Ohio economists optimistic about impact of free school lunch

In a survey released this morning by Scioto Analysis, 14 of 17 economists surveyed agreed that universal free school lunches will improve student outcomes such as test scores and graduation rates, with three uncertain of the impact and none disagreeing with the statement.. This comes after Senate Bill 109 was introduced last month, a bipartisan bill that would offer free breakfast and lunch to all children in Ohio’s public and charter schools. If passed, this bill will cost the state an estimated $300 million.

“There is an abundant body of literature that finds that universal free school lunches not only improve average test scores and overall academic performance (Gordanier et al. 2020 among others), but also reduce suspensions (Gordon and Ruffini 2018)” wrote Will Georgic from Ohio Wesleyan. “While not every student's academic achievement will improve, the average effect for all students will be unambiguously positive.”

14 of 17 respondents also agreed that universal free school lunches would promote equitable outcomes in Ohio’s K-12 education system. Jonathan Andreas from Bluffton University wrote “Universal benefits are more equitable than means-tested benefits because they literally treat everyone the same.  They increase equitability of social status by eliminating the stigma of singling out the needy for special help.  They also increase equality of opportunity by eliminating a high shadow-tax-rate whereby higher earned income can be completely ‘taxed’ away by radically reduced benefits thereby eliminating the marginal incentive to increase earnings.  The tradeoff is that they are a lot more expensive to fund than means-tested benefits, so they are a relatively inefficient way to increase equity.”

The one respondent who disagreed that universal lunch would improve equitable outcomes was Michael Jones from the University of Cincinnati. He considered the impact of providing free breakfast as well, writing: “Encouraging children to eat breakfast at school rather than at home shifts parental responsibilities to government programs. This sends the message that providing basic needs such as food is something families can opt out of rather than prioritize. Parents who value family time together should not be put at a financial disadvantage simply because they do not use a free school breakfast. Families are strengthened when children see their parents taking care of them.”

The Ohio Economic Experts Panel is a panel of over 30 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here.

Which state workforces rely the most on immigrants?

With immigration grabbing the headlines in the United States, the potential loss of state workforce has economists wringing their hands. . A study conducted during the election last year as a joint effort between the American Enterprise Institute, the Brookings Institution, and the Niskanen Center analyzed alternative immigration policies under a potential Harris administration and a potential Trump Administration.

In this study, the three think tanks analyzed what gross domestic product could look like under the two administrations. Under a Harris Administration, their analysis projected anywhere from a tenth of a percentage point increase to a tenth of a percentage point decrease in GDP. That may not seem like a lot, but from a baseline of about $29 trillion, that means about $29 billion either way based on the policy decisions of the administration.

The range of decisions projected under the Trump Administration were even larger. They projected anywhere from a tenth of a percentage point decrease in GDP to four-tenths of a percentage point decrease. That means anywhere from $29 billion to $117 billion in lost GDP under Trump immigration policy scenarios.

While it is yet to be seen how much of a drag the Trump Administration immigration policy with have on the U.S. economy, the administration has doubled down on its commitment to mass deportation policy, suggesting economic losses in the United States will likely be on the high end.

We have posed questions to our Ohio Economic Experts Panel about how mass deportation will impact the Ohio economy. In November of last year, 14 of 20 Ohio economists we asked believed mass deportations would reduce gross state product. In April, earlier that year, 17 of 19 said immigration helped counteract Ohio’s brain drain. If Ohio’s economy drops in proportion to its foreign-born population, it stands to lose anywhere from $330 million to $1.3 billion in gross state product due to mass deportations. This not only means fewer people working for businesses and purchasing goods and services, it also means reduced tax revenue for state and local governments.

The impact of mass deportations will be felt unevenly. From my vantage point here in Ohio, I am in a state that is squarely in the bottom half of the country when it comes to the percentage of workers who are foreign-born (about 6% according to American Community Survey data). Some states, especially some of the U.S.’s largest states, have workforces that are over a quarter foreign-born. Below is a table of each of the states ranked by the percentage of their workforce that is foreign-born.

