Student Debt Varies by State

Sixty-nine percent of graduating college seniors nationwide in 2014 had some amount of student loan debt, averaging about $28,950, according to the Institute for College Access & Success. But some states had more 4-year college graduates in more debt than others. NEW HAMPSHIRE had the highest percentage of graduates in debt (76 percent), and DELAWARE had the highest average amount of debt ($33,808). NEVADA had the lowest percentage of graduates in debt, 46 percent, while UTAH had the lowest average debt, at $18,921.

 

Source: Institute for College Access & Success

 

Legend:

 

Highest average 4-year college graduate debt: Delaware, New Hampshire*, Pennsylvania*, Minnesota*, Rhode Island

 

Highest percentage of 4-year college graduates in debt: New Hampshire*, Idaho, Pennsylvania*, Minnesota*, Wisconsin

 

Lowest average college graduate debt: New Mexico*, Utah, California, Nevada*, Arizona

 

Lowest percentage of college graduates in debt: Louisiana, Hawaii, Nevada*, Wyoming, New Mexico*

Hogan Intros Transportation, Manufacturing, Ed Proposals:

Maryland Gov. Larry Hogan (R) has unveiled a series of agenda items he plans to pursue in the new legislative session, including the repeal of a law adopted earlier this year that requires state officials to rate and rank proposed transportation projects to determine which should get funding priority.

 

Other plans include attempting to revive a proposal to create manufacturing jobs in high-unemployment areas and doubling the amount of money the Old Line State spends on scholarships for low-income students to attend private schools. All three ideas face an uphill battle in the Democrat-dominated General Assembly.

 

The transportation rating legislation (HB 1013) became law after lawmakers overrode Hogan’s veto in April. But Hogan says the law will “wreak havoc on the entire state transportation system” because the scoring system it will utilize favors projects in urban areas over those in more rural jurisdictions. The law’s supporters counter that it will ensure fiscal accountability while also giving the Hogan administration the flexibility to choose lower-scoring projects over higher-ranking ones if he can justify the decision.

 

Hogan’s manufacturing proposal previously failed during the 2016 legislative session, though a Hogan spokesperson said earlier this month that his office has “worked out some of the kinks” that led lawmakers to reject the original proposal. That plan would have provided a 10-year tax exemption for new manufacturers and their employees in certain areas, including Baltimore, Western Maryland and the lower Eastern Shore.

 

The governor’s education proposal would double – to $10 million over the next three years – the amount the state dedicates to a program known as Broadening Options and Opportunities for Students Today. The plan has already drawn strong opposition from the state teachers union, which wants the program abolished. Last week the union called the scholarship proposal a “Trump-like initiative that sends taxpayer money from public schools to private schools.” (WASHINGTON POST, BALTIMORE SUN, LEXIXNEXIS STATE NET)

Will Regulation of the “Internet of Things” Fall to the States?

There’s a busy world all around us that goes relatively unnoticed much of the time but that could soon be a major focus of government regulation. It’s called the Internet of Things, or IoT, and although it has dominated the attention of the tech industry for the last several years, many in the general public still don’t know what it is or have even heard of it.

 

“Nobody knows what this is, but yet it’s incredibly important,” said U.S. Sen. Brian Schatz (D-Hawaii) at an IoT policymaking event in Washington, D.C. in December hosted by the Center for Data Innovation, as reported in Government Technology. “The reality is that while few people know what IoT is, they are already exposed to it when they cross the street or wash their hands.”

 

As a concept, the “Internet of Things” has been around since the early 80s, when a group of students in the Computer Science department at Carnegie Mellon University wired up a Coke machine to the Internet to keep tabs on its inventory. But there still isn’t a widely accepted definition of what the IoT actually is, according to a report released last month by the Federal Trade Commission. A working definition may be that it is the rapidly-growing network of physical devices -- from cable TV boxes and refrigerators to wearable medical devices and traffic lights -- that can connect to the Internet. It enables home thermostats to automatically adjust to weather forecasts, doctors to remotely monitor patients’ heart rates and stoplights to adapt to local traffic patterns.

