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<ul><li>Two Indian states — <keyword id="68884" type="LOCATION" weightage="20" keywordseo="Telangana">Telangana</keyword> and <keyword id="6357713" type="COMPANY" weightage="20" keywordseo="Uttar-Pradesh">Uttar Pradesh</keyword> — are giving the country a digital push by implementing <keyword id="107950" type="TECHNOLOGY" weightage="20" keywordseo="artificial-intelligence">artificial intelligence</keyword>. </li><li>The Telangana state is planning to introduce programmes specific to AI throughout the year, thereby declaring 2020 as the year of Artificial Intelligence. </li><li>Uttar Pradesh is bringing its prisons and examination systems in the ambit of artificial intelligence. </li><li>The UP government will conduct AI-based video analysis across 70 prisons via JARVIS — by scanning CCTV footages of the prisons. </li></ul>AI has become ubiquitous to companies across sectors be it — healthcare, finance, agriculture and human resources. AI’s ability to grasp knowledge and make decisions also caught the eye of the government which deals with tough decisions and extensive data. Two Indian states — Telangana and Uttar Pradesh — are taking the first steps with a digital push to governance. Telangana is planning to introduce programmes specific to AI throughout the year, and declared 2020 as the year of Artificial Intelligence, according to KT Rama Rao, Information Technology Minister of the state. The state is looking to aid research in AI and also training workforce in the emerging technology. "The Telangana government is continuing to attract investment from marquee companies that are setting up their research &amp; development (R&amp;D) and technology development centres in emerging technologies like the internet of things (IoT), AI, <keyword id="294572" type="TECHNOLOGY" weightage="20" keywordseo="machine-learning">machine learning</keyword>, cyber security and blockchain. The government is happy to collaborate with <keyword id="6372077" type="COMPANY" weightage="20" keywordseo="nasscom">NASSCOM</keyword> in bridging the skill gap in this emerging technology space," the minister <a href="https://cio.economictimes.indiatimes.com/news/corporate-news/telangana-to-declare-2020-as-year-of-ai/71769885">said</a>. The state has also sought expressions with government think-tank Niti Aayog to roll out a National Strategy for Artificial Intelligence. Digital push in the state of Uttar Prades The state of Uttar Pradesh is also using AI to manage its prisons and examination systems. It is implementing AI to <a href="https://www.digit.in/news/machine-learning-and-ai/uttar-pradesh-government-partners-with-staqu-to-introduce-ai-based-video-analytics-platform-jarvis-i-50967.html">crack down on </a>unlawful activities in prisons. It has joined hands with technology company Staqu to conduct AI-based video analysis across 70 prisons using their analytics platform, JARVIS. The platform will be used to scan CCTV footages of the prisons and alert concerned authorities. The move is an attempt to put a halt to criminal activities in prisons like use of mobile phones, knives and guns. The state is also considering implementing AI-enabled bots to maintain transparency in the education and examination system. "Things are still in the planning stage and we are trying to ensure implementation of the programme for the 2020 board examinations," the government officials told IANS. The move will track and report cases of proxy students and teachers. See also: <a href="https://www.businessinsider.in/tech/article/heres-how-artificial-intelligence-changed-the-way-we-eat-write-drive-and-talk/articleshow/71846412.cms">Here's how artificial intelligence changed the way we eat, write, drive and talk</a> <a href="https://www.businessinsider.in/business/startups/news/staqu-launches-jarvis-an-artificial-intelligence-video-analytics-platform-for-india-prisons/articleshow/71955239.cms">This Indian startup has launched an AI led ‘Video Wall’ for surveillance in India’s prisons</a> <a href="https://www.businessinsider.in/careers/news/ai-skills-needed-to-get-best-jobs-in-the-industry-according-to-the-data-science-skills-study-2019/articleshow/71473858.cms">The hottest AI jobs will need you to know these programming languages and tools</a>