State	Native Workers	Foreign-Born Workers	Percentage Foreign Workers
California	12,539,284	6,169,684	33%
New Jersey	3,275,151	1,372,134	30%
New York	6,943,299	2,625,782	27%
Florida	7,445,333	2,770,246	27%
Nevada	1,113,674	359,744	24%
Hawaii	520,080	148,152	22%
Texas	11,037,800	3,108,474	22%
Massachusetts	2,905,380	781,084	21%
Maryland	2,476,434	656,236	21%
Washington	3,038,934	742,912	20%
Connecticut	1,483,008	351,627	19%
Illinois	5,107,664	1,143,398	18%
Rhode Island	458,575	96,981	17%
Virginia	3,535,477	721,017	17%
Arizona	2,793,197	545,911	16%
Georgia	4,373,228	758,511	15%
Delaware	415,788	66,278	14%
Oregon	1,788,710	261,064	13%
New Mexico	800,879	110,867	12%
Colorado	2,692,830	359,021	12%
North Carolina	4,409,315	584,177	12%
Utah	1,483,755	190,768	11%
Minnesota	2,666,414	321,281	11%
Alaska	301,929	36,306	11%
Nebraska	921,274	97,389	10%
Kansas	1,318,018	135,752	9%
Pennsylvania	5,735,658	583,997	9%
Oklahoma	1,649,611	160,092	9%
Michigan	4,305,985	406,668	9%
Idaho	825,896	70,409	8%
Indiana	3,045,994	256,285	8%
Arkansas	1,225,421	102,248	8%
Tennessee	3,048,347	252,346	8%
South Carolina	2,206,550	180,895	8%
Iowa	1,509,726	119,703	7%
New Hampshire	691,604	53,760	7%
Ohio	5,336,548	357,748	6%
Louisiana	1,888,719	124,392	6%
Kentucky	1,910,564	122,496	6%
North Dakota	380,463	24,204	6%
Wisconsin	4,488,911	282,363	6%
Missouri	2,806,505	168,685	6%
South Dakota	433,717	23,936	5%
Alabama	2,112,897	115,748	5%
Vermont	321,182	16,276	5%
Maine	657,639	30,537	4%
Wyoming	442,807	19,429	4%
Mississippi	1,206,731	39,930	3%
Montana	524,086	14,728	3%
West Virginia	723,049	16,959	2%

Table 1: Foreign-born workforce by state, data from American Community Survey

California is the state with not only the most foreign-born workers (6.2 million), but also the largest percentage of foreign-born workers, with about a third of workers in the state coming from another country. California relies heavily on foreign-born workers in service, construction, production, and transportation occupations. This means California’s agriculture, construction, manufacturing, and wholesale trade and warehousing industries are heavily reliant on foreign-born workers. California is also heavily dependent on foreign-born workers in its professional services industry. California’s foreign-born population is mostly from Latin America and Asia, with about 89% of the population coming from those two regions of the world.

The state that is the second most reliant on foreign-born workers is located on the opposite side of the country–New Jersey. About three in ten workers in New Jersey are foreign-born, about 1.4 million foreign-born workers in the state. New Jersey’s agriculture industry is not as dependent on foreign-born workers as California’s, but other sectors like construction, manufacturing, wholesale trade, warehousing, and professional services are disproportionately supported by foreign-born workers. About half (48%) of New Jersey’s foreign-born population is from Latin America, about a third (32%) are from Asia and most of the rest are from Europe (13%) and Africa (6%).

Right next to New Jersey comes the third state on our list, New York. New York’s 2.6 million foreign-born workers make up over a quarter of the state workforce. Foreign-born workers are actually less likely than native workers to work in agriculture, manufacturing, wholesale trade, or professional services. Foreign-born workers in New York are disproportionately represented in the construction and warehousing industries, but also the arts, entertainment, and recreation industries. Most of New York’s foreign-born population is from Latin America (49%) and Asia (30%), but a larger proportion is from Europe (15%) than California or New Jersey can claim.

For our fourth-most foreign-born-worker-dependent state, we must go south. Florida is the highest southern state on the list with its 2.8 million foreign-born workers making up 27% of the state workforce. Foreign-born workers make up a disproportionate share of Florida’s agricultural, manufacturing, wholesale trade, and transportation industries. Florida’s foreign-born population is heavily Latin American, with over three-quarters (78%) hailing from Latin America. This compares to only 10% hailing from Asia and 7% hailing from Europe.

Rounding out the top five is the first small state to make the list, Nevada. Nevada’s 360,000 foreign-born workers make up nearly a quarter of the state workforce. Nevada relies disproportionately on foreign-born workers in its construction, transportation, and warehousing industries, but notably not in its agricultural, manufacturing, or wholesale trade industries. Where it relies most heavily on foreign-born workers is its arts, entertainment, recreation, and accommodation industry, which employs over a quarter (28%) of foreign-born workers in the state. Nevada’s foreign-born workers mainly hail from Latin America (54%), with a significant minority from Asia (32%) and some Europeans (8%).