 

The FTC report said experts estimate there will be 25 billion such devices in operation this year and twice that number by 2020. A story by Katy Bachman last January in Adweek, placed the latter figure even higher, between 50 billion and 75 billion, which she said would “create 13 quadrillion connections to the Internet and generate 200 exabytes of data a year.” To put that into perspective she noted the Library of Congress houses 5 exabytes of data.

 

That enormous volume of data has sounded alarm bells in Washington.

 

“We’re now in a world where data is being collected all the time,” FTC Commissioner Edith Ramirez said at the 11^th annual State of the Net conference last month, according to The Verge. “We’re bringing these devices into our homes, into what used to be private spheres, and the data that is being generated is increasingly much more sensitive.”

 

The FTC’s report, titled The Internet of Things: Privacy and Security in a Connected World, which was based on a workshop the agency conducted in Nov. 2013, stated that while participants generally agreed the IoT offered “potentially revolutionary” benefits to consumers, they also noted it “presents a variety of potential security risks that could be exploited to harm consumers by: (1) enabling unauthorized access and misuse of personal information; (2) facilitating attacks on other systems; and (3) creating risks to personal safety.”

 

“Participants also noted that privacy risks may flow from the collection of personal information, habits, locations, and physical conditions over time,” the report said. “In particular, some panelists noted that companies might use this data to make credit, insurance, and employment decisions.”

 

The security and privacy threat posed by IoT devices has already been demonstrated. Last summer researchers at the University of Michigan found that networked traffic signals were susceptible to cyberattacks. And in 2012 hundreds of home security cameras and baby monitors were hacked and their video streams posted on the Internet. That cyberattack led to the FTC’s first action against the purveyor of an IoT device, the marketer of the baby monitors, TRENDnet, which ultimately reached a settlement with the agency under which it agreed to beef up its security practices.

 

Despite the evidence of such threats, the FTC’s position, according to its report, is that “legislation at this stage would be premature,” aside from “strong, flexible, and technology-neutral federal legislation to strengthen [Congress’] existing data security enforcement tools and to provide notification to consumers when there is a security breach,” for which the agency has been advocating since at least 2012.

 

The bulk of the FTC’s recommendations lean toward self-regulation. The report states, for example, that IoT companies “should build security into their devices at the outset, rather than as an afterthought” and “limit the data they collect and retain.” It also advises that those companies give consumers choice in what data they share and notify them when there is a security breach.

 

The FTC’s light-handed approach is guided by a desire to avoid stifling innovation and economic growth.

 

“We should adopt a regulatory regime that allows technology, even disruptive technology, to thrive,” FTC Commissioner Maureen Ohlhausen said at last year’s International Consumer Electronics Show (CES), according to Adweek. “Success of the Internet has been driven by the freedom to experiment even in the face of unease. It’s vital that government approach the Internet of things with regulatory humility.”

 

President Barack Obama has called for federal legislation to protect against cyberattacks, including a bill requiring companies to notify consumers within 30 days of discovering a data breach that their personal information may have been compromised, like what the FTC has been seeking for years. With the recent high-profile cyberattack at Sony, some form of that measure could finally happen.

 

But states haven’t been willing to just sit around and wait for Congress to act on the issue. Every state but three -- Alabama, New Mexico and South Dakota -- has already enacted its own data breach notification law, according to the National Conference of State Legislatures. And even if Congress passes such a law, there are plenty of other facets of the issue for states to focus their attention on, such as consumer privacy. By NCSL’s count, for instance, 15 states have enacted laws, which, among other things, prohibit the downloading of information from motor vehicle event data recorders, or “black boxes,” without the consent of the vehicle owners or policyholders (see Bird’s eye view).