These two state governments are looking at AI for governance and development

By <a href="http://www.econmatters.com/search/label/EconMatters">EconMatters</a> Energy and environment conservation has been high on every nation’s agenda probably even before the oil crisis in the 1970s. Green cars such as hybrids and electric cars have been gaining popularity as well as auto market share in the U.S. driven in part by high oil and fuel prices, as well as government policies, and subsidies in some cases, pushing for higher fuel efficiency.
Most people think “eco-driving” or even carpooling is a win-win-- saving gas money and the environment at the same time. But it looks like what may be good for the environment, is actually bad news for the government. 
<table class="image-container float_right" width="200"><tr><td><div class="image"></div><a href="http://feedproxy.google.com/~r/EconForecastFullFeed/~3/c5gbbyO5jC0/the-unintended-consequence-of-green-cars.html">Econmatters</a></td></tr></table>You see, for each gallon of gasoline or diesel we gas up in our cars, there’s a portion of tax that goes to the state government to fund the building and maintenance of roads and bridges. So unfortunately, more fuel efficiency and less driving even by carpooling means less tax revenue for the government, and the green car is also to blame.
For example, in Vermont, revenue collection of the state’s transportation fund has been shy of their target for seven straight years. <a href="http://finance.yahoo.com/news/gas-tax-revenue-down-officials-201237896.html">According to AP</a>, 25% of Vermont’s expected $232-million transportation fund in the current fiscal year is supposed to come from the gasoline tax of about 20 cents a gallon. 
In order to make up for the shortfall in the fuel tax revenue, instead of coming up with ways to cut costs, Vermont and Oregon reportedly are mapping out a possible new scheme of taxing drivers not based on how much fuel is burned but how far each vehicle travels as AP reports.
Although Europe has a longer history and higher adoption rate of fuel efficient cars, what’s taking place in the U.S. right now is actually the conclusion of <a href="http://www.guardian.co.uk/uk/2012/may/15/green-cars-fall-motoring-revenue">a U.K. study</a> published back in 2011: 
“The drive to promote greener, more efficient motoring will blow a £13bn hole in the public finances as revenue from fuel and road taxes dries up." 
“Drivers may end up being taxed more, even as the industry adapts to meet environmental targets….[government will be] forced to look at ways of clawing back the money motorists think they will be saving." 
Now the U.S. is projected to have high growth in green car sales. Market research firm Mintel <a href="http://www.greencarreports.com/news/1081229_sales-of-hybrids-electric-cars-surge-73-in-2012">says </a>that U.S. sales of hybrid, plug-in hybrid, and electric cars should reach 440,000 units in 2012 -- a 73% improvement over 2011, reaching 850,000 in unit sales by 2017, or 5% of the U.S. auto market. 
Separately, a 2011 study by the J.D. Power and Associates <a href="http://www.hybridcars.com/jd-power-sees-4x-growth-green-car-market-2016-29806/">projects</a> major growth, as much as 10%, of vehicles with <keyword id="1366308" type="UNKNOWN" weightage="60" keywordseo="fuel-efficient">fuel-efficient</keyword> technologies by 2016, which would represent a four-fold increase in the sales numbers for green cars compared to 2010.
If these are realistic forecasts, then don’t be surprised to see a Big Brother GPS inside every vehicle in the country as Vermont Transportation Secretary Brian Searles indicated,
“….. calculating how much of a VMT tax is owed would be done through the global positioning system devices that are expected to be standard equipment [capable of tracking location, time] in cars later this decade.” 
I personally can’t even begin to count the possible number of privacy concerns having a government GPS inside my car, not to mention the additional resource tracking and collecting this new mileage tax would require, and I thought the U.S. Federal and state government has had enough funding problems already? 
I guess the moral of the story is that it’s all about money, and whatever "savings" coming out from one end will eventually need something else (e.g. new taxes) to replenish, at least as far as “government budget” is concerned. Ultimately, taxpayers still end up footing all bills and more--in this case, you get hit with a new mileage tax before even seeing an ROI from your Prius.
© <a href="http://www.econmatters.com/" target="_blank">EconMatters</a> All Rights Reserved | <a href="http://www.facebook.com/EconMatters" target="_blank">Facebook</a> | <a href="http://twitter.com/#!/EconMatters" target="_blank">Twitter</a> | <a href="http://feedburner.google.com/fb/a/mailverify?uri=EconForecast" target="_blank">Post Alert</a> | <a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=25" target="_blank">Kindle</a>
Read more posts on <a href="http://www.econmatters.com">EconMatters »</a>All of the content on EcoMatters is provided without assurance or warranty of any kind. The opinions expressed here are personal views only, and no warranty of fitness for any particular use, merchantability or non-infringement is made. <keyword id="1738428" type="UNKNOWN" weightage="60" keywordseo="EconMatters">EconMatters</keyword> (The Site) is not intended to provide tax, legal, insurance or investment advice. Nothing on The Site should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by the Site or any third party.

Fuel Efficiency Is Bad News For State Governments

The <keyword id="6354335" type="COMPANY" weightage="20" keywordseo="reserve-bank-of-india">Reserve Bank of India</keyword> (RBI) has asked state governments not to transfer their deposits out of private sector banks saying apprehensions about the safety of deposits in private lenders are highly misplaced. In a letter written to chief secretaries of all states, the central bank said moving deposits out of private sector banks could have implications for banking and financial sector stability. The letter came after reports suggested that some state governments have advised government bodies and other entities under their jurisdiction to transfer their funds held with private sector banks to public sector lenders. This follows the crisis at <keyword id="45660" type="COMPANY" weightage="20" keywordseo="Yes-Bank">Yes Bank</keyword> where the RBI has superseded the bank's board and placed restrictions on withdrawals. "We strongly believe that such a move can have banking and financial sector stability implications," the RBI wrote. "We feel that apprehension on the safety of deposits in private sector banks is highly misplaced and will not be in the interest of stability of the financial system in general and the banking system in particular." It requested state governments to reconsider any decision they might have taken in this regard or are in the process of taking such decision. "The Reserve Bank has adequate powers to regulate and supervise the private sector banks and by using these powers, it has ensured that the depositors' money is entirely safe," the letter said. The RBI said the resolution of weak private sector banks in the past has been done in a manner that the depositors are not put to loss. "It is precisely with a view to retaining depositors' confidence in private sector banks and mitigating their hardship that, after the imposition of a moratorium on <keyword id="436044" type="DOMAIN" weightage="20" keywordseo="Yes-Bank-Ltd">Yes Bank Ltd</keyword>, the RBI has drawn up a draft scheme without any delay and we are making every effort to expedite the finalisation of the scheme," it added.