All in all, nine states have more than one in five workers born in another country and 24 states have more than  one in ten. Mass deportations will disrupt state economies significantly, especially if they are conducted in large states with workforces heavily dependent on foreign-born workers like California, New Jersey, New York, and Florida. States impacted most severely by this policy will have to make adjustments to budgets, workforce development programs, and social safety net design to accommodate this change.

Tobacco tax increase could save tens of thousands of lives

Earlier this month, Jeremy Pelzer of Cleveland.com reported Ohio House Finance Committee Chair Brian Stewart has said the House will be removing Gov. DeWine’s proposed tobacco tax hike from the state budget.

When DeWine rolled out his child tax credit increase as the centerpiece of his final budget proposal, he assured lawmakers in the General Assembly that he would finance it with an increase to the state tobacco tax.

The tobacco tax is not necessarily tied to the child tax credit. The tax credit will be paid for partially through foregone revenue and partially through payments from the state General Revenue Fund. But the governor was trying to “show his work” that he was balancing the budget with this particular proposal.

Much breath has been lost and ink has been spilled by those critical of tobacco taxes as a financing mechanism. Meanwhile, the most powerful human impact of a tobacco tax took a backseat in the discussion: its ability to discourage smoking. 

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Smoking reigns as the number one preventable cause of death in the state of Ohio. Tobacco kills more than three times as many people as heroin in the state of Ohio every single year. This state has a special problem with it: Ohio has the 4th-highest smoking rate in the country, behind only West Virginia, Kentucky, and Louisiana. The state tobacco tax is an evidence-based strategy to discourage its use and save lives.

A 2011 report by the American Cancer Society projected the impacts of tobacco tax increases across each of the 50 states. In this report, researchers estimated the impacts of a $1-per-pack increase in tobacco tax in each of the states. This would equate to about a $1.44 increase in 2025 after accounting for inflation, which makes this study very helpful for analyzing the potential impacts of DeWine’s proposed $1.50 increase.

According to the American Cancer Society study, a tobacco tax increase would cause 59,000 adult residents of Ohio to quit smoking and prevent 72,000 youth from beginning to smoke in the first place. They also project a tobacco tax would save 56,500 lives by causing people to quit and preventing smoking habits from developing.

In addition to saving lives, the study projected the tax would reduce health care spending. This includes savings of $8.4 million in lung cancer treatment, $20.3 million in heart attack and stroke treatment, $5.7 million in Medicaid spending, and $22.2 million in smoking-related pregnancy treatment savings in the first five years of the program.

Some anti-poverty advocates worry about the potential household financial harm from a cigarette tax. In particular, people who are current smokers and unlikely to quit, especially those who are low-income, will bear the largest burden of the increased tax. To support smoking cessation, policymakers can invest funds toward evidence-based programs like tobacco quitlines and anti-smoking media campaigns. By preventing people from taking up smoking, Ohio can mitigate the impacts of health problems and the higher economic burdens imposed by tobacco taxes.

The tobacco tax is a powerful tool the state of Ohio has to reduce smoking rates, reduce medical spending, and save lives. If the general assembly cuts this program, they will be voting for more smokers and more deaths. On the other hand, if this increase makes its way back to the governor’s desk in June, we are likely to see progress on one of Ohio’s largest public health fronts.

Which states rely the most on federal employment?

With federal workers in the crosshairs of the new administration, the United States’s 2.3 million federal employees have been thrust into an era of the greatest job insecurity they’ve faced in decades.

The federal government is a large employer across the country, but jobs are distributed unevenly across the states. Below is a table of federal government employment by state as reported by the federal Office of Personnel Management.

State	Federal Employees	Federal Employees per 1,000 Workers
District of Columbia	162,489	211
Maryland	144,497	51
Hawaii	24,804	38
Virginia	147,358	34
Alaska	11,658	34
New Mexico	22,695	25
West Virginia	17,301	24
Oklahoma	42,212	24
Wyoming	6,832	23
Montana	11,353	21
Maine	12,717	19
Utah	33,961	19
South Dakota	8,940	19
Alabama	41,319	19
Rhode Island	8,598	17
Mississippi	19,690	16
Georgia	81,366	16
Washington	58,508	16
Colorado	41,167	14
North Dakota	5,736	13
Idaho	10,993	13
Missouri	37,220	12
Kansas	17,824	12
Kentucky	23,449	11
Vermont	3,368	11
Pennsylvania	66,656	11
Arizona	34,460	11
Oregon	20,952	10
South Carolina	24,863	10
Arkansas	14,269	10
North Carolina	51,900	10
Ohio	56,068	10
Nebraska	10,412	10
Louisiana	19,486	10
Tennessee	32,574	10
Florida	95,167	9
Texas	130,686	9
Nevada	13,967	9
California	150,679	8
Delaware	3,998	8
Indiana	24,499	8
Illinois	45,213	7
New Hampshire	5,208	7
Massachusetts	25,698	7
Michigan	29,822	7
Iowa	9,930	6
Minnesota	18,183	6
Wisconsin	17,946	6
New York	54,092	5
New Jersey	22,684	5
Connecticut	7,304	4

Table 1: Federal Employees by State

The top of the list is not a state at all, but the District of Columbia, where about one in five workers are employed by the federal government. This makes sense because DC is the nation’s capital and center of the federal government.

