State and Local

State and Local

Research

Justin M. Ross, Olivia Gonzalez | Aug 11, 2015
Taxpayers and policymakers alike are drawing attention to opaque tax practices at the local level. Recent evidence suggests that local officials have the incentive to raise extra revenue through less transparent means and are channeling this revenue into assets for future spending. States have an opportunity to make their tax structure more transparent by adjusting tax rates following property reassessments and making the calculation of their property taxes clearer.
Robert Krol | Jul 14, 2015
A new paper for the Mercatus Center at George Mason University gathers and analyzes economic research on transportation benefit-cost analysis and the voting behavior of politicians, and concludes that current transportation infrastructure spending policies lead to inefficient decisions and are often driven by political forces.
Eileen Norcross | Jul 07, 2015
In new research for the Mercatus Center at George Mason University, Senior Research Fellow Eileen Norcross ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, including unfunded pensions and health care benefits. The study, which builds on previous Mercatus research about state fiscal conditions, provides information from the states’ audited financial reports in an easily accessible format, presenting an accurate snapshot of each state’s fiscal health.
Robert Krol | Jun 24, 2015
In a new study for the Mercatus Center at George Mason University, economist Robert Krol demonstrates that governments are more likely to set up barriers to new technology when the performance advantage of the new technology is small or incremental and lobbying costs are low. Incumbent businesses threatened by a new technology may use the government to block businesses using the new technology from entering the market. Ultimately, government protection of incumbent businesses reduces consumer well-being.
Justin M. Ross | Jun 23, 2015
An important concern to the efficiency of public finance systems is that voters suffer from various “fiscal illusions” that can politicians can exploit to expand the public sector. This paper contributes evidence of this effect on a public finance system through the revenue elasticity hypothesis, which is a form of fiscal illusion in which voters confuse tax rates with tax burdens in the approval of public spending. The applied empirical setting is Virginia cities and counties from 2001 to 2011, where the timing of mass property reappraisals is exogenous but known to local policymakers in setting the annual budget.
James Bailey, Douglas Webber | Jun 17, 2015
By 2010, the average US state had passed 37 health insurance benefit mandates (laws requiring health insurance plans to cover certain additional services). Previous work has shown that these mandates likely increase health insurance premiums, which in turn could make it more costly for firms to compensate employees. Using 1996–2010 data from the Quarterly Census of Employment and Wages and a novel instrumental variables strategy, we show that there is limited evidence that mandates reduce employment. However, we find that mandates lead to a distortion in firm size, benefiting larger firms that are able to self-insure and thus exempt themselves from these state-level health insurance regulations. This distortion in firm size away from small businesses may lead to substantial decreases in productivity and economic growth.

Testimony & Comments

Christopher Koopman, Thomas Stratmann, Mohamad Elbarasse | Jun 12, 2015
There is little evidence to support the claim that certificates of need are an effective cost-control measure; and Stratmann and Russ have found that these programs have no effect on the level of charity care provided to the poor. While controlling health care costs and increasing care for the poor may be laudable public policy goals, the evidence strongly suggests that CON regulations are not an effective mechanism for achieving them. Instead, these programs simply decrease the supply and availability of health care services by limiting entry and competition.
Eileen Norcross | Jun 11, 2015
In this brief comment, I will focus on the correct framework to use in selecting the appropriate interest rate when valuing public pension sector liabilities. A framework based on economic principles will accurately measure the market value of these liabilities and is superior to the actuarial approach.
James Broughel | Sep 02, 2014
This year’s report makes several important improvements over reports from previous years. However, there are still a number of ways in which this report can be made more useful if it is to be a meaningful representation to Congress and the American public of the effects of the regulatory system in the United States.
Matthew Mitchell | Oct 04, 2011
Matthew Mitchell testified before the House Committee on the Judiciary about state governments' experiences with Balanced Budget Amendments.
Russell Roberts | Feb 16, 2011
Russell Roberts testified before the House Committee on Government Oversight and Reform on the second anniversary of the stimulus.
Eileen Norcross | Feb 09, 2011
Eileen Norcross testified before the U.S. House Committee on Oversight and Government Reform on the looming municipal debt crisis.