RBI assures state governments that their deposits are safe in private banks

Residents in Republican-leaning states are more likely to "trust" their state governments, according to <a href="http://www.gallup.com/poll/168251/illinois-residents-least-trusting-state-government.aspx?utm_source=alert&amp;utm_medium=email&amp;utm_campaign=syndication&amp;utm_content=morelink&amp;utm_term=Politics" target="_blank">a new survey released by Gallup on Friday</a>.
According to Gallup, in only six states do at least 70 percent of residents place either a "great deal/fair amount of trust" in their state's government - North Dakota (77 percent), Wyoming (76), Utah (75), South Dakota (74), Nebraska (73), Texas (72), and Alaska (71). 
Illinois, by far, is the worst-ranking state in the survey - only 28 percent of its residents say they have a great deal or fair amount of trust in the state government. The next-lowest levels of trust come in Rhode Island (40 percent), Maine (40), Pennsylvania (46), Louisiana (48), California (49), and Maryland (49).
Here's a map from Gallup shading the different levels of trustworthiness:
<div class="KonaFilter image-container display-table"><div><div class="image">Gallup</div></div></div>
Gallup found that trust tends to be higher in less-populous states than in states with larger populations. Gallup said this helped to explain why red-leaning states earned more trust in the survey.
Illinois is by far the state in which residents least trust their government, which is helped by the fact that two of its most recent governors - Democrat Rod Blagojevich and Republican George Ryan - spent time in prison on wide-ranging corruption offenses.

This Map Shows Where Americans Trust Their State Governments

The ban on the sale of liquor within 500 meters of highways in the country would mean a probable loss of Rs 50000 crore for several state governments. This, because a list of prominent hotel chains, like the Taj, Oberoi, Hyatt and Accor groups will now have to stop serving alcohol to guests at their premium locations, thus denting the 
estimated revenue of state governments, which they would have earned from these hotels in form of taxes. 
 
Also read: <a href="http://www.businessinsider.in/The-11-best-Champagne-bars-in-the-world/articleshow/54549480.cms">The 11 best Champagne bars in the world</a> 
 
Riyaaz Amlani, president of the National Restaurant Association of India (<a href="http://www.businessinsider.in/strategy/restaurant-body-fights-back-says-dont-eat-if-you-dont-want-to-pay/articleshow/56313066.cms">NRAI</a>), told ET that along with this loss to the governments, restaurants, bars and pubs will also be taking a hit of Rs 10,000-15,000 crore, and 100,000 people will be out of work. 
 
Also read: <a href="http://www.businessinsider.in/good-karma-or-bad-man-behind-liquor-ban-cant-find-liquor-nearby/articleshow/57985331.cms">Good karma or bad? Man behind liquor ban can’t find liquor nearby</a> 
 
However, as per a tweet by Niti Aayog CEO Amitabh Kant, the ban would impact jobs of around <a href="http://www.businessinsider.in/1-million-people-to-lose-job-inindia-blame-drunken-driving-for-it/articleshow/57971679.cms">1 million people</a>. 
 
The country houses over a third of liquor outlets around national and state highways, which means that this ban would result in a deep impact on the liquor industry and state governments’ pockets. 
 
Also read: <a href="http://www.businessinsider.in/Bihar-politics-ban-making-liquor-companies-suffer/articleshow/53767756.cms">Nitish Kumar wooed Carlsberg to set up a plant in Bihar, and then banned liquor in the state</a> 
 
In order to avoid this, some state administrations have even changed the nomenclature of state highways to district roads. 
 
(Image source New Indian Express)

Liquor ban would dent state governments’ estimated revenue by Rs 50,000 crore

Raipur, <keyword id="9142746" type="UNKNOWN" weightage="20" keywordseo="physical-classes">Physical classes</keyword> for students of classes 9 to 12 in <keyword id="37180" type="COMPANY" weightage="20" keywordseo="schools">schools</keyword> of <keyword id="43945" type="COMPANY" weightage="20" keywordseo="Chhattisgarh">Chhattisgarh</keyword> will resume from Monday, the <keyword id="51011" type="ORGANIZATION" weightage="20" keywordseo="state-government">state government</keyword> has said. The decision was taken at a state cabinet meeting held here on Saturday. Offline or physical classes in universities and colleges would also start from Monday, state Agriculture Minister Ravindra Choubey told reporters after the meeting. All COVID-19 prevention guidelines issued by the <keyword id="6356303" type="COMPANY" weightage="20" keywordseo="Centre">Centre</keyword> and the state <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword> will be followed in the classrooms, he said. The government also decided to restart skill development training programmes in the state. A proposal to constitute 'Bastar Fighters', a special force, in all districts of the Bastar division was also approved. Choubey said the state cabinet also decided to implement the Rajiv Nagar Awas Yojana in all districts of the state to provide housing facilities to homeless people. Under the scheme, government land would be made available to the Chhattisgarh Housing Board at the rate of Re 1 per sq ft and one lakh residential buildings would be built in all urban, semi-urban and major towns. SEE ALSO: <a href="https://www.businessinsider.in/tech/mobile/news/comparison-between-realme-x7-pro-5g-and-xiaomi-mi-10i-mobile-phones-with-price-and-specifications/articleshow/80873224.cms">Realme X7 Pro 5G vs Xiaomi Mi 10i – best mid-range device under ₹30,000 in India</a> <a href="https://www.businessinsider.in/defense/news/experts-say-india-and-china-both-need-to-show-their-voters-that-they-won-in-ladakh-for-the-disengagement-to-be-successful/articleshow/80876036.cms">Experts say India and China both need to show their voters that they won in Ladakh⁠ for the disengagement to be successful</a> <a href="https://www.businessinsider.in/business/ecommerce/news/why-grofers-may-allow-an-american-blank-cheque-firm-to-buy-it-out-instead-of-fighting-ambani-and-bigbasket-for-ipo/articleshow/80874979.cms">Here’s why Grofers may allow an American “blank cheque” firm to buy it out instead of fighting Ambani and BigBasket for IPO</a>