 

At the Center for Data Innovation’s Dec. 4 event entitled “How Can Policymakers Help Build the Internet of Things?” U.S. Sen. Deb Fischer (R-Nebraska) advised, “policymakers can’t bury their heads in the sand and pretend this technological revolution isn’t happening, only to wake up years down the road and try to micromanage a fast-changing, dynamic industry.” Many state lawmakers likely share that view.

 

-- By KOREY CLARK

 

More States Looking to ‘Go Green’ In Spite of Banking Woes

This Tuesday, Ohio voters will go to the polls to decide whether to legalize recreational and medicinal marijuana use. But even if the Buckeye State becomes the 24^th (along with the District of Columbia) to legalize some form of marijuana, it will not solve one of the most significant problems facing the burgeoning legal weed industry: the lack of access to banking services that virtually all other legal businesses take for granted. 

 

It is hardly a new problem (See “Legal Weed Outlets Flush in Cash Struggling to Find Banks” in the July 2, 2015 issue of SNCJ). But with Ohio possibly boarding the legal marijuana bandwagon and several states likely to have legalization ballot measures in 2016, it is one that cries for a solution.

 

Since 2012, four states and DC – all of which already allowed medicinal marijuana use - have passed laws legalizing the use by adults of small amounts of marijuana for recreation. Legalization advocacy groups like the Washington D.C.-based National Organization for the Reform of Marijuana Laws (NORML) expect similar bills in between six to eight states next year. This includes California, the first state to legalize medicinal marijuana use (via Proposition 215 in 1996) and home to more than 12 percent of the U.S. population.

 

The prime motivation behind such a relatively rapid push for legalization is simple: money. According to a report released earlier this year by The ArcView Group, a research and investment firm in San Francisco, the marijuana industry took in more than $2.7 billion in 2014, a 74 percent jump from the year before. ArcView predicts that as many as 18 states could pass recreational use laws by 2020, something that could drive cumulative annual revenues as high as $10.2 billion.

 

Much of that is predicated on what happens at the ballot box in California, where voters rejected a marijuana legalization ballot measure in 2010. But with polls showing a majority of Californians now support legalization, proponents feel confident the Golden State may soon be going green.

 

“Should an Adult Use legalization initiative pass in California in 2016 the entire industry could rapidly double in size,” the ArcView report concludes. Another study by New York-based Green Wave Advisors is even more bullish on the so-called “green rush” economy, saying in an October 2014 report that nationwide legalization could push combined medical and recreational retail marijuana sales to over $35 billion a year.

 

If the results in Colorado and Washington - the first two states to make recreational pot legal - are any indicator, it’s not hard to imagine such bold predictions coming true. According to the Colorado Department of Revenue, combined medical and recreational pot sales in August topped $100 million, the first time monthly revenues have reached that plateau. The Centennial State has already taken in over $86 million in marijuana tax revenues this year, more than it collected in all of 2014. Washington, meanwhile, has collected more than $67 million in pot tax revenues in its first year of legalization. Steve Lerch, executive director and chief economist for the state’s Economic and Revenue Forecast Council, told BloombergBusiness in October that Washington expects to take in more than $1 billion in pot-related revenues over the next four years.

 

But while states have no problem processing and banking such large amounts of cash, weed sellers are not so fortunate. With marijuana still barred by federal law, most banks want no part of their money. That leaves the vast majority of dispensaries as strictly cash-only operations – and high-value targets for theft and robbery. It also makes accurately collecting and tracking taxes on those sales much more problematic for state and local officials than for other industries.

 

Colorado has tried to address the situation. In 2014 Gov. John Hickenlooper (D) signed legislation to create a state-chartered credit union that would cater specifically to the state’s nascent legal weed industry. But the legislation had to clear a tall hurdle - federal law requires banks and credit unions to have a master account with the U.S. Federal Reserve in order to process checks and credit cards. The first financial institution created under the new Colorado law, Fourth Corner Credit Union, applied for such an account in December 2014. After months of silence, the Fed rejected Fourth Corner’s application in July, citing marijuana’s illegality under federal law. Fourth Corner has since filed suit seeking to force the Fed to grant them the account. A federal court is scheduled to hear oral arguments on December 28. 

