058,597 30,121,283 91,095,592 788,897,979 547,532,991 241,364,988 173,692,276 10,052,133 607,547,135 1,140,459,460 738,618,895 529,580,698 130,909,741 95,082,008 35,827,733 35,712,920 8,410,799 2,260,082 31,744,655 401,840,564 311,597,025 90,243,539 159,673,523 1,553,136 97,837,178

PIA812: Introduction. State and Local Revenue Shares, 2018 PIA812: Introduction. State and Local Revenue Shares, 2018 United States Total Share of General Revenue State & local government 22.5% 22.5% State Local government 32.8% 32.0% government 34.9% Intergovernmental revenue From Federal Government From State government From local governments General revenue from own sources Taxes Property Sales and gross receipts General sales Selective sales Individual income Corporate income Motor vehicle license Other taxes Charges and misc general revenue Current cgs (e.g. higher ed, hosp.) Miscellaneous gen revenue (e.g. int.) 3.9% 31.0% 0.0% 65.1% 42.1% 30.2% 7.5% 5.4% 2.0% 2.0% 0.5% 0.1% 1.8% 22.9% 17.8% 5.1% 0.0% 0.0% 77.5% 53.5% 16.6% 18.6% 12.5% 6.1% 12.9% 1.7% 0.9% 2.8% 24.0% 16.6% 7.3% 0.0% 0.8% 67.2% 48.8% 0.8% 22.9% 15.1% 7.8% 18.6% 2.3% 1.3% 2.8% 18.4% 11.2% 7.2%

PIA812: Introduction PIA812: Introduction State and Local Revenue State and Local Revenue States receive almost 1/3 of their revenue from the federal government, mainly for TANF and Medicaid. Local governments receive almost 1/3 of their revenue from their state, mainly for education. State own-source revenue comes mainly from sales and income taxes Local own-source revenue comes mainly from the property tax and fees. Numbers come from 2018 Census of Government Finance,

PIA812: Introduction PIA812: Introduction Questions What types of local governments can be observed in the United States? What are the major trends in local government structure over the last 50 years in the U.S.? What are the major differences in revenue sources and spending responsibilities between state and local governments in the U.S.?

PIA812: Introduction PIA812: Introduction Lecture Outline Class Requirements Governmental Organization in the U.S. Federal System Budgets in the U.S. Federal System Research Topics on U.S. Federalism

PIA812: Introduction PIA812: Introduction Studying Federalism Studying Federalism This course begins with a look at the American federal system, Because many topics that are not explicitly about federalism must account for the features of the federal system, and Because many features of the federal system are themselves worthy of study.

PIA812: Introduction PIA812: Introduction Studying Federalism, 2 Studying Federalism, 2 Examples of studies that require an understanding of American federalism: How does aid from a state alter school district spending? Does the result depend on the form the aid takes? What happens to property values in a town when a village inside that town is dissolved or created? What happens to video lottery ticket purchases in a given state when a neighboring state implements a video lottery? Does the use of tax-increment financing result in lower revenue for schools?

PIA812: Introduction PIA812: Introduction Studying Federalism, 3 Studying Federalism, 3 More examples: What happens to the per pupil cost of education when two school districts consolidate? Do tax limitations induce local governments to set up more special districts? How does a tax increase in one local government influence the taxing decisions of overlapping governments? Does consolidation of the assessing function lower assessing cost per parcel?

PIA812: Introduction PIA812: Introduction Studying Federalism, 4 Studying Federalism, 4 One key feature of all these examples: They all appear in articles or working papers by scholars (including graduate students!) who are affiliated with PAIA. We will look at studies focusing on many of these topics later in the class.