Chhattisgarh to reopen schools for classes 9 to 12 from Feb 15

With the spike in coronavirus cases in <keyword id="41646" type="LOCATION" weightage="20" keywordseo="Haryana">Haryana</keyword>, the <keyword id="51011" type="ORGANIZATION" weightage="20" keywordseo="state-government">state government</keyword> on Wednesday announced summer vacation in all schools till May 31. "The schools will be closed on account of summer holidays from April 22 to May 31," Education Minister Kanwar Pal said in a tweet. Earlier, the state had decided to close all schools till April 30 for students up to Class 8. SEE ALSO: <a href="https://www.businessinsider.in/tech/news/apple-privacy-oriented-ios-14-5-update-can-impact-on-facebook-ad-revenue/articleshow/82176041.cms">Apple will roll out the privacy-oriented iOS 14.5 update next week that has Facebook worried</a> <a href="https://www.businessinsider.in/tech/news/netflix-co-founder-talks-about-pricing-experiments-in-india-and-partnership-with-jio/articleshow/82175848.cms">Netflix co-founder Reed Hastings says India is a 'speculative' investment – talks about pricing experiments and partnership with Jio</a> <a href="https://www.businessinsider.in/tech/news/all-the-first-time-from-apple-announcements-from-its-spring-loaded-event/articleshow/82174522.cms">All the 'first-time from Apple' announcements from its Spring Loaded Event</a> <a href="https://www.businessinsider.in/business/startups/news/cryptocurrency-firm-coinbase-hires-former-google-pay-exec-to-lead-india-operations/articleshow/82174729.cms">Coinbase hires former Google Pay exec to lead India ops, is hiring aggressively and looking for startup acquisitions</a>

Haryana government declares summer vacation in schools due to spike in COVID-19 cases

