The Indiana Law Blog has flagged an opinion column on how public pensions are in trouble. It notes that Indiana is one of the places where public pensions are in trouble.

I haven’t seen numbers lately, but Indiana’s pension trouble is not a new problem. This train has been rolling for a long time. I remember about 12 years ago, when Indiana was running a surplus, some of the folks I worked with thought it was high time to devote a lot of that surplus to stabilizing the underfunded public pensions. (They were not exactly unbiased on the subject because they were folks who were devoting their careers to working for the State, in part, because of the promised pension.)

Ezra Klein has an interesting column (h/t Paul Roales) looking at where the Laffer Curve bends. The basic explanation of the Laffer Curve – and I am capable of no other – is that, on one end, taxes can be so high (e.g. 100%) that no one will bother working and tax revenues will be down and that, on the other end, taxes can be so low (e.g. 0%) that the government will capture very little tax money. Government wants to find the top of that curve – capture a lot of tax money without discouraging it’s citizens from being industrious. This is of some interest with the Bush-era tax cuts expiring and the Clinton-era tax structure reviving.

Klein interviewed a bunch of people and tried to get a sense of where the top of the curve might be. The tax experts and lefties he spoke to seemed to offer up a top marginal rate of 70% as the peak of the curve. The folks on the right he spoke with seemed more reluctant to offer a number but, where they did, seemed to fall in the 20-30% range. They also cautioned that, while short-term revenues might increase at higher levels, there was also a risk of limiting growth and, therefore, long term gains.

I can’t articulate it well and, may just be wrong, but my guess is that low rates are associated with an incentive to just move money around instead of doing different kinds of work that contribute more to productivity in the long term. About the best I can offer is that, if you can gamble, hit a jackpot, then walk away with enough money to quit the game, you might not bother with the harder work of creating a system that generates lesser, but steadier, gains year after year after year.

This has to be tough for everyone involved. The Hancock County Sheriff has been arrested on charges that he had been diverting public funds to personal use. It does provide a minor civics lesson, however. The County Coroner is charged with arresting the Sheriff in these situations, since the Sheriff isn’t, obviously, available for the purpose.

IC 36-2-14-5 charges the Coroner with serving an arrest warrant on the Sheriff and entrusts the Coroner with the jail and its prisoners while the Sheriff is in custody.

The Urbanophile has an interesting post on the demographics of property tax revolts.

He offers the speculation, without concluding, that resistance to property taxes versus other kinds of taxes might have something to do with the aging population.

People who are coming up on retirement are going to see drops in income and consumption, but they own lots of taxable property. In fact, they probably have more wealth, much of it in the form of taxable property, than the younger families who are out buying clothes for their kids, furniture for their growing families, etc. Younger people are also those who are more likely to see their incomes go up, not down over time. Older households are also less likely to consume services, such as schools, typically funded by property taxes.

This would make property tax caps a sort of tax shelter tending to benefit older people. This goes to the point that, here in Indiana, we’ve been engaged in a tax shift, not so much “tax reform” or “tax relief.” I don’t think it’s an accident that the sorts of taxes that have gotten the most attention – estate taxes and property taxes – are those which disproportionately affect those of means. There hasn’t been nearly the push for payroll tax relief or income tax relief or sales tax relief. In fact, those taxes have tended to increase as the other sorts are limited or eliminated.

(I’m paraphrasing). According to an AP story, Everybody’s Favorite Economist ™, Larry DeBoer, says that 2011 is going to be the year that the recession hits local governments, with an 18-20% drop in income tax revenue for counties statewide.

Professor Larry DeBoer told a meeting of Allen County officials on Tuesday that 2011 will be the year the recession hits local governments in Indiana. DeBoer warned that with less money from property tax, local governments will have to rely more on unstable revenue such as income taxes and fees.

(It’s worth noting how we got to where we are.)

Sophia Voravong has a good and lengthy article in today’s Lafayette Journal & Courier on embezzlement cases in Tippecanoe County. Special attention was paid to embezzlement from small, non-profit type organizations. The psychology of the embezzler stood out to me:

Although greed is a possible factor, people who steal from nonprofit organizations and small businesses typically begin doing so out of perceived necessity — for example, outstanding medical bills or rising credit card balances, according to Tony Greig, a continuing term lecturer in the Krannert School of Management at Purdue University.

“They say they’re just going to borrow a small amount and pay it back,” said Greig, who teaches a class on forensic accounting. “They do that a couple of times and realize, ‘No one’s seen anything, so why pay it back?’
. . .
“In many cases, they rationalize that, ‘I’m a volunteer for a club. I’m doing work that it may cost others to do.’ They feel they’re entitled.

“They have to come up with some sort of rationalization because people have to live with themselves.”

I think I’ve mentioned the creative writing teacher who gave us a nugget of wisdom for writing about people who do bad things to the effect that everybody is the protagonist and basically a good guy in their own internal narrative. I suspect that goes a long way toward understanding the psychology of these people. Or, you know, Guns ‘N Roses sing about Mr. Brownstone, “I used to do a little but the little wouldn’t do it, so the little got more and more.”

The Lafayette Journal & Courier has a pretty sensible editorial discussing how the current school funding issues are the result of actions taken by the General Assembly on property taxes. They note that shifting school funding from property taxes to sales taxes has led to the current shortfall for local schools.

They blame the current state of things on partisan bickering. I’m not sure that’s the case, necessarily. It’s a policy choice to rely on sales tax instead of property taxes. If the vote to proceed in this fashion was unanimous, it wouldn’t make the policy any more successful. And I’m not sure that full cooperation among lawmakers would have made the ideal solution any more obvious. In hard times, there is just less money to go around. The choice is between a funding mechanism that reflects this hardship and passes it along to schools or one that stays level, thereby taking proportionately higher amount of available money. The former is fair, but sacrifices education; the other preserves education but does so by making the tax bite bigger.