The federal government employs five percent of Maryland’s entire workforce and  three and a half percent of Virginia’s, likely due to their relative proximity to the capital.  These two states come in number one and number three respectively among U.S. states.

Maryland has a range of departments with federal offices located within it. A heavy-hitter is the National Institutes of Health in Bethesda, Maryland, which employs over 18,000 people who conduct, fund, and disseminate health research. The Federal Food and Drug administration, headquartered in Silver Spring, Maryland, employs nearly 14,000 people who inspect and monitor products and conduct research on product safety.

Virginia is another major state for federal employees. Surprisingly, its largest federal employer is not in northern Virginia near D.C., but instead in Norfolk, located in southern Virginia. The United States Fleet Forces Command, one of the major forces of the United States Navy, is headquartered at the world’s largest naval base. The base  employs over 20,000 people in Virginia. Another major employer is the Veterans Health Administration, which employs over 10,000 people in the state.

Doubling back, the state with the second-highest concentration of federal workforce is Hawaii. Despite having a total state workforce just shy of 650,000, the federal government employs nearly 25,000 people in Hawaii (3.8% of the workforce). This is largely due to naval employment: the federal government employs over 6,400 people for its naval pacific fleet and over 2,100 people for its naval facilities engineering command.

Fourth highest is Alaska, which has about three and a half percent of its workforce employed by the federal government. I wrote a lot about this state in my recent blog post about which states depend most on federal funds. Federal employment in Alaska is driven by two characteristics of the state—its massive landmass and its small population. This leads to a need for federal employees to manage airfields and public lands. Due to Alaska’s strategic position near the arctic circle and its reliance on flight as a major form of transportation, these sectors employ large numbers of Alaskans. The federal government employs nearly 1,800 people in its Pacific Air Forces and over 1,100 people in the Federal Aviation Administration. The federal government also employs nearly 900 people in Alaska for the National Park Service, nearly 800 for the Forest Service, nearly 700 for the Bureau of Land Management, and nearly 500 for the Fish and Wildlife Service.

The ranking drops off considerably after the top four (or five if you count the District of Columbia), with the other 46 states having less than three percent of their workforce employed by the federal government. The next four states are rural states with (with the exception of Wyoming) elevated poverty rates. The federal government employs two and a half percent of the workforces in each of these states.

Coming in at number five is New Mexico. New Mexico has about 3,400 Veterans Health Administration employees, but also 3,200 Indian Health Service employees who provide medical care, public health services, and community health support to American Indian communities in the state. New Mexico also has 2,400 Forest Service employees, some Air Force presence, and over 900 employees for its Bureau of Indian Education.

Maryland and Virginia have large federal workforces due to their proximity to Washington, Alaska and Hawaii have large workforces due to their strategic military locations, and New Mexico does due to its large Native American population. West Virginia, at number six, has largely benefited from politics. The 2,000 West Virginians employed by the federal government’s Bureau of Fiscal Services and 1,200 employed by the Internal Revenue Service are largely located in West Virginia because of federal government decentralization in the mid-20th century and adept political maneuvering by Senator Robert Byrd, who was canny at directing funds back to his home state. West Virginia also has drawn some federal employees due to its geography. The 1,000 people employed by the Bureau of Prisons and 900 employees of the Army Corps of Engineers each take advantage of West Virginia’s mountainous terrain for their respective projects.

At number seven is Oklahoma. The federal government employs 15,000 Oklahoma residents for the Air Force Materiel Command, many at Tinker Air Force Base in Oklahoma City. Another 6,000 people are employed by the Veterans Affairs Administration and 3,000 are employed by the Federal Aviation Administration.

Wyoming has the eighth highest concentration of federal workers.  Due to its public lands, the federal government employs 2,700 people in Wyoming between its National Park Service, Forest Service, and Bureau of Land Management employees.