<div class="image-container float_right"><div class="image">White House photo/Pete Souza</div></div>Here's a feature of <keyword id="6579869" type="PERSON" weightage="60" keywordseo="ObamaCare">Obamacare</keyword> you probably don't know about: A transfer of hundreds of billions of dollars in liabilities to retired public employees from state and local governments to federal taxpayers.
Here's how it's going to work.
States and localities have enormous liabilities in the form of health benefits they have promised to provide to retired workers. (Finance professionals call these benefits OPEB, or "other post-employment benefits.") Most public sector retirees get health plans until they turn 65, and then supplemental coverage on top of Medicare after that.
In most cases, state and local governments haven't prefunded these liabilities at all. As Americans age and health care costs rise, this is becoming a major drain on state and local finances, arguably more important than more-widely-discussed problems with public employee pensions.
But Obamacare will give states and cities a major out. Instead of providing health care to under-65 retirees, they can tell them to go buy health plans in the Obamacare exchanges. In many cases, those retirees will qualify for substantial subsidies to buy such plans. States and localities will often stand to save thousands of dollars per retiree per year, even if they provide a cash stipend to help each employee buy insurance in the exchange.
All told, state and local governments should be able to shift hundreds of billions of dollars in OPEB liabilities to the federal government. That will mean a major saving for those governments. But it will also drive costs upward at the federal level.
Some governments are already planning to do this. Detroit, as part of its bankruptcy plan, wants to stop providing health care to retirees and instead give them each a <a href="http://www.freep.com/article/20130912/NEWS01/309120035/Detroit-retiree-health-care-cuts">$125 monthly stipend</a> to buy insurance in the exchange. Currently, Detroit spends $721 per month per retiree on health benefits, so this move will allow Detroit to cut its OPEB liability by 80%.
But it won't just be bankrupt cities like Detroit making the move. <a href="http://www.suntimes.com/20112162-761/city-to-phase-out-health-care-subsidy-for-30000-retirees-but-5500-oldest-will-be-covered.html">Chicago</a> and <a href="http://www.wpri.com/news/politics/state-politics/ri-could-move-city-retirees-to-obamacare">Rhode Island</a>-governments facing tight fiscal situations but not on the brink of bankruptcy-are considering similar shifts.
Unlike pensions, retiree health benefits usually are not legally guaranteed. Stressed cities and states will see kicking OPEB costs up to the federal government as a politically appealing option because of that legal flexibility.
Even in places where finances are flush, the shift will be tempting. Public employee unions that work together with state and local governments to switch to federal coverage will be playing a positive sum game: Existing benefits can be replaced with a combination of Obamacare coverage and cash that leaves retirees with more income and local governments with lower costs. Only federal taxpayers will get left holding the bag.
The numbers are big
Surprisingly, we don't know the total amount of state and local OPEB liabilities. My best back-of-the-envelope guess is that they are about $2 trillion. For comparison, total outstanding state and local bond debt is $3 trillion.
In 2012, the Pew Center on the States calculated that states <a href="http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Pensions_Update.pdf">have accrued</a> $627 billion in unfunded OPEB. But most OPEB liabilities are at the local level, since most public employees work for local governments. There's no way to determine the total amount of local liabilities without examining financial statements on a county-by-county and town-by-town basis. Federal agencies like the Census Bureau and the Bureau of Economic Analysis don't do that for retiree health benefits.
The Empire Center for New York State Policy did a <a href="http://www.empirecenter.org/Special-Reports/2012/09/icebergahead101310.cfm#_ednref1">fairly comprehensive review</a> in New York State last year, looking at the reported liabilities of the state's 89 largest local government employers and imputing liabilities for other, smaller governments. They estimated $177 billion in local liabilities, 2.5 times the $73 billion in liabilities accrued by the state government.
Applying a similar ratio nationally would imply just over $2 trillion in total OPEB liabilities. A 2007 research note from Credit Suisse put the figure at $1.5 trillion, but liabilities have grown significantly over the last six years.
How many of those liabilities can be shifted?
A substantial fraction. Consider the below example.
A retired public employee in <keyword id="72226" type="COMPANY" weightage="60" keywordseo="New-York-City">New York City</keyword>, age 60, is married to another 60-year-old, with $50,000 a year in retirement income. New York City's most common health plans would have cost about $12,500 per year for that couple in 2012, paid entirely by the city of New York. Given the current pace of medical inflation, such a plan will likely cost about $14,000 in 2014.
The default Obamacare exchange plan for that couple will be substantially cheaper: About $9,360, <a href="http://kaiserfamilyfoundation.files.wordpress.com/2013/09/early-look-at-premiums-and-participation-in-marketplaces.pdf">according to</a> the Kaiser Family Foundation. But it gets better: The federal government will provide a subsidy of $4,610 to help that retired couple buy a health plan. Instead of the $14,000, that retired couple can get health coverage at a cost of just $4,750 after federal subsidies.
Instead of directly providing a health plan, New York City could just give that couple cash to buy such a plan. Even if it adds $1,000 to cover added income taxes and $3,000 to compensate for the plan's reduced generosity, New York City will still come out ahead by about $5,000 a year, cutting the cost of insuring this retiree by more than a third.
What costs won't get shifted to the federal government?
States and cities won't be able to offload their entire OPEB liabilities, even if they move under-65 retirees into the Obamacare exchanges. Here are a few components that they'll still have to pay for:
<ul>
<li>Benefits for retirees over 65. Many state and local governments provide supplemental coverage on top of Medicare, including assistance with premiums for Medicare Parts B and D. These costs won't be greatly affected by Obamacare, though the enhancement of prescription drug benefits in Medicare Part D may reduce the cost of supplemental coverage that states and cities provide.</li>
<li>Dental, vision and life insurance benefits. While OPEB liabilities consist mostly of medical benefit promises, they include any non-pension benefits that were promised to retirees. Non-medical benefits won't be affected.</li>
<li>Retiree contributions toward health premiums. As in the New York City example above, simply telling retirees "go buy in exchanges" would mean a marked reduction in their real income in retirement, because the retiree would be on the hook for several thousand dollars a year in premium contributions. Unless they're insolvent or close to insolvent, cities will generally feel pressed to make up this gap with cash payments that will eat up much of the savings from dropping retiree health plans-but not all of them.</li>
<li>Retirees who aren't eligible for premium subsidies. If you make more than 400% of the federal poverty line (about $62,000 for a family of two) you aren't eligible for health plan premium subsidies under Obamacare. The cost of making these retirees whole might be so high that it eats up all the savings from switching to federal coverage.</li>
</ul>
What to do with the "windfall"
As some states and localities start switching retirees to federal coverage, the temptation is likely to spread. In this way, it's likely to be similar to participation in the <a href="http://www.businessinsider.com/you-cant-resist-the-medicaid-expansion-pennsylvania-governor-corbett-wants-in-2013-9">Medicaid expansion</a>: Holdout states will have increasing difficulty justifying why they're not taking federal dollars that their neighbors are getting.
The question for cities and states will then be what to do with all the money they're saving. In Detroit, the answer is simple: The city doesn't have any money anyway. But in solvent jurisdictions, the temptation will be find new ways to spend money that lawmakers had been expecting to spend on retiree health care.
In general, the first choice should be to cut taxes. After all, new federal health benefits for retirees won't be free. They'll be an added and unexpected cost to the federal government, which will have to collect taxes over time to pay for them.
But very often, I expect that state and local officials will find other ways to spend the money. 
Bill de Blasio, New York's Democratic nominee for mayor, wants a new pre-Kindergarten program that he estimates will cost $350 million a year. He wants to pay for it with a high-income tax increase that state lawmakers aren't likely to approve. His Republican opponent, Joe Lhota, says he also favors universal pre-K but wants to find a different funding mechanism.
Meanwhile, in the next mayor's first year in office, New York City will spend $2.3 billion on health benefits for retirees. Cutting a deal with unions to shift many of those costs up to the federal government would produce enough savings to pay for universal pre-K, and then some. Watch for the next mayor to do so, whoever it is.

