Analysis Brief – October 22, 2013

WINTER CONFERENCE!

We’re going back to Asheville, December 11th-13th, for our 2013 Winter Conference at the Omni Grove Park (Inn). Click here for the registration packet and hotel reservation information. Members need to act quickly in order to take advantage of the group hotel rate!

Click here for a recent column by our Winter Conference Keynote Speaker, Steve Straus.

Remember, in order to take advantage of the Membership Rate for the Conference, you need to renew your members for 2013-14.

Also, if you are asked by your Purchasing Office for our E-Verify Affidavit, click here to download a copy.

FY 2014 Powell Bill Allocations Grow… Slightly

NCDOT released their FY 2014 Powell Bill Allocation Report earlier this month. Overall allocations increased 2% compared to last year, with most of the 507 eligible municipalities seeing little to no growth in allocations.

Click here to view “State of Powell Bill” Analayis at NCLGBA.org

Click here for NCDOT FY 2014 Powell Bill Allocation Report (PDF)

Data Backup Expected After Shutdown

With the end of the Federal shutdown, expect delays in delivery of monthly and quarterly economic data. As it becomes available, it will be featured in future briefs.

Construction Spending Improves

Today’s report showed that August construction spending was up 0.6% nationally in August , with the August increase upgraded to 1.4%. Home improvement activity, which would drive retail sales tax revenue, remains “restrained” according to Wells Fargo, with stronger growth in multi-family construction over the summer than single-family housing.

Slow Job Growth Disappoints

UnempEmpPopRatio

Wells Fargo predicts that Quantitative Easing will continue at existing levels, with August employment report from BLS showing only an increase of 148,000 jobs. The national unemployment rate did drop to 7.2%, but this was once again driven more by labor force contraction rather than employment growth.

NC’s Job Growth Created by Metros

How significant of a difference in job growth in North Carolina’s metropolitan areas compared to the rest of the state?

  • Since January 2007, North Carolina payroll has grown by 75,771 (unadjusted, as of August 2013).
  • In that same timeframe, North Carolina MSA payroll has grown by 135,660. This means non-MSA areas have seen net payroll contraction of nearly 60,000 during the same period.

For the first 8 months of this year (January-August), non-MSA payroll growth (+21,703) kept pace with slower-than-expected MSA payroll growth (+23,482). At the same time, non-MSA payroll growth for the period was its lowest level since 2009.

Analysis shows most of the non-MSA payroll growth in the first 8 months of the year is seasonal, followed by drop-offs in the final four months of the year. Conversely, MSAs continue to see growth in later months, influenced by overall growth, larger presence of holiday retail and year-around employment needs.

In the final four months of 2012, non-MSAs saw net payroll contraction of more than -20,000. Since the start of the last recession, MSAs have contributed more than 80% each year to net job growth in North Carolina (92% in 2012 alone).

As for MSAs themselves, the Top 10 MSA labor markets accounted for nearly 134,000 net payroll increase since January 2007.

Possible Bright Spot on Retirement Contributions

(From NCLM) The Local Government Employees Retirement System Board of Trustees heard this week that the financial condition of the retirement system could allow the FY14-15 employer contribution rates to be reduced 0.13 percentage points below the FY13-14 level. Favorable market returns on invested assets and lower than assumed payroll increases led to the improved financial condition. The Trustees will decide early in 2014 whether to use the improvement to reduce the employer contribution rate by the full 0.13 points, or to use some or all of the available funding to provide a cost of living adjustment to retiree benefits.

Overview of Provisions in Legislation ending Shutdown, Raising Debt Ceiling

(From NASBO) Late in the evening on October 16, Congress voted to pass a bill (HR 2775) to fund the federal government through January 15, 2014 and suspend the debt ceiling until February 7, 2014. The Treasury Department will likely be able to take extraordinary measures to continue borrowing past February 7. The Senate passed the measure by a vote of 81-18, and the House followed by approving the measure by a vote of 285-144. The bill was signed into law by President Obama shortly after midnight on October 17, ending a 16-day long government shutdown and extending the Treasury Department’s ability to borrow to help pay for federal expenses. As part of the agreement, the House and Senate also agreed to establish a bicameral budget committee to negotiate a broad budget deal for fiscal 2014, with instructions to complete a conference report by December 13 to allow lawmakers time to draft and pass appropriations before stopgap funding expires in mid-January.