In any case, the J&C cautions against enshrining the current property tax caps into the Constitution — this, once again, changes nothing currently but only ties our hands in the future if we find that this is the wrong policy choice — it’s a caution I share, but I think that ship has sailed. Perhaps I’m cynical about my fellow citizens’ ability to see nuance beyond “taxes = bad” and to appreciate the difference between a statutory provision and a constitutional one. I think the Constitutional amendment will pass in a landslide and we’ll be no better off for it.

It would certainly be a shame if Obamacare put an end to all of this. A story in the Indianapolis Star by Daniel Lee reports on the financial impact medical care has on patients in Indianapolis. About half of patients surveyed going to the major hospitals which are tax-exempt, “non-profits” have to go into debt to pay their bills.

The survey by the Citizen’s Action Coalition wasn’t scientific, which is a shame, since I suspect the issues it raises are valid, but renders it worthless to those who don’t think there is a problem worth addressing.

Federal and state laws require that nonprofit hospitals provide a community benefit in return for their tax-exempt status. Because of that status, hospitals save tens of millions of dollars each year by not having to pay local, state and federal taxes.

However, the law does not require any set amount of charity-care services. In Indiana, tax-exempt hospitals are required to file a community benefit report, but hospitals often define benefits they provide in different ways.

As a guy who has obtained thousands of judgments for medical providers against debtors, I’m part of the system. I don’t make any apologies for it; that’s the system we’re in, and I would be doing my clients a disservice if I didn’t take the system as I found it. But, I’d be blind if I suggested that the system was working well or treating people fairly.

I have some respect for those who suggest that the forthcoming solutions, anemic as they probably are, will be worse than the problem. That’s at least rational in that the effect of the solutions have yet to be seen. But those who suggest that the current system in the United States for financing healthcare is the best in the world are borderline delusional.

I’ve never been a big fan of the “won’t someone *please* think of the children!” gambit in political policymaking, but I guess I’m a little more sympathetic how that I have kids of my own. That’s probably why this story by Robert King about a report from the Anne E. Casey Foundation caught my eye.

Apparently Hoosier kids (and kids nationally for that matter) are losing ground in a number of indicators. 20% of Hoosier children are living in poverty (up from 18%).

Indiana children lag behind the national average on eight of 10 key indicators, according to the report, released today. In terms of the overall well-being of kids, the state ranked 33rd nationally, down from 31st in the 2009 report.

Low birth weight babies are increasing as are babies in single-parent families.

Most of the gains documented by the Kids Count, now in its 20th year, were made in the late 1990s, Beavers said.

A healthier economy then was a big factor. But so were expanding government support for children’s health insurance and day-care programs. That’s an important lesson now, Beavers said, as governments with shrinking budgets look to make cuts.

“Children’s programs are critical going into the next budget period. Kids get only one chance to be a child, and they can’t wait until the recession is over to be born, to go through school,” she said.

Or, as Mr. Young put it:

I see a woman in the night
With a baby in her hand
Under an old street light
Near a garbage can
Now she puts the kid away, and she’s gone to get a hit
She hates her life, and what she’s done to it
There’s one more kid that will never go to school
Never get to fall in love, never get to be cool.

Keep on rockin’ in the free world.

One of the meatier blogs I read is that of Gary Becker and Richard Posner. They have similar notions on extension of unemployment insurance: they’re ag’in it. Both of their entries are pretty cold, giving the impression that unemployed workers are widgets or disposable cogs in a machine. When discussing policy, that is appropriate to some extent – good policy can’t be abandoned every time a hard luck tale comes along. But, people aren’t objects, and so some consideration has to be given to the notion that we might want to treat people a little more delicately.

That said, here are a couple of the passages I found especially interesting.

Becker:

However, the actual large extension poses a major risk of creating an unemployment culture where men and women remain “ unemployed” for years. Once the period of unemployment becomes long enough, people begin to get the habits from being unemployed for a long time: they sleep late, develop various leisure interests, and at the same time their work skills depreciate from not using them for an extended period. Studies have shown that skill depreciation is a serious effect of being unemployed for a long time.

Some might retort that this argument is persuasive during periods of normal unemployment rates, perhaps 7% and under, but not when jobs are scarce, the unemployment rate is over 9%, and it is coming down slowly. There is merit to this response, but on the other hand, the JOLTS data show that even with the current high unemployment rates, about 4.5 4 million persons were hired in May 2010 (and about the same number are either being laid off or quitting their jobs). So for the most part, even the long term unemployed can find jobs if they are willing to take a cut in their earnings, and/or move to other industries and occupations.

This analysis leads me to the following conclusions. During bad times, 6 months of unemployment compensation may not be long enough, but the 2 years in the new law is too long. About 9 months of unemployment compensation would be the right length. Anyone unemployed longer than that would lose these benefits. If they want to work they should be forced to adjust, at least temporarily, to the bad economic environment, and accept jobs that they would turn down during good economic times.

Posner:

Far from being effective as stimulus, the extension of unemployment benefits will have two negative effects on employment. First, it will increase the opportunity cost of the recipient’s rejoining the labor force. Unemployment benefits are set lower than earnings to reduce the moral hazard that Becker discusses, but the gap between benefits and earnings is narrowed by the costs of work (such as commuting, and any disutility associated with work, such as fatigue and boredom) and by the benefits of household production and of leisure—and those benefits, unlike earnings, are not taxed. The gap is so small for many unemployed people that studies show that they do not begin a serious job hunt until their unemployment benefits are about to expire.

So extending or otherwise enhancing unemployment benefits, far from stimulating employment, is likely to reduce employment and so slow the pace of economic recovery.