Obamacare Is Secretly A Bailout Of State And Local Governments

<ul class="summary-list"><li>Congress is split over passing additional state and local government aid in a new <keyword id="41832" type="PERSON" weightage="60" keywordseo="Stimulus-bill">stimulus bill</keyword>. Experts fear the lack of such support will likely result in the same drags on the <keyword id="34412" type="ORGANIZATION" weightage="100" keywordseo="economy">economy</keyword> seen after the 2008 financial crisis.</li><li>Bipartisan negotiations on a $908 billion economic aid package are stalled due to disagreements over aid to states backed by Democrats and a liability shield for businesses being pushed by the GOP.</li><li>The $150 billion allocated to governments via the CARES Act in March offset most of the year's drop in tax revenue, but tax income is expected to decline further in the next two years, according to the Brookings Institution.</li><li>Budget shortfalls threaten additional job cuts, gutted social programs, and can cripple states' abilities to conduct coronavirus vaccination programs, Jonathan Wright, an economics professor at Johns Hopkins University, said.</li></ul>Economists largely agree that a lack of state and local government aid stifled growth after the financial crisis. A plunge in tax revenues led to cost-cutting, forcing public workers out of jobs and freezing key aid programs - despite federal efforts to revive a sputtering economy in 2009 through an $830 billion <keyword id="45304" type="COMPANY" weightage="60" keywordseo="Stimulus">stimulus</keyword> plan under President Barack Obama.In the four years following the financial crisis, <keyword id="10422253" type="UNKNOWN" weightage="60" keywordseo="state-and-local-governments">state and local governments</keyword> slowed economic growth by an average of 0.26 points each year, according to JPMorgan. "The cuts state and <keyword id="664316" type="PERSON" weightage="60" keywordseo="local-governments">local governments</keyword> made were partially counteracting all the stimulus efforts at the federal level," Ernie Tedeschi, policy economist at Evercore ISI, told Business Insider. "It's like your right hand working against your left hand as you're trying to dig yourself out of a hole."Now some of the pieces are lining up in a similar way a decade after the last recession. The federal government's historic $2 trillion stimulus package drove the first leg of this year's rebound, buoying the economy as it regained just over half of the 22 million jobs shed in March and April. But experts say that the financial needs of states and local governments have only grown as the pandemic continues ravaging the country.Their budgets are now coming under greater strain than in the early 2010s because of a one-two punch from the pandemic: <a href="https://www.taxpolicycenter.org/taxvox/congress-needs-understand-state-tax-revenue-declines-when-drafting-covid-19-legislation">Sharp drops</a> in state income and sales taxes, followed by larger safety net and healthcare spending. Since states have to balance their budgets, painful cuts to social services like cash assistance or tax hikes may loom if they don't receive more federal cash to close the gap."What I worry about is that lawmakers might be getting complacent now with positive economic data and thinking the recovery is self-sustaining at this point - when in fact there are a whole bunch of possible traps around the corner," Tedeschi said.Read more: <a href="https://www.businessinsider.com/stock-market-crash-overvalued-tech-stocks-bubble-collapse-albert-edwards-2020-12" target="_blank" rel="noopener">'I'm getting a sense of deja vu': A prominent bear rips into the argument that the stock market's 'obscene' valuation is justified - and lays out why a Great Depression-like collapse could strike at any moment</a><h2>State of play</h2>The CARES Act that Congress and President Donald Trump signed in March included $150 billion in aid for state and local governments under <a href="https://www.ncsl.org/research/fiscal-policy/state-actions-on-coronavirus-relief-funds.aspx">the Coronavirus Relief Fund</a>. Yet those funds only cover pandemic-related expenses until December 30. Any unspent money must be returned after that date, even if it's been earmarked for the future.Additional state and local aid has proved to be a lightning rod disrupting the passage of another economic rescue package for months. Democrats are pushing to include it, warning of more layoffs among teachers, police officers, and firefighters.Roughly 1.2 million government workers have lost their jobs during the pandemic, outpacing the public job losses seen during the financial crisis. The bulk of those job losses this year <a href="https://www.cbpp.org/blog/states-localities-need-federal-aid-to-restore-jobs-avoid-more-layoffs">fell squarely</a> on local governments, with K-12 and higher education shedding many positions.Republicans, however, argue the measure would amount to a bailout of fiscally irresponsible states, with many GOP senators fiercely opposed to it. Senate Majority Leader Mitch McConnell slammed the idea of further money for state and local relief as "a slush fund" in a Senate floor speech on Friday."In what universe should emergency aid for small business be contingent on massive bailouts for <keyword id="176732" type="COMPANY" weightage="60" keywordseo="State-governments">state governments</keyword> with no linkage to actual needs?" he said. "Democrats are acting like it's more important to supply the Governor of California with a special slush fund than to help restaurant workers in California keep their jobs."Read more: <a href="https://www.businessinsider.com/investing-advice-economic-recovery-priced-in-cyclical-stocks-mike-wilson-2020-12" target="_blank" rel="noopener">Morgan Stanley is warning that the stock market's economic recovery trade may soon be over. Here are 4 strategies they recommend for finding the returns that still exist.