State Net Capitol Journal – December 10, 2012

State Net Capitol Journal – December 10, 2012

Budget & Taxes

GOVERNMENTS PAYING PRICE FOR CORPORATE INCENTIVES: States, counties and cities are handing out more than $80 billion in incentives to companies each year, according to an investigation by The New York Times. But a full accounting of the awards isn't possible, the Times said, because many state and local officials don't know exactly how much they've given out, and the number of jobs created by the incentives are rarely tracked.

"How can you even talk about rationalizing what you're doing when you don't even know what you're doing?" said Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan.

Despite the number of dollars involved, the incentives have largely been left out of the national economic debate, even though federal funding makes up 20 percent of state and local budgets. The Times's analysis revealed that Texas gives out more than $19 billion in incentives a year, more than any other state, while Oklahoma and West Virginia, award the equivalent of a third of their annual budgets.

California is one of the only states that has actually scaled back its awards. But its cities aren't necessarily following that lead. When Twitter threatened to leave San Francisco last year, the city exempted the company from what could end up totaling $22 million in payroll taxes. And Twitter employees may not even notice the effects of the budget pressures that have forced the city to cut funding for public parks by about $12 million in recent years. The company's new office evidently has plenty of open space and amenities. One employee recently tweeted: "Tanned on Twitter's new roof deck this morning as some dude served me smoothie shots." (NEW YORK TIMES)

STATE INSURANCE OFFICIALS WORRIED ABOUT STICKER SHOCK FOR YOUNG PEOPLE: State officials gathered at a meeting of the National Association of Insurance Commissioners this month told representatives of the Obama administration they're concerned that insurance "rate shock" may lead young people to pay the penalty - a relatively modest $95 in the first year - instead of coming up with the thousands of dollars needed to buy the coverage required under the health reform law.

"We are very concerned about what will happen if essentially there is so much rate shock for young people that they're bound not to purchase [health insurance] at all," said California insurance commissioner Dave Jones.

What could happen is that the cost of coverage for older, sicker people could go up. The Affordable Care Act requires that the premiums insurers charge older beneficiaries be no more than three times what younger people pay. The provision helps control costs for people up to age 64 who may have serious health problems, but it also drives up the rates for younger people. So some officials posed the idea of phasing in that provision.

"Is there any way to find some wiggle room on age rating to implement it over a two- or three-year period?" asked Kansas insurance commissioner Sandy Praeger.

But Gary Cohen, director of the Center for Consumer Information and Insurance Oversight, said the government may not have much leeway.

"The statute is pretty clear," he said. (KAISER HEALTH NEWS)

BUDGETS IN BRIEF: The Federal Emergency Management Agency has denied MARYLAND's request for federal aid for hundreds of coastal residents impacted by super storm Sandy. FEMA officials said the storm didn't cause enough damage to warrant assistance to residents who lost homes or businesses. The state said it would appeal the decision (BALTIMORE SUN). • KENTUCKY and INDIANA have spent only a small portion of the $371 million the federal government awarded them last year to help struggling homeowners. Officials in both states said the programs have been distributing more money in recent weeks as more homeowners have received word of the assistance through radio ads and other outreach efforts (COURIER-JOURNAL [LOUISVILLE]).

- Compiled by KOREY CLARK

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