As the new federal administration aims to slash jobs at the federal level, states closest to Washington are likely to take the hardest hits. If they decide to slash military jobs, places like Alaska, Hawaii, and Oklahoma could face significant hits to their workforces.  If natural lands are in the crosshairs, which they seem to be, Alaska and Wyoming could be hurting. To understand how persistent these employment policy changes are, we will have to see how much these discussions play out over the next few years.

What are “rainy day funds” and how are they used?

When the doors were shuttered at Moraine, Ohio’s General Motors plant in 2008, 10,000 people immediately lost their jobs. The Ohio economy, along with the rest of the country’s economy, was reeling, struggling to make ends meet under the economic strain. The Great Recession humbled the state of Ohio as then-governor Ted Strickland drained all but 89 cents from the $1 billion fund.

Ohio’s manufacturing industry was hit hard by the Great Recession. Instability in the sector led to mass layoffs, business closures, and declining wages. This created a problem for the state of Ohio because of its reliance on income tax, sales tax, and corporate tax revenues — the recipe for a budget deficit.

The budget stabilization fund was the duct tape holding the state of Ohio’s budget together as it stared down a yawning budget deficit. To close that deficit, Ohio could raise taxes, lower spending, or dip into the budget stabilization fund. Without that fund, the pain would have been a lot worse for the state as a whole.

Unlike the federal budget, which can (and almost always does) finance a deficit through borrowing, nearly all state budgets must be balanced at the end of each fiscal year due to clauses in their state constitutions. There is no room for debt, so budget stabilization funds (often colloquially referred to as “rainy day funds”) provide lawmakers with a tool to balance the state budget. Ohio was not alone drawing from its budget stabilization in 2008 and beyond. Many other states in financial straits have similarly benefited from their budget stabilization funds.

Alaska’s reliance on oil revenue hit a breaking point in the mid-2010s when oil prices crashed. To cover the deficits, Alaska withdrew $14 billion from its budget stabilization fund.

In addition to economic recessions, environmental disasters are frequently cited as reasons for drawing on the fund. Florida withdrew money from its budget stabilization fund repeatedly throughout the 21st century to help the state recover from hurricane damage.

Nearly every state tapped into its rainy day fund during the COVID-19 pandemic. Between 2020   and 2021, California withdrew $9.6 billion to cover the cost of rising unemployment benefits. In 2020, Texas withdrew $1.2 billion to pay for the state’s increased healthcare costs during the COVID-19 pandemic. 

The recent budget cuts announced by President Donald Trump pushed Governor Lamont, of Connecticut, to consider alternative funding options for the state’s critical services. Cuts to Medicaid could eventually create a deficit that would require a draw from the state’s $4 billion budget stabilization fund. 

How do states replenish their budget stabilization funds after they are spent down? Ohio faced a steep climb, from 89 cents in its budget stabilization fund in 2011 to a record-breaking $3.5 billion by 2023. By holding taxes steady and cutting education spending while piggybacking off a slow economic recovery after the Great Recession, Governor Kasich’s administration was able to close the budget deficit. 

After the Great Recession pummeled Ohio’s manufacturing industry, the state’s healthcare, logistics, and finance sectors grew. A more diverse economy will help Ohio avoid a steep economic downturn based on any one sector. 

There are currently debates across the country about whether or not states should spend some of their budget stabilization funds on pressing issues like affordable housing and healthcare. Leaders at the Children’s Defense Fund of Ohio, for example, have made the case that the $3.5 billion could be used to supplement social services like funding a child tax credit and free school meals. Others argue that large reserves are the only thing that saved the country from chaos during crises like the Great Recession and the Covid-19 Pandemic. With recession risk on the rise, we might end up hearing more about budget stabilization funds sooner rather than later.

What would it cost to end poverty in the U.S.?

About $168 billion. That’s how much money it would take to get every household in the United States above the federal poverty line. 

We’ve written in the past about the equity-efficiency tradeoff, and the problem of poverty is the poster child of this phenomenon. We could end poverty in this country overnight. The government could appropriate $168 billion and give it to every household whose income falls below the federal poverty line. This may not be efficient, but it’s important to recognize that poverty is not an inherent property of the economy. It doesn’t necessarily need to exist. 

In order to arrive at the $168 billion number, I looked at data from the American Community Survey. I took the total reported income of each household and saw how far below the federal poverty line each family was. Below is a table showing how much money each state would need in order to end poverty.