Key Provisions Included in Bill:
The bill, reflecting an agreement reached by Senate Majority Leader Harry Reid (D-NV) and Senate Minority Leader Mitch McConnell (R-KY), funds most government operations at fiscal 2013 post-sequestration spending levels. The Congressional Budget Office (CBO) estimates that the legislation results in budget authority of approximately $986.3 billion on an annualized basis. The measure makes only one minor change to the Affordable Care Act by providing for stricter income verification requirements for individuals applying for health care exchange subsidies. Other key bill provisions of relevance to states are summarized below. Many of these provisions were added to the measure as new anomalies shortly before the bill was passed.

State Reimbursements: Section 116 of the bill includes explicit language to clarify that states that “used state funds to continue carrying out a Federal program” or furloughed federally-funded employees “shall be reimbursed for any expenses that would have been paid by the Federal Government during such period had appropriations been available, including the cost of compensating furloughed state employees.” The legislation stipulates that this provision applies only to federal programs that states were carrying out prior to the shutdown. The provision applies to any period in fiscal 2014 when a lapse in appropriations occurs, not just the shutdown that took place in October 2013.

Effective Date: Under the bill, fiscal 2014 appropriations are retroactively dated to begin on October 1, 2013, which should help ensure federal grants to states are made whole and do not see any reductions as a result of the shutdown.

Temporary Extensions for Expired Mandatory Programs: The bill extends authorizations for several programs that expired at the end of federal fiscal 2013, such as Temporary Assistance for Needy Families (TANF) and related programs, the Supplemental Nutrition Assistance Program (SNAP), the Emergency Food Assistance Program (TEFAP) Commodities, and the Senior Farmers’ Market Nutrition Program.

Backpay for Furloughed Federal Employees: Section 115 of the measure provides for retroactive pay for federal employees, as well as District of Columbia employees, who were furloughed during the shutdown.

Low Income Heating Assistance Program (LIHEAP): A provision is included to clarify the LIHEAP formula for the distribution of funds to states to ensure funds are allocated consistent with previous years.

Additional Funding for Fire Suppression: Two sections in the bill provide additional funds for the Interior Department and the Forest Service to support firefighting activities.

Disaster Aid for Colorado: One provision raises the cap on federal highway emergency relief funds that can be distributed to the state of Colorado from $100 million to $450 million, to be used to support repair and recovery efforts from recent flood damage.

Budget Autonomy for the District of Columbia: The bill provides the District of Columbia the authority to use local funds to operate throughout fiscal 2014.

Federal Funds Information for States (FFIS) published a budget brief for subscribers providing more in-depth analysis of the bill and its implications for major grant programs for states. This FFIS table, available to the public, lists overall funding levels for major discretionary and mandatory grant programs based on the October 17th budget agreement.

Provisions Excluded from Bill
It is also worth noting several provisions that were excluded from the bill. During the final round of negotiations in Washington over a deal to end the shutdown and raise the debt ceiling, there was talk of a deal that would include additional flexibility for federal agencies to implement reductions under the sequester. However, such a provision was left out of the final agreement. While Congressional Republicans generally favor such a change, Democrats view it as a mechanism to help keep the sequester in place and therefore have been inclined to oppose additional flexibility for agencies. Another item missing from the bill is a provision explicitly allowing for states to be reimbursed for the expenses incurred from opening national parks during the shutdown. The U.S. Interior Department has said it would need explicit permission from Congress to authorize reimbursement to states for such expenses. Companion bills that would do this have already been introduced in both the House (HR 3286) and Senate (S 1572). During negotiations leading up to the agreement, there were also proposals to prohibit the Treasury Department from using “extraordinary measures” to avoid breaching the debt ceiling and delay the need for a debt limit increase. However, no such provision was included in the final bill.

Articles of Interest

McCrory predicts State might be forced to expand Medicaid (NC Spin)

Mental Health Gaps jeopardize Public Safety (Civitas)

Amtrak reaches Agreements with State to preserve Corridors (Press Release)

Amtrak sets Ridership Record (Press Release)