I. States Are Facing an Uncertain Fiscal Future

Where States' Money Comes From

Where States' Money Comes From


When Congress approved a New Year’s deal to prevent the nation from falling over the fiscal cliff, the question of how much taxes would increase was, at least for the time being, settled.

But important questions about federal spending cuts were left unanswered and the political leaders who need to know more about those possible reductions are not all in Washington. They are the governors and legislators in the 50 states who are facing tough budget decisions themselves this spring, the peak season for legislative sessions from Augusta, ME, to Honolulu.

Because the economic downturn has been so long and so deep—and because the recovery has been so tepid—these policymakers have struggled to balance their budgets in recent years. They already have exhausted short-term fixes such as tapping into rainy-day funds, using one-time asset sales, increasing taxes temporarily, postponing construction projects, or issuing more debt. They have seen state tax revenue decline by $97.9 billion, or 12 percent, in real terms from their 2008 peak to 2010. At the same time, demand for state services has increased substantially.

Since the Great Recession began, the states’ reliance on federal grants and aid has increased significantly, according to a report by Pew’s fiscal federalism initiative. In 2010, for example, the analysis showed that federal grants provided, on average, $1 out of every $3 in state revenue. That is why choices that federal policymakers are considering to cut the deficit could have a huge impact on state budgets.

In addition, state tax codes are often linked in various ways to the U.S. tax code, so changes to federal tax policies directly affect state revenues—decreasing tax receipts in some cases and increasing them in others.

“Right now, the impact on the states isn’t really part of the national conversation in Washington,” said Pew expert Anne Stauffer. “Finding opportunities for dialogue and comprehensive facts about the benefits and consequences of these fiscal decisions are vital to identifying solutions that will lead to long-term stability and effective services at all levels of government.”

Just as this need to better understand the evolving relationship between federal and state governments increases, the ability to do so has declined. Federal units in the Office of Management and Budget, the Government Accountability Office, and the Office of Personnel Management that reviewed federal-state issues have been disbanded. Congressional subcommittees that once looked at the subject have new responsibilities, and even the Census Bureau has cut back its data-gathering on the subject.

Pew’s fiscal federalism initiative, which was formed last year, conducts original, nonpartisan research and partners with other organizations to study the connections between federal and state governments’ budget, tax, and fiscal policies. It shares the data with policymakers and also convenes meetings of federal and state decision makers to discuss the issues.

In November, the initiative issued a study on the potential impact of the fiscal cliff negotiations on states. “The public interest is best served by an enriched policy debate that incorporates implications for all levels of government and leads to long-term fiscal stability for the nation as a whole,” said Stauffer, who directs the project.

–Daniel LeDuc

For more information, go to pewstates.org/fiscal-federalism.

II. Forage Fish Protected on U.S. Coasts

Humpback whales chase after pilchards, or sardines, which are among the key forage fish in the Pacific.

Humpback whales chase after pilchards, or sardines, which are among the key forage fish in the Pacific.
© Leigh Hilbert

It was a big year for little fish after Pew-backed efforts led to increased protections for forage species on the East and West coasts of the United States.

In November 2012, the California Fish and Game Commission adopted a policy to protect the small schooling fish, incorporating recommendations from the Lenfest Forage Fish Task Force. And in December, the Atlantic States Marine Fisheries Commission approved the first coastwide catch limit for menhaden, another small but important fish.

Forage fish—which include anchovies, herring, and sardines, in addition to menhaden—are a crucial part of the ocean food web because they eat tiny plants and animals, known as plankton, and then are consumed by larger fish and seabirds. Their populations have plummeted in the past half-century because humans also catch them in large numbers for uses such as bait, nutritional supplements, and animal feed.

The forage fish task force, convened by the Pew-managed Lenfest ocean program, concluded in its 2012 report that the fish are worth twice as much if left in the water as food for other species than if they are caught directly. California’s new policy should result in regulations that limit new fishing for forage species until their sustainability is scientifically established. (Learn more about lenfest at ocean.org/foragefish.)

On the East Coast, Pew, which has been pushing hard for menhaden protection, thanked its activists for contacting the Atlantic fisheries commission in support of catch limits. Commissioners received 126,000 comments from the public before their historic vote to reduce the catch by 25 percent from 2011 levels.

“Sound science clearly calls for leaving more of these fish in the water to fulfill their ecological role,” said Peter Baker, director of Pew’s Northeast fisheries program. “More menhaden means more food for ocean wildlife, from seabirds to whales and popular game fish such as striped bass.”

–Carol Hutchinson

For more information, go to pewenvironmentgroup.org/federal-fisheries-policy.

III. New Nutrition Rules For School Snacks

Calories in snacks currently in many schools

For the first time in more than three decades, the government has proposed updated guidelines for snack foods sold in schools that will encourage more fruits, vegetables and low-fat whole-grain items while limiting sugary drinks and high fat snacks.

The proposal from the U.S. Department of Agriculture sets minimum requirements for limiting calories and fats while still allowing parents to send treats to school for birthday and holiday parties and schools to sell sweets for fundraisers. After a comment period, the new guidelines could be finalized and take effect as early as the 2014-15 school year. Similar guidelines for school meals were put in place this school year.

