We’ve added Scott Fogleman’s presentation materials from the Forecasting workshop to the 2012 Winter Conference Archive Page. You can also access them directly below:
Part A – Forecasting
Part B – Creativity & Innovation?
How’s Our Economy Doing?
Last week’s roundup was a deluge of economic forecasts for the coming year. The Richmond Fed released their snapshot today, shedding some light on how conditions are right now.
For the Richmond District as a whole:
- Moderate overall improvement in recent months
- 37,500 jobs added in November, including 5,400 in manufacturing
- Year-to-year growth in payroll jobs (1.04%) still below national trend (1.44%)
- Two consecutive growth months for manufacturing activity to end 2012
- Residential housing permits up 4% month-to-month for November, more than 47% compared to November 2011
- Home values up 4% year-to-year for October
As for North Carolina:
- Continued labor market improvement, 30,600 addl. jobs in November (+0.8%)
- Year-to-year job growth (+1.52%) slightly above national average
- Job growth for the year in all sectors except logging & mining, construction, other services and government
- Declining rate of mortgage delinquency (2.7%) already significantly below national average
- Housing market “softened” slightly; single family permits down 10% compared to October; average values down 0.2% for October (month-to-month), up 1.*% for year
Here are some informative graphs on North Carolina Employment from the Snapshot:
Are We Going to Buy Cars This Year?
UNC School of Government economist Karl Smith mentioned this as a prediction for 2012, and it really did not materialize much last year. However, there is some increase in vehicle loan activity and sales. Ford announced this week they will hire 2,000 more workers and make their first dividend payments in several years. Certainly, companies like ALCOA (see below), who do pretty well providing raw materials for new vehicles, look forward to possible growth.
More Fun Stuff from Washington
The “fiscal cliff” deal only addressed Federal tax policy. Now it’s time to deal with spending, as the news is not good with respect to the re-emerging “debt ceiling”:
”We estimate that Treasury will exhaust its borrowing authority and no longer have sufficient funds to meet its obligations in full and on time at some point between February 15 and March 1. It will be difficult for Treasury to get beyond the March 1 date in our judgment.”
Steve Bell, Bipartisan Policy Center (Click Here for Report)
The US Treasury would face a 38% negative cash flow position with respect to obligations over the following 30 days, creating serious problems prioritizing payments and handling economic repercussions, as concluded by Wells Fargo.
We expect another contentious political debate over the future of both tax and spending policy when the debt ceiling debate begins shortly after the new Congress is in place. This debate will re-introduce uncertainty to financial markets and will likely weigh on business and consumer confidence.
McCrory’s Gang Settles In
Governor Pat McCrory took the opportunity to host a statewide string of open houses during his first week in office, highlighting a series of more formal welcoming events that will conclude this weekend. Most of the media focus this week has been on the Governor’s pick of Tony Tata to head NCDOT.
NCLM’s Julie White offered this summary of Tata’s first meeting with the NC Board of Transportation:
In summary the Secretary shared his background and the goals the Governor has laid out for him. These include 1) enhancing the Department’s customer service focus, particularly in DMV, 2) leveraging infrastructure to enhance job creation (including a mention of the NCDOT 2040 Plan), and 3) making NCDOT more efficient, eliminating redundancy, and eliminate gaps. He discussed his intentions to get out among the NCDOT employees across the State, among town leaders and others to bring those perspectives back to the Department and make the Department more responsive.
Committee Finalizes Unemployment Insurance Reform Plan
Click Here for a Summary of the Proposal. Karl Knapp at NCLM distributed a message on NCFinance about this earlier in the week. Here’s what he had to say:
At its January 8, 2013 meeting, the legislative Revenue Laws Study Committee approved its final recommendation to restore the solvency of the State’s Unemployment Insurance (UI) Fund. This legislative proposal would affect how cities and counties pay for unemployment benefits. An earlier version of the proposal was considered in December and the new version makes some changes to how local governments are affected.
The Committee’s final proposal would require cities that are reimbursing employers to maintain a reserve account in the State UI fund equal to 1% of their taxable wage base. For each employee, the taxable wage base is the greater of the federal wage base ($7,000) or 50% of the State average yearly insured wage ($20,900 for 2013).