State	Amount Needed to End Poverty	Per Capita	Households in Poverty
California	$17,214,506,268	$438.67	1,522,399
Texas	$16,001,075,509	$539.84	1,392,305
New York	$11,322,505,843	$569.76	1,032,499
Florida	$11,132,233,232	$507.65	1,044,689
Ohio	$6,567,602,300	$557.52	623,894
Illinois	$6,494,454,210	$511.67	585,786
Pennsylvania	$6,450,478,080	$496.71	604,820
Georgia	$5,926,791,086	$547.63	517,794
North Carolina	$5,742,585,246	$542.55	537,488
Michigan	$5,488,476,066	$546.03	509,788
Tennessee	$3,942,381,489	$564.32	372,500
Arizona	$3,813,769,244	$524.72	325,868
New Jersey	$3,669,825,896	$396.01	343,018
Virginia	$3,654,968,769	$422.17	331,499
Louisiana	$3,483,011,621	$753.73	329,464
Indiana	$3,465,090,635	$508.69	317,271
Alabama	$3,298,573,345	$652.63	312,509
South Carolina	$3,171,156,723	$608.34	289,916
Missouri	$3,112,352,627	$504.58	307,748
Kentucky	$3,074,362,542	$681.57	289,694
Massachusetts	$3,022,624,611	$432.27	298,893
Washington	$2,961,360,328	$382.56	275,446
Oklahoma	$2,482,808,368	$621.44	227,110
Maryland	$2,479,179,167	$401.76	220,848
Wisconsin	$2,477,475,585	$420.48	246,377
Colorado	$2,348,106,492	$404.10	210,248
Mississippi	$2,341,319,924	$793.28	218,010
Minnesota	$2,042,361,857	$357.45	205,570
Oregon	$1,979,543,462	$467.02	190,419
Arkansas	$1,963,917,073	$647.59	189,809
Nevada	$1,664,073,405	$529.79	142,946
Connecticut	$1,554,699,690	$432.06	144,867
New Mexico	$1,472,476,815	$696.28	138,332
Iowa	$1,444,320,891	$451.92	140,178
Kansas	$1,394,899,517	$474.85	131,739
West Virginia	$1,242,770,474	$696.44	121,901
Utah	$1,071,849,227	$321.76	94,327
Nebraska	$806,337,527	$410.16	81,348
Idaho	$732,766,597	$387.03	69,183
Hawaii	$627,510,580	$434.07	48,899
Maine	$568,495,447	$412.73	63,269
Montana	$506,699,776	$458.52	50,764
District of Columbia	$503,804,437	$749.62	40,961
Rhode Island	$499,944,707	$456.42	49,682
Delaware	$437,231,264	$434.68	38,714
South Dakota	$408,104,275	$453.86	37,611
New Hampshire	$388,590,676	$280.00	41,093
North Dakota	$359,985,008	$461.90	35,831
Alaska	$337,041,950	$459.20	24,983
Vermont	$280,263,620	$434.35	28,707
Wyoming	$262,716,316	$453.15	26,480

Unsurprisingly, the states that would need the most money to end poverty are the states with the largest populations. There is a huge dropoff between Florida and Ohio both in terms of the amount of money needed to end poverty and their population. 

Among the states that would need between $1 billion and $10 billion, Louisiana and Mississippi stand out as the only states whose per capita amount needed to end poverty is over $700. Washington D.C. is the only other place with a per capita amount this high, but naturally the population there is significantly smaller. 

If we actually wanted to go down this path as a country, we’d be looking at a price tag of $1.7 trillion over the next 10 years. While this is a ton of money, it’s not impossible for the federal government to raise this type of revenue. If you wanted to do it without raising the deficit, there are programs we could cut in favor of this massive cash transfer.

Every year, the Congressional Budget Office releases a handful of options that could lower the deficit. There are certainly things that could be cut if lawmakers decided this was more important. 

One option would be to eliminate state and local tax deductions. This would save about $1.6 trillion over the next 10 years. Another option that would get you there would be to impose a new payroll tax between 1% and 2%. This is not to suggest that these particular tradeoffs would be good or bad, it’s just to highlight that eliminating poverty over the next 10 years is not just some pipe dream, it’s a real tangible policy option.

I must note at this point that there are some important limitations to this analysis. First off, while the American Community Survey does an amazing job trying to account for sampling errors, it is still just a survey. One particular group that I imagine is being under reported is people experiencing homelessness (the American Community Survey does survey some homeless people who are currently sheltered, but this is certainly a gap). 

Another issue is that the variable I was using to approximate household size does not always equal the household size that would be used to determine a household’s poverty threshold. From the variable description, the variable I used “reports the number of person records that are included in the sampled unit. These person records all have the same serial number as the household record. The information contained in the household record usually applies to all these persons.”

Despite these limitations, it is interesting to see just how far away we are from living in a world with zero poverty. I should also note that the federal poverty line is not the only measure of social wellbeing we should care about. Lifting everyone out of poverty would not solve every single issue in our country. However, it would solve the problem of people living in poverty, and that is worth something.