 

Another possible avenue opened up in May with the formation of CannaNative, the brainchild of a trio of Native American businessmen in Southern California who want to unite over 550 Western tribes in the cannabis business. In a statement, CannaNative co-founder Anthony Rivera says the tribes would use their expertise in running casinos on sovereign land to set up financial services for weed dispensaries. In doing so, he says, tribes would use the fast-growing weed industry “to gain true sovereignty” in a way that is both economically and environmentally sustainable.

 

“CannaNative will usher a new age for sovereign nations, as Native American tribes have unique rights that allow for cannabis (marijuana and industrial hemp) cultivation, manufacturing, marketing, sales, use, distribution, medical research and even banking institutions for the rapidly growing cash-and-carry industry,” he said in a statement.

 

But while that might sound good to weed sellers desperate to find a bank, it seems highly unlikely that such a scheme will ever come to fruition.

 

“I don’t see how they would have the leeway to do something like that,” says Khurshid Khoja, the founder of Greenbridge Corporate Counsel in San Francisco, which represents numerous clients in the cannabis industry. “Even with tribal sovereignty there are things they can’t do. I just question how much leeway they would have to exempt themselves from federal anti-money laundering laws.”

 

The answer is very little, according to Brian Pierson, an attorney who specializes in working with Native American tribes for the law firm Godfrey and Kahn in Milwaukee. 

 

“Certainly there is tremendous need in Indian country, and it’s fair for tribes to explore every potential means for economic development,” he says. “But with respect to commercial activity focused on non-Indians living off reservation, there is no judicial authority for immunity or exemption from federal law.”

 

Technology is now also offering potentially much simpler possibilities for weed entrepreneurs. Companies like Denver-based FlowHub and Integrated Compliance Solutions, based in Las Vegas, offer “seed to sale” accounting and point-of-sale solutions that allow cannabis dealers to meet the strict guidelines laid out by the U.S. Department of Justice and the U.S. Financial Crimes Enforcement Network (FinCEN) for ensuring dispensaries are not laundering money or running afoul of racketeering laws. Others, like California-based Hypur, are promoting software they claim can almost fully automate the compliance process for banks, thus drastically reducing the amount of time they take to service a marijuana client.

 

But while technology offers wondrous new tools, it does not by itself solve the basic problem facing financial institutions that work with cannabis companies.

 

“At the end of the day, it is still the bank’s responsibility to make sure there’s no mistakes made with one of these accounts, regardless of what software they are using,” says Beth Mills, Vice President for Communications and Marketing for the California Bankers Association. 

 

That reality is why most observers still look to Congressional action for a resolution. But the wait has so far been frustrating. Multiple bills have been introduced in Congress, including HR 2076 by Colorado Rep. Ed Perlmutter (D). The “Business Access to Banking Act” would grant civil protections for managing accounts with legal weed dispensaries, but it has so far languished in a House subcommittee with no sign it will ever get a vote. With an often dysfunctional and hyper-partisan Congress heading into an election year, its prospects appear dim.

 

But there remains one small ray of hope for those who support a Congressional solution. An amendment to the tentative budget agreement reached last month between the White House and Congress included an amendment authored by Oregon Sen. Jeff Merkley and Washington Sen. Patty Murray, both Democrats, that would bar the Dept. of Justice from using federal funds to go after banks that provide services to marijuana businesses that are operating legally within their own states. It is yet to be seen if the amendment survives the complicated budget negotiation process. Even if it does not this time, NORML Deputy Director Paul Armentano says the expansion of the legal marijuana industry in the states is likely to force Congress’s hand sooner rather than later.