Research Summaries & Toolkits

Speeches & Presentations

Expert Commentary

Aug 10, 2015

There are economically worthwhile transportation infrastructure projects that need funding, but given the limited tax funds available, it makes sense to target the funds to get the biggest bang for the buck. Since the completion of the Interstate Highway System in the 1980s, politicians in Washington have failed to do this. It's time to shift responsibility for the provision of transportation infrastructure back to cities and states.
Jul 23, 2015

Michigan has struggled to emerge from the Great Recession, just like so much of the rest of the nation — and it still has a great deal of work to do. The latest evidence is a new report published by the Mercatus Center at George Mason University, which shows the state’s “fiscal health” ranking is slipping.
Jul 23, 2015

If there’s a lesson to draw from the financial disasters in Greece, Puerto Rico and Chicago, it’s this: When governments take on too much debt and continually defer their bills, it eventually spells trouble — for both taxpayers and those who rely on government pensions or services.
Jul 14, 2015

State fiscal health: It may not sound like the most exciting topic, but knowing a little bit about the fiscal health of the states can help people answer questions that impact their everyday lives. For example, is it likely that your state will need to raise taxes in the future in order to pay its bills? Does your state have enough cash in its rainy day fund to soften the blow of another economic downturn? If you're a state or local government worker, will your state be able to pay the full pension it promised you?
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Jul 14, 2015

Given that most highways in the United States are toll free, overuse is to be expected. The only way we can determine whether or not we need to build more highways is to charge drivers who travel during peak hours. These charges or prices reflect the value drivers place on using the highway. These pricing signals can then be used to determine whether it makes economic sense to build more highway capacity. When the value drivers place on using a highway exceeds the cost of additional lanes, more lanes should be built.
Jul 08, 2015

New research by my Mercatus Center colleague Eileen Norcross reveals that more fiscal disasters loom in the United States. She ranks each state's financial health using data from standardized and audited Comprehensive Annual Financial Reports (CAFRs) that show short- and long-term debt along with key fiscal obligations, including unfunded pensions and health-care benefits.

Charts

Increasingly, states are deeply divided on central questions of national politics and policy. The divide is often viewed as a lamentable and perhaps dangerous form of political “polarization.” But those fears are exaggerated. In fact, the divide between and among the states offers an opportunity to reform federalism on a constitutional basis.

Experts

Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the director of the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.
Eileen Norcross is a senior research fellow at the Mercatus Center at George Mason University. As director for the Mercatus Center’s State and Local Policy Project, she focuses on questions of public finance and how economic institutions support or hamper economic resiliency and civil society. She specializes in fiscal federalism and institutions, state and local governments and finance, pensions, public administration, and economic development.
The Honorable Maurice McTigue, QSO, is vice president for outreach at the Mercatus Center at George Mason University. He is director of the Mercatus Center’s Government Accountability Project and a member of its Spending and Budget Initiative and State and Local Policy Project.
Adam Millsap is a research fellow for the State and Local Policy Project at the Mercatus Center at George Mason University. Adam was also a Mercatus Center Adam Smith Fellow.
Mark J. Warshawsky is a visiting scholar at the Mercatus Center of George Mason University. His research interests include employer-sponsored retirement programs, social security, financial planning, health and long-term care financing, corporate and public finance, and macroeconomics.

Podcasts

| August 21, 2015
Guest Bill Kramer with the Council of State Chambers Discusses Policy Reform in the States

Recent Events

The Mercatus Center invites you to join Research Fellow Christopher Koopman for a presentation examining the economics and policy issues surrounding the sharing economy.

Books

Michael S. Greve | May 22, 2015
This essay examines the sources and the scope of federalism’s failures. It provides a trenchant, constitutionally grounded analysis with profound implications for a range of current policy debates. Federalism’s restoration requires not merely rebalancing the federal-state relationship through decentralization. Rather, we must restore the structure of federalism to competitive federalism—which encourages states to compete to enhance freedom and economic growth—in response to the rise of cartel federalism, which squashes competition between the states and makes states dependent on the federal government.

Media Clippings

Eileen Norcross | Feb 02, 2014
Eileen Norcross cited at The New York Times.
Sarah Arnett | Jan 17, 2014
The Mercatus Center cited at Philly.com.
Sarah Arnett | Jan 16, 2014
The Mercatus Center cited at Investor's Business Daily.
| Jan 16, 2014
Mercatus cited at Union Leader.
Adam Thierer | Oct 08, 2013
Adam Thierer cited at Politico.
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