“Good nutrition lays the groundwork for good health and academic success,” said Agriculture Secretary Tom Vilsack. “Providing healthy options throughout school cafeterias, vending machines and snack bars will complement the gains made with the new, healthy standards for school breakfast and lunch so the healthy choice is the easy choice for our kids.”

Getting the new guidelines issued has been the focus of the Kids’ Safe & Healthful Foods Project, a joint initiative of The Pew Charitable Trusts and the Robert Wood Johnson Foundation. Last year, a project report found that most of the nation’s secondary schools do not sell fruits or vegetables in their stores, snack bars, and vending machines. Although many schools have reduced the availability of candy, fatty chips, and sugary drinks, the report found that this progress had stalled.

Last spring, a project survey showed that 80 percent of parents favor national standards that would limit calories, fat, and sodium in snack and a la carte foods sold in schools and encourage young people to eat fruits, vegetables, and low-fat dairy items.

“The new rules are the kind of positive change we need to help reduce obesity rates among children and teens, which are now more than triple what they were four decades ago,” project director Jessica Donze Black said after the snack rules were announced. “With many students consuming up to half of their daily calories at school, these guidelines could make a real difference in the health of our nation’s kids.”

–Chelsea Toledo

To learn more about the project, go to healthyschoolfoodsnow.org.

IV. Cultural Data Project Becomes Independent Nonprofit

After six years of incubation at The Pew Charitable Trusts, the Cultural Data Project has become an independent nonprofit with a national board that matches its broad scope. 

The project is a powerful online management tool designed to strengthen arts and cultural organizations through the collection of reliable longitudinal data. Hailed as a national standard, it enables participating organizations to track trends and benchmark their progress through sophisticated reporting tools, empowers researchers and advocates with information to make the case for arts and culture, and equips funders with data to plan and evaluate grantmaking activities more effectively.

“Especially in an uncertain economy, the arts must prove their ‘investment worthiness’ with solid numbers, because anecdotal evidence alone is unlikely to persuade policymakers or the public of their importance,” said Glen Howard, chairman of the board of the newly independent project. “The Cultural Data Project enables arts organizations to make their case as, among other things, an economic engine. Now is the ideal time to take to the national level what has already been a hugely successful integration of data collection and research on the arts.”

Howard, who had been Pew’s managing director of legal affairs and general counsel, is a veteran concert performer and has held leadership positions in several cultural nonprofits in Washington. He said that the project would have its headquarters in the historic district of Philadelphia and that its staff, all of which will transition from Pew to the new nonprofit, is excited about opportunities to advance a national agenda for arts and culture. 

The project’s new president and CEO will be Beth Tuttle, a nationally known consultant to cultural and educational organizations.

The project now spans four time zones, collecting data from more than 14,000 arts and cultural organizations in 12 states and the District of Columbia. “Here in New York City, the Cultural Data Project is emerging as a vital resource for research, funding, and advocacy,” said Kate D. Levin, commissioner of the city’s Department of Cultural Affairs and a member of the project’s board. “As it goes national, we look forward to building on this work with even more regions to help strengthen the entire cultural community.”

–Daniel LeDuc

For more information, go to culturaldata.org.

V. New Insights Into Philadelphia Taxes

Philadelphia residents have benefited from a lower-than-average property tax burden.

Philadelphia residents have benefited from a lower-than-average property tax burden.
© iStockphoto

Since the beginning of the new century, Philadelphia’s residential tax burden, measured as a percentage of income, has been falling while taxes have risen in many suburbs in Pennsylvania and New Jersey, reversing a long-term trend and making the city more competitive with its neighboring communities.

The finding by Pew’s Philadelphia research initiative came in a report, Residential Taxes: A Narrowing Gap Between Philadelphia and Its Suburbs, which analyzed 237 municipalities in the Philadelphia region. The study found that the tax disadvantage of living in Philadelphia versus the suburbs declined markedly from 2000 to 2012 and in some instances disappeared. In 2000, Philadelphia imposed the region’s third-highest tax burden on its residents compared with the taxes imposed on non-commuters in the suburbs. By 2012, the city had the 48th-heaviest burden.

One reason was that Philadelphia lowered its wage tax while many Pennsylvania suburbs raised theirs, the study determined. Another major factor was the city’s failure to raise property assessments to keep up with market values over the 12 years that were studied.

Philadelphia is now preparing to tackle that issue, and the research initiative has developed a second report that examines the challenges the city faces in that area. Officials propose to change the certified market value of every piece of property, the way assessments are used to calculate tax bills, and property owners’ options for dealing with any big tax increases that might result. The study, The Actual Value Initiative: Overhauling Property Taxes in Philadelphia, determined that no large American city in recent years has attempted to do all three things at once.

“The changes to the city’s property tax system will be a significant transition, and for some, a painful one,” said Larry Eichel, who directs the project. “The report looks at the challenges and experiences of other cities for the benefit of policymakers, who will need to determine how much can be done to alleviate the impact on the thousands of Philadelphia residents who will be looking at significant increases in their tax bills.” 

–Cindy Jobbins

The reports and an interactive graphic can be found at pewtrusts.org/philaresearch.