CBO: Climate Change will reduce GDP by 6% by the end of the century

Last month, the Congressional Budget Office published a working paper entitled “The Effects of Climate Change on GDP in the 21st Century.” Using historical data, analysts at CBO projected the impact of climate change on The United States' gross domestic product (GDP) in 2100. 

Their findings track with three scenarios: the worst, the less bad, and the silver lining.At its worst, climate change will result in a GDP 21% lower than it would’ve been had global temperatures held steady after the year 2024. Less bad was CBO’s average prediction of a less drastic 6% decrease in GDP relative to historical trends. The silver lining predicted by CBO’s model was the 5% chance of a 6% or greater increase in GDP.

Examples of Climate Change Impacting Economic Growth

In day-to-day life, a 6% reduction in US GDP because of climate change may come from impacts like slower productivity for workers in outdoor occupations like construction who battle the rising temperatures. More workers may miss work due to heat-related medical conditions. Air-conditioners fighting off rising temperatures outside will strain an already overburdened power grid. Businesses must pay higher energy bills, crowding out more productive uses of their resources.

Another cost to the economy from climate change comes from natural disasters. According to the National Centers for Environmental Information, the US sustained 27 climate disasters in 2024 causing losses exceeding $1 billion. The weather events which caused this damage included one drought, one flood, 17 severe storms, five tropical cyclones, one wildfire, and two winter storms.

Figure 1: The United States had 27 weather events costing $1 billion or more in 2024

Long-term, the model’s 21% predicted reduction would have colossal implications. When less money circulates in the economy, the government receives less revenue in taxes. This will result in budget deficits, tax increases, or both, as the government tries to make up for the losses. This could have stronger impacts on budgets in southern states, which some experts project will bear the brunt of the impact of climate change.

With a smaller economic base available to fund the government, there is less money to fund social services like SNAP, rental assistance, Medicare and Medicaid. It could also impact the ability of state and local governments to fund K-12 education, which could have compounding impacts on local economies for decades to come.

All of these factors necessitate targeted, efficient, and effective interventions in the immediate future. 

What does this mean for policymakers, businesses, and citizens?

CBO’s findings confirm, in part, what we have always known: climate change is unpredictable. The National Centers for Environmental Information published the following chart which tallies the rising costs of extreme weather events in the US over time. From 1980 to 2024, the costs associated with severe weather events appear to be rising exponentially. 

Figure 2: Severe weather events have risen in the United States since the 1980s.

Both preventative measures like carbon abatement and adaptive measures like building a healthy reserve fund can help states combat the oncoming volatility brought about by climate change.

Next Steps - What Can States Do?

To effectively address the economic impacts of climate change, states can take steps to prevent and adapt to climate change. Below are four examples.

1. Renewable Portfolio Standards - These policies require a defined share of electricity be generated from renewable sources like solar, water, or wind power. Most of these programs apply to electricity, though some include heating fuels and energy-efficient appliances.

2. Cap-and-Trade - This system sets increasingly strict limits on the amount of pollution one entity can produce. Companies with excess allowances can sell the credits to companies in need of more. This produces an incentive system to reduce excess pollution.

3. Carbon Taxes - This tax incentivizes companies to reduce CO₂ emissions by taxing them per ton of CO₂ emitted.

4. Budget Stabilization Funds - These “rainy day” funds are set aside by governments during relatively good economic times to cover budget shortfalls during lean seasons. These funds can stabilize public services by avoiding sudden tax hikes or spending cuts.

Each of these strategies can help states slow climate change and deal with the economic problems that will come from it. The best action states can take now is to manage the risk of increasing climate disasters and do their best to plan for the long-term economic problems it will create. 

Minnesota Child Tax Credit generates over $930 million in annual net benefits

A cost-benefit analysis released today by Scioto Analysis finds that Minnesota's Child Tax Credit is projected to generate over $930 million in present benefits to the state. Minnesota’s Child Tax Credit is one of the most generous state Child Tax Credits in the country, providing $1,750 in benefits to low-income families with qualifying children. 

“Child tax credits do so much more than just giving resources to families that need them, they are significant investments in the future state economy” said policy analyst Michael Hartnett. “the decreased pressure on the social safety net going forward more than pays for the upfront costs of this program.”

Key Findings:

• Increased Future Earnings: The largest benefit, estimated at $670 million, comes from projected increases in the future earnings of children receiving the tax credit. The added resources from the tax credit support better educational opportunities and health outcomes, leading to higher lifetime earnings.

