Week 8: Issues in State and Local Public FinanceCase Study -- Developing the Tax BaseCase Study (cont.): LeBlanc’ s ChoicesCase Study: Estimating RevenuesCase Study (cont.): Questions RaisedIssues Raised by School Finance GenerallyEffect of Serrano and Proposition 13 (PPIC Study)Taxation of E-CommercePreview of Week 9Week 8: Issues in State and Local Public Finance•Guest Speaker: Betty Masuoka, Assistant City Manager, City of Sacramento–City revenues and expenditures–Major financing issues facing the City•ICMA Case Studies•School Finance•E-commerce•Eight-week evaluationCase Study -- Developing the Tax BaseSubstantive Issues•Competition for economic development, tax rates•Strategies: annexation, attracting industry and jobs, redevelopment (tax increment financing, enterprise zones)Process/political Issues•Long-run v short-run benefits•Expertise v politics; professional v political incentives•Old v new organizational culture -- professionalism•Ethics (of omission and/or commission)•Political Skill to avoid untenable choicesCase Study (cont.): LeBlanc’ s Choices1. Present his cost-benefit analysis to Board in low-key way2. Present his analysis to Board and express concern3. Let someone else make presentation and keep quiet or don’t attend Board meeting4. Revise cost-benefit analysis with rosier numbersCould he have avoided this situation?Case Study: Estimating RevenuesSubstantive Issues•City finances are heavily dependent on state economy•There is always uncertainty in making revenue projections•There are more and less sophisticated ways to estimate revenues. Is more “rationality” always best?Process/political Issues•Politicians need to explain and communicate to citizens•Conventional wisdom can be powerful•There are political consequences to being right•Ethics – when there’s no clear right or wrongCase Study (cont.): Questions Raised•How useful to the city manager is the consultant’s report?•How should the manager deal with the uncertainty reflected in the range of revenue estimates?•How should he present the information to the Council?•What recommendations should he make with regard to layoffs and reserves?Issues Raised by School Finance Generally•Role of government–promote equality -- defined as:•opportunity/quality/outcomes/revenue per effort?–public v private education–local choice issues•Accountability–shows complexity of performance measurement–inputs and outcomes of public education–cause/effect knowledge•Nature of citizen involvement in education issuesEffect of Serrano and Proposition 13 (PPIC Study)•Decline in per pupil spending–due to end of subsidy by non-residential property owners?•State finance has resulted in less inequality in revenue, but:–performance has declined –housing choices still reflect preferences for “better” schools •Are problems caused by State financing of schools?–Do other factors affect performance?–Do other factors affect housing choice?•Impact of financing v governance on school quality–disconnect between financing and governance–move to local financing or state control; not mixedTaxation of E-Commerce•Sales Tax and Income Tax issues•“Nexus” -- connection between state and taxpayer–consumption v production/performance–physical v economic presence•Reasons to support internet taxation–states have legitimate claim to revenues•Reasons to oppose internet taxation–tax increase; hinders business climate•Other issues–Enforcement issues–Definitional issues -- new kinds of transactions/servicesPreview of Week 9Part III: Practical Applications in Budgeting•Back to Rubin, Ch 5 on tradeoffs and competition for $$•Practical chapter on budgeting in local government•Department of Finance –Budget analysis–BCPs•In class project on budget justification/analysis•Class notes may not get posted (I’m in St. Louis until