 

“Ultimately, this is an issue for Congress,” he says. “It is federal law that is preventing these state-compliant businesses from gaining access to financial services, and ultimately it is Congress that has to deal with this issue head on.”

 

 

 

 

Follow Rich on Twitter at @WordsmithRich

Growth Lag And Budget Caution In The States

The U.S. economy is expanding for a ninth consecutive year, unemployment is low, stock indices are near record highs, despite an early August slump, and the Great Recession of 2007-09 is a distant memory. Despite these positives, state budgets for fiscal 2018 are “extra cautious as states contend with slow revenue growth, limited budget flexibility and substantial federal uncertainty,” according to an annual report by the National Association of State Budget Officials (NASBO). Adjusting for inflation, 19 states have failed to reach the revenue levels they enjoyed before the recession.

 

A recent analysis of state trends by the Pew Charitable Trusts underscored the NASBO findings. “The slow pace of tax revenue growth has left many with little or no wiggle room in their budgets,” Pew found.

 

There are several explanations for the tight budgets. “The most prominent reason is the slow economic recovery,” said John Hicks, executive director of NASBO. Although the recovery is the third longest in U.S. history, growth has been weaker than in other post-recession rebounds. The annual growth rate — “real GDP,” which is gross domestic product adjusted for inflation — has never reached 3 percent in any of the recovery years. This year growth was a dismal 1.2 percent in the first quarter and 2.6 percent in the second.

 

Other reasons include a slump in sales-tax revenue and the ever-present shadow of unfunded pension liabilities for state and local government workers and teachers. The gap between the benefits promised to workers and pension fund assets was $1.1 trillion in 2015, the last year for which full figures are available. This was a 17 percent increase from 2014.

 

Meanwhile, sales tax revenues have fallen below estimates, and states are finding it difficult to collect taxes on Internet sales, Hicks said. Americans are spending less on goods, which are taxed in most states, and more on services, which are broadly taxed in few states. This year bills were introduced in 23 legislatures to align tax codes with the modern service economy and tax such activities as personal care, home repair, funeral services and computer maintenance. So far, none have passed. According to Pew, states with service taxes have found them so complicated that tax offices are writing clarifying memos, such as one in North Carolina to distinguish between roof repair (taxable) and roof replacement (not taxable).

Nonetheless, overall tax revenue is up in 31 states. Most of these states have also rebuilt their rainy-day funds, which are reserves they can draw on during a natural disaster or the next economic downturn.

 

There are wide variations among the states, reflecting differences in economic conditions and tax policy. The nation’s most contentious fiscal situation is in Illinois where legislators in July overrode the veto of Gov. Bruce Rauner (R) and passed the state’s first complete budget in more than two years. The repercussions from this budget and an accompanying income tax increase continue to rock the Prairie State. Illinois has more than $14 billion in past-due bills and missed a payment to schools this month. Its credit rating is shaky.

 

States in the nation’s oil patch remain under pressure from declines in production that began with the 2014 oil price collapse. Tax revenue has fallen and job growth stagnated in energy-producing Alaska, Louisiana, New Mexico, North Dakota, Oklahoma and Wyoming, according to an analysis by S&P Global Ratings. Texas, another energy-producing state, has managed to weather the downturn in energy revenue because of economic diversification.

 

Apart from oil-patch states and Illinois most states have shied away from general tax hikes except for gas taxes. Eight states raised taxes on motor fuels this year, bringing to 26 the number of states that have done so during the past four years.

 

“There’s nothing more fundamental in the business of government than making sure the roads and bridges don’t fall apart – and they are falling apart,” California Gov. Jerry Brown (D) said in support of a 12-cent hike in the Golden State’s gas tax that is estimated to raise $5 billion.

 

California is a liberal, Democratic bastion, but the gas-tax raising states this year include fiscally conservative Tennessee and South Carolina, where Republicans are in charge.