Local governments would begin making quarterly payments during FY 13-14 to bring their account balance up to 1% of their taxable wage base. How these quarterly payments would be calculated and the number of quarters for which they would be required is still to be determined, but local governments should plan on budgeting an additional 1% of their taxable wage base for FY 13-14 in order to fund their reserve accounts. All unemployment claims charged to a municipality would be deducted from the reserve account and municipalities would be billed annually for the amount necessary to bring the account back up to 1% of the taxable wage base. We will provide more details about the timing and amount of the quarterly and annual payments as they become available.
The earlier version of the Committee’s proposal required local governments to pay an additional 0.2% of their taxable wage base as a surcharge to improve the solvency of the State’s Unemployment Insurance Fund. The Committee determined that such a requirement is not allowed under Federal law and the requirement is no longer part of the proposal.
The proposal does require local governments that are reimbursing employers to pay 100% of their claims with no appeal rights, removing the option to pay 120% of claims with the right to appeal. The proposal does attempt to restrict the circumstances under which claims can be filed, so the loss of appeal rights would have less effect than it would under current law. For those currently reimbursing at 100%, the Committee proposal could actually save money.
The text of the proposal and supporting documents can be found on the General Assembly website. The proposal will be introduced as legislation later this month and is expected to be one of the first items taken up by the General Assembly in what is expected to be a busy and fast-moving legislative session.
NCGA Fiscal Research determined what the overall impact to state and local government would be, from a cost perspective (click here for report).
Significant changes are also being proposed to the level of benefits provided by UI (click here for summary).
What About LGERS & LEO?
In a reply to an email question on NCFinance, Karl summarized where retirement contributions might end up for FY14:
The system valuation report was presented to the Trustees in the fall and it indicated that an increase of 0.33 in the general and LEO rates was needed for FY 13-14. This increase is less than was projected for FY 13-14 in the previous year. The Trustees will meet on January 17 and may consider the increase at that time or delay the decision until the April 18 meeting.
Kukura Leaving NCLM
Kelli Kukura stepped down this week from the Director of Government Affairs position at the NC League of Municipalities. She is taking a position with Duke Energy.
General Assembly Sets Bill Drafting Schedule
NC Metro Mayors Coalition provided this information
The House bill drafting deadlines are as follows:
- Local bill to bill drafting by March 20 and introduced by April 3
- Public bills from commissions or standing committees to bill drafting by Feb 19 and introduced by Feb 27
- Agency bills to bill drafting by March 12 and introduced by March 20
- Public bills that don’t have to go to Appropriations or Finance to bill drafting by March 28 and introduced by April 10
- Public bills that need to go to Appropriations or Finance to bill drafting by April 24 and introduced by May 8
The Senate bill drafting deadlines are as follows:
- Local bills to bill drafting by March 5 and introduced by March 13
- Public bills to bill drafting by March 15 and introduced by March 28
Cross over deadline is May 16. The House rules again restrict each member to introducing no more than 10 public bills.
Healthcare Spending Keeps Going Up
No real big surprises here. US healthcare spending increased 3.8% in 2011 and comprised 17.9% of GDP. This growth rate did decline a little, potentially the result of the economic recession.
Click Here for Wells Fargo Report on Healthcare Spending
There is also the possibility that slower growth in Medicare spending (driven in large part because of caps on reimbursements to providers) may have influenced the growth rate decline.
Links of Interest
With taxes rising less than earlier projected, estimates for consumer spending and business fixed investment have been increased ever so slightly. Consumer spending is now expected to rise at a 1.6 percent pace for all of 2013, up from 1.3 percent a month ago. Business fixed investment is expected to rise 0.9 percent this year, up from 0.5 percent in our last forecast.
The relative paltry gains in the private sector largely reflect the uncertainty surrounding the fiscal cliff, which caused economic activity to pull back at the tail end of 2012 and at the beginning of 2013. After a slow start, we expect the private sector to steadily build momentum over the course of the year, which will be needed to offset the drag from cuts in federal government outlays.