</a>The latest $908 billion economic framework from a bipartisan group of moderate senators contains $160 billion in aid to cash-starved state and local governments. It remains unclear whether Congress will pass another relief package before the end of the year. But the fiscal element is only one layer of the federal government's extraordinary response, which also includes the Federal Reserve.While the Fed established an emergency lending program for states, cities, and counties, only the state of Illinois and the New York Metropolitan Transportation Authority have tapped the facility since it opened in June. At the same time, the US is being battered by the most dangerous wave of the pandemic yet. The country reported 215,669 new COVID-19 cases on Thursday, according to The COVID Tracking Project. Current hospitalizations hit 107,258 and total deaths rose above 283,000. Several cities and municipalities have reinstated lockdown measures to curb the virus's spread, bringing about a grim repeat of the economic weakness seen at the start of the pandemic. Indicators tracking the country's economic rebound are showing new signs of weakness. Weekly jobless claims <a href="https://www.businessinsider.com/us-weekly-jobless-claims-853000-unemployment-benefits-labor-market-recovery-2020-12">unexpectedly jumped to an 11-week high</a> last week, and the government's last nonfarm payrolls report <a href="https://www.businessinsider.com/november-jobs-report-tk-nonfarm-payrolls-unemployment-rate-economic-recovery-2020-12">came in well below economist forecasts</a>.To be sure, the CARES Act largely covered the decline in state and local tax revenues seen in 2020. But tax income is estimated to decline by $167 billion in 2021 and another $145 in 2022 before recovering, <a href="https://www.brookings.edu/blog/up-front/2020/09/24/how-much-is-covid-19-hurting-state-and-local-revenues/">according to the Brookings Institution</a>. With most of the federal government's support already used up, a lack of fresh aid leaves governments on their own to find billions of dollars in new savings, likely through job cuts and slashed social programs."The way it's looking at the moment, [past bills] aren't going to have a countervailing effect to offset the loss of revenue in 2021," Jonathan Wright, a professor of economics at Johns Hopkins University, told Business Insider.Read more: <a href="https://www.businessinsider.com/top-wall-street-investors-of-2020-stock-picks-2021-outlook-2020-12" target="_blank" rel="noopener">We spoke with Wall Street's 9 best-performing fund managers of 2020 to learn how they crushed the chaotic market - and compile the biggest bets they're making for 2021</a><h2>Budget struggles</h2>Budget shortfalls stand to weaken the 2021 recovery in several corners of the economy. Hiring has nearly slowed to levels seen just before the coronavirus crisis, signaling continued job gains will be increasingly difficult to come by. The stress on the labor market also comes as certain services such as public K-12 education and Medicaid are of greater need than before the pandemic, Wright said.State and local governments will play a critical role in upcoming vaccine distribution efforts. While the Trump Administration has already ordered hundreds of millions of doses through Operation Warp Speed, governments will determine which populations receive the shots first and work with providers to roll out vaccination efforts. The Centers for Disease Control has so far provided $200 million to governments to prepare for vaccination programs. Yet CDC Director Robert Redfield <a href="https://www.youtube.com/watch?v=ZyGTc_gy_p0&amp;feature=emb_titleitle">estimated</a> in September that governments would need $6 billion to roll out vaccines. Separately, trade groups including the National Association of County and City Health Officials have said that more than $8 billion would be needed to vaccinate the US population."If Congress were to give state and local governments no further relief at all, then they're going to have to do an awful lot more on the public health side while still cutting their overall costs by 10%," Wright said.Aid for state and local governments is also viewed as one of the most effective parts of the CARES Act. According to the <a href="https://www.cbo.gov/publication/56597">Congressional Budget Office</a>, the multiplier for such aid reached 0.88, signaling the majority of stimulus dollars allocated to governments were spent efficiently. That compares to multipliers of 0.67 and 0.36 for expanded unemployment benefits and the Paycheck Protection Program, respectively.Economists have also broadly agreed that state and local government support should be a top priority in future stimulus talks. In a survey of 33 economists conducted by <a href="https://fivethirtyeight.com/features/economists-think-congress-should-keep-paying-unemployed-workers-600-a-week-or-even-more/?utm_campaign=wp_the_finance_202&amp;utm_medium=email&amp;utm_source=newsletter&amp;wpisrc=nl_finance202l_finance202">FiveThirtyEight</a> in July, 85% of respondents said that such aid should be among legislators' top three priorities. More than a third said it should be of greatest importance."The danger is that we repeat those mistakes in this recession, and it would be truly tragic because the federal efforts to get us out of this economic hole have been even larger than they were in the Great Recession," Evercore's Tedeschi said. "It would be extra tragic if we let all of that good effort be counteracted by fiscal crises at the state and local level."Read more: <a href="https://www.businessinsider.com/fbi-fisa-spying-2016-elections-trump-private-contractor-2020-12">The FBI quietly scuttled plans to hire an outside contractor to help turn the page on a spying controversy from 2016 after Insider's reporting</a>

