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As a joint project of State Budget Solutions (SBS) and the State Policy Network (SPN), Federalism in Action is excited to welcome J. Scott Moody as the new CEO of SBS. SBS recently sat down with Scott to ask him a few questions as he begins his new role. Check out the full Q&A session below or read the original post here. Welcome, Scott!

JSMoody

What do you find most exciting about joining SBS?

Having been very involved with the State Policy Network (SPN) community over the last decade, I am excited about working with our friends at state-based think-tanks to tackle the really hard public policy issues such as pension reform and federalism. When I was the CEO of The Maine Heritage Policy Center, we didn’t always have the resources to pursue these types of issues.  State Budget Solutions (SBS) will be able to house the high-level of expertise these issues require while working collaboratively with our state-based partners.

If you could accomplish just one thing as CEO of SBS, what would it be and why?

From a public policy perspective, we need to fix the relationship between the states and the federal government. It use to be that the federal government was created to help the states, but today the states are more of an administrative aid to the federal government. As a consequence, federal solutions are “one-size-fits-all” and in a country as large and diverse as America that simply does not work. Rebalancing the relationship between the state and the federal government would be a major accomplishment of Federalism in Action, a joint project of SBS and SPN.

Why should the everyday American be concerned about public pension reform?

Unfortunately, the crisis in our public pension system was created from a lack of transparency in the system. Without proper taxpayer oversight, promises were made to our public employees that were simply unsustainable. This is not only going to hurt taxpayers with higher tax bills, but also government workers who will see a lower standard-of-living in their retirement years despite promises made to them by state and local governments. No American will be immune from the public pension crisis.

Who are the worst offenders when it comes to pushing off public pensions?

First we should be clear that all states are facing a public pension crisis, it is only a matter of how bad the crisis will be. States like Illinois and Connecticut are on the cutting edge of the pension crisis and are already starting to sell off assets to pay for their climbing pension bills.

Are there any ways in which they do this that you find especially egregious?

As a trained economist, I find how states have misused the discount rate to hide the true cost of their pensions systems especially egregious. In essence they created a perpetual money machine by assuming away investment risk. Imagine how easy it would be to borrow money on a house if you could guarantee to the bank that it would appreciate in value by 8.5 percent a year for the next 30 years. Of course, state governments went along because it lowered their annual payment to the pensions system. Someone should have rang the alarm bell decades ago, but now it is nearly too late.

Why does it matter if states continually take money from the Federal Government and insert it in their budgets?

Unfortunately, we have seen that taking money from the Federal Government leads a situation where local decision-making is thwarted by priorities from Washington, D.C. For example, Obamacare’s Medicaid expansion scheme is being fueled by the promise of 100 percent federal funding for three years. Predictably, many states are considering expanding Medicaid not because their constituents want it, but because they are being enticed by so-called “free money.” Of course, Uncle Sam already has a history of reneging on such promises and it will be state taxpayers left holding the bag in three years.

SBS talks a lot about “Budget Gimmicks.” What are they? Why do governments use them?

The list of budget gimmicks is a long one and can include minor gimmicks such as delaying a payment into the next fiscal year to balance the budget up to major gimmicks such as using questionable schemes to draw upon additional federal funding, such as Medicaid. The end result is that they are very often used to disguise higher spending without the accountability that goes along with having a more transparent budgeting process. SBS will continue to work tirelessly to hold state and local governments accountable on budget gimmicks – and that goes for states lead by Governors from both sides of the aisle.

 

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