 

“We’ve seen more bipartisan agreement on raising gas taxes than almost any other tax out there,” said Jared Walczak, senior policy analyst at the right-of-center Tax Foundation, quoted by Pew.

 

The neglect of roads and bridges that brought about these tax increases was also arguably bipartisan. Another factor is continuing improvement in fuel efficiency for cars and trucks, which reduces gas sales and the taxes that go with them.

 

CNBC rates Rhode Island, New Hampshire, Maine, Connecticut, New Jersey, New York and West Virginia as the seven worst states on infrastructure. Four of these states have Republican governors and three have Democratic governors, but the infrastructure deficiencies began long before any of the present occupants held office.

 

Some governors are trying hard to overcome past shortcomings. Rhode Island Gov. Gina Raimondo (D) has won plaudits for pushing through the Ocean State legislature a repair program called RhodeWorks. It is funded by charging large commercial trucks a toll. In New Jersey the outgoing governor, Chris Christie (R), although generally unpopular, persuaded the legislature to pass a gas tax increase to fund an additional $400 million a year in road repairs.

 

The seven best states for infrastructure on the CNBC list are Texas, Tennessee, Indiana, Georgia, Ohio, Kentucky and Florida. These states have long spent heavily on infrastructure and continue to do so. A notable example is Tennessee, where Gov. Bill Haslam (R) in June signed the IMPROVE Act, which relies on gas taxes and user fees to fund nearly a thousand highway projects, while ultimately cutting state and local taxes by $500 million a year.

 

There are various ways to measure states’ economic health. The Mercatus Center at George Mason University ranks states by financial condition based on tests that include short and long-term budget solvency and unfunded pension and healthcare liabilities. The top five states in 2017 on the Mercatus rating are Florida, North Dakota, South Dakota, Utah and Wyoming. The bottom five are Maryland, Kentucky, Massachusetts, Illinois and New Jersey.

 

The Wall Street Journal (WSJ) ranks states on pension stability based on the percentage of future retirement benefits that are funded. Illinois is last on this list with only 47 percent of its pension obligations funded. Kentucky also has funded less than half of its obligations. The surprise is Connecticut, which has the nation’s highest per capita income but has funded only 48 percent of its pension liabilities. Alaska and Kansas round out the bottom five.

 

South Dakota government workers and retirees can breathe easy. The WSJ notes that the Coyote State funds 100 percent of its pension liabilities. Wisconsin, Washington, North Carolina and Oregon come close, financing more than 95 per cent of their liabilities.

 

U.S. News and World Report rated states this year using more than 60 metrics to measure them on their economic growth and opportunities as well as health, education, safety and much more. The seven top states on the 2017 list are Massachusetts, New Hampshire, Minnesota, North Dakota, Washington, Iowa and Utah.  The seven bottom states are Oklahoma, South Carolina, New Mexico, Alabama, Arkansas, Mississippi and Louisiana.

 

Such lists are interesting but should be read with large grains of salt and understanding. Louisiana, for instance, at the bottom of the U.S. News and World Report list, has been among the most burdened of states. It had not fully recovered from the devastation of Hurricane Katrina in 2005 when the oil price collapse put a heavy dent in state revenues. Small wonder that the Pelican State is facing a $1.2 billion budget gap in 2018, according to Gov. John Bel Edwards (D).

 

The rankings reflect the dangers inherent in hyper-partisanship. Illinois and New Jersey, as examples, are struggling in part because Republican governors have battled for years with Democratic-controlled lower houses of the legislature with little willingness to compromise on either side. Contrast that with Massachusetts where Gov. Charlie Baker (R) works productively with a Democratic legislature. Or with California, where Democrats have a super-majority and a governor who prides himself on fiscal restraint. Gov. Brown, liberal on environmental and social issues but tight-fisted on the budget, acts as a brake on the spending tendencies of a Democratic legislature.

 

Given the weakness and duration of the current recovery and the weight of unfunded pension liabilities, fiscal caution is advisable in any state.