Inadequate stimulus will create the same risks that crippled the economic recovery following the Great Recession, experts say

<div type="image" title="President Donald Trump speaks before he signs the coronavirus stimulus relief package in the Oval Office at the White House, Friday, March 27, 2020, in Washington, as Senate Majority Leader Mitch McConnell, R-Ky., and House Minority Leader Kevin McCarthy of Calif., listen. (AP Photo/Evan Vucci)" height="1808" width="3616" msid="75455693" hostid="261"></div><ul class="summary-list"><li>Aid to states is set to be a major priority for Democrats in the next relief bill, but Republicans are opposing it as a "blue state bailout."</li><li>But states and local governments are warning that drastic cuts to public services are on the horizon if no federal help is coming, and the virus is wreaking havoc regardless of people's political stripes.</li><li>Republicans are risking exacerbating the economic pain from the coronavirus if municipal governments lay off public-sector workers in education, safety, sanitation, and health.</li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories</a>.</li></ul>The chorus of Republican calls to oppose an emergency infusion of federal aid to state governments is growing louder. The proposal is a key Democratic priority in the next coronavirus economic relief bill.On Monday, President Trump assailed it, and on Twitter cast Democratic-led states in particular as irresponsible spenders."Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?" he said.That was mirrored by other GOP lawmakers like Sen. <keyword id="564556" type="PERSON" weightage="60" keywordseo="Rick-Scott">Rick Scott</keyword> of Florida, who argued it would be unfair to taxpayers in the conservative-leaning state he once governed."It's not fair to the taxpayers of Florida. We sit here, we live within our means, and then New York, Illinois, California, and other states don't," Scott told reporters. "And we're supposed to go bail them out? That's not right."Senate Majority Leader <keyword id="192852" type="PERSON" weightage="60" keywordseo="Mitch-McConnell">Mitch McConnell</keyword> <a href="https://www.businessinsider.com/mcconnell-states-bankruptcy-coronavirus-federal-bailout-economy-instead-aid-2020-4">perhaps went the furthest last week</a>, bringing back an idea that <a href="https://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html%20https:/www.reuters.com/article/us-usa-states-bankruptcy-senate/senate-leaders-eye-option-of-state-bankruptcy-idUSTRE70O66220110125">Republicans pushed for</a> in the aftermath of the Great Recession: Let states go bankrupt instead. The comments, though, triggered intense blowback from Republican and Democratic governors, and <a href="https://twitter.com/alexanderbolton/status/1254857568335171584?s=20">he softened his position on it. </a>Read more: <a href="https://www.businessinsider.com/coronavirus-investing-strategy-trade-next-stock-market-crash-gold-bofa-2020-4">Bank of America says an under-the-radar gauge of volatility is warning that the bear market is not over — and shares 2 cheap trades to protect against the next drop</a>There's a strain of thinking among Republicans that "bailing out" states would essentially put taxpayers on the hook for reckless spending practices, despite the fact many state governments had <a href="https://www.businessinsider.com/mcconnell-blue-state-bailout-coronavirus-cash-reserves-levels-recession-aid-2020-4">bolstered their cash reserves</a> after the Great Recession.It also ignores that the virus is wreaking economic havoc regardless of a state's political stripes. There's ample evidence indicating that the downturn could be significantly worse if state governments are forced to cut public services and fire workers, as they've been warning up to now.<a href="https://www.washingtonpost.com/business/2020/04/29/cities-states-layoffs-furloughs-coronavirus/">The Washington Post reported on Wednesday</a> that states and cities nationwide are gearing up to make withering cuts to critical services absent further federal aid. Up to 1 million municipal jobs are at risk, stretching across sectors like sanitation, education, safety, and health.<h2>State governments cut spending and many jobs even after the last recession was over</h2>During the Great Recession, states also had to contend with plummeting tax revenues as millions of people lost their jobs.President Barack Obama attempted to address the shortfall through the 2009 <keyword id="45304" type="COMPANY" weightage="60" keywordseo="Stimulus">stimulus</keyword> law, which <a href="https://www.cbpp.org/research/state-budget-and-tax/states-need-significantly-more-fiscal-relief-to-slow-the-emerging-deep">directed $275 billion</a> in additional federal funding to shore up Medicaid and a range of energy, education, and transportation programs.But it was not enough to money to stanch the economic damage wrought by the financial crisis. Shared by CNBC economics reporter Steve Liesman, the two charts below illustrate the severe downturn among state governments, which shed jobs for four straight years, including those of 272,000 education workers.State and local government subtracted from overall gross domestic product until 2013, according to the data from Haver Analytics and the Bureau of Economic Analysis.That experience is creating a shared sense of urgency among state leaders crossing party lines. A bipartisan letter from the National Governors Association called for $500 billion in additional aid, and governors are pleading with Washington for immediate help. "The alternative is not bankruptcy," New Jersey Gov. Phil Murphy said <a href="https://www.cnbc.com/2020/04/27/coronavirus-gov-phil-murphy-nj-needs-more-aid-to-avoid-armaggedon-scenario.html">Monday on CNBC</a>. "The alternative is we will gut the living daylights out of the very services that our folks now are desperately relying upon in what is the biggest healthcare crisis in the history of our country."Congress already allotted $150 billion in state and local aid as part of the $2.2 trillion <keyword id="9073299" type="UNKNOWN" weightage="60" keywordseo="cares-act">Cares Act</keyword> approved last month, though much of the money was mandated for only coronavirus-related expenditures state governments hadn't expected. And they can't use the aid to reduce their budget shortfalls.Read more: <a href="https://www.businessinsider.com/coronavirus-investing-strategy-stocks-to-buy-economy-reopening-goldman-sachs-2020-4">Goldman Sachs outlines a 3-part investing strategy to profit from the economy's reopening — including 4 stocks to buy for the recovery</a>Cuomo <a href="https://www.rev.com/blog/transcripts/andrew-cuomo-new-york-covid-19-briefing-transcript-april-27">blasted McConnell</a> earlier this week during one of his press conferences, saying the Republican Senate leader should be more upfront about what the federal aid is capable is covering."Don't say state and local. Say what the state and local governments fund: police, fire, teachers, hospital workers. Funds small business but also fund police, fire, school teachers, and hospital workers. How can you exclude them when you're talking about priorities?"Many local leaders are urging Congress to make aid to states a key concern similar to the federal help extended to large businesses in the last massive <keyword id="8955738" type="UNKNOWN" weightage="60" keywordseo="coronavirus-relief">coronavirus relief</keyword> bill.Lee Saunders, the president of the American Federation of State, County and Municipal Employees, AFL-CIO, <a href="https://www.washingtonpost.com/business/2020/04/29/cities-states-layoffs-furloughs-coronavirus/">told The Post</a> that the public sector employees that his union represents "need to be a priority just as the corporations and small businesses were."Read the original article on <a href="https://www.businessinsider.com/republicans-risk-amplifying-economic-pain-states-not-given-aid-bailouts-2020-4">Business Insider</a>

Republicans are staunchly against 'bailing out' state governments — but they risk amplifying the economic pain if states are left to fend for themselves

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