• Crime Reduction: The tax credit is expected to prevent over $460 million in future criminal justice and victim costs by reducing the likelihood of future crime. This benefit accrues to the whole state, meaning that even those who don’t receive the tax transfer still experience long term gains.

• Excess tax burden: Funding the program to make up lost tax revenue costs the state economy around $180 million.

A Monte Carlo simulation of all the possible outcomes finds that about 86% of the time, the child tax credit will have benefits that outweigh costs. The range of likely outcomes is heavily right-skewed, meaning that there are more extreme positive outcomes than there are extreme negative outcomes. High-end estimates of the value of the child tax credit reach $2 billion in annual net benefits.

Ohio public school spending is economic development

This year’s budget debates have focused heavily on the future of education funding. 

Early in the budget cycle, Ohio House Speaker Matt Huffman came out strong for K-12 budget cuts, saying the current education budget in Ohio is “unsustainable.” The governor’s budget has come under some fire from education advocates for shifting resources away from public schools.

Some in the public have debated whether education funding creates benefits for students or whether it is just wasted by administrative spending in school districts. A couple of years ago, a working paper tackling this question was circulating through academic circles.

Finally published last year in the American Economic Journal, this study was a comprehensive meta-analysis of impacts of school spending on student outcomes. They found when school spending increases by $1,000 per pupil for four years, test scores increase by 0.0316 standard deviations and college matriculation increases by 2.8 percentage points.

Okay, so school spending does help students test better and go to college more often. But is this worth it? This is a question my firm asked in 2023. We conducted a cost-benefit analysis to see whether this increased spending would pay off for the state as a whole.

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The general model looks like this: if a student is at a school with more resources, they will have higher test scores and a higher chance to go to college. Both of these will lead to higher future wages for that student. These wages and the reduced social spending on that student in the future due to higher wages will both increase the size of the state economy. If schools have less resources, students will test worse, go to college less, make less over their lifetime, and the public will spend more money supporting them with social spending down the road.

To analyze what Ohio would look like under different scenarios, we compared Ohio’s current spending (about $14,000 per pupil at the time) to a decrease in per-pupil spending that would put Ohio at about Indiana’s per-pupil spending (about $10,000 per pupil). We also compared an increase to per-pupil spending at Pennsylvania levels (about $16,000 per pupil).

Overall, we found that increased school spending paid off for the state. Conservative simulations of increases in per-pupil spending to Pennsylvania levels put wage and social savings benefits of spending increases outweighing the costs of spending by $23 billion. On the other hand, reducing spending to Indiana levels led to decreases in wages and social spending outweighing savings from the program by at least $30 billion.

Overall, the analysis is clear: from a long-term perspective, increases in school spending within standard limits of what we have seen in the United States lead to economic benefits that outweigh costs. Decreases in school spending lead to economic development costs that outweigh savings benefits. We studied these over a range of discount rates, too, finding that even very short-sighted policymakers should not favor spending cuts if they care at all about future economic development.

To put it short, school spending is an investment. And according to the evidence we have available, it is an investment that will pay off for Ohio.

This commentary first appeared in the Ohio Capital Journal.

Rising housing prices make renters hit the bottle

Last month, the National Bureau of Economic Research published a new working paper examining the relationship between housing expense inflation and household alcohol and tobacco purchases. The researchers used county-level changes in housing regulations to identify how exposed certain groups of renters and homeowners were to the high rates of housing price inflation during the pandemic.

They found that in counties with more stringent housing regulations and greater exposure to housing inflation, renters increased their beer consumption by approximately 15.2% relative to homeowners with lax regulations and less housing inflation when comparing 2022 to 2019. This increase is particularly noteworthy because one might expect that households facing increased housing costs would reduce spending on non-essential items like alcohol due to constrained disposable income.

Instead, the researchers suggest that these increases in beer consumption may be due to the use of alcohol as a coping mechanism for the added financial stress caused by rising housing expenses. They also observed that the increase in spending was primarily on low-cost beer, rather than on wine or liquor. This observation further supports the idea that renters might be turning to more affordable options as a way to manage their financial burdens.

To conduct this research, the authors used a difference-in-difference-in-difference approach. This method compared changes in alcohol and tobacco purchases between renters and homeowners, before and after the housing expense surge, across counties with varying levels of housing regulation. The housing regulation index was constructed using data from the Wharton Residential Land Use Regulation Index.

This approach lets the researchers compare between renters and homeowners across counties. They choose to separate renters from homeowners because renters more regularly enter into new housing contracts, and homeowners are relatively insulated from the increase in housing inflation. They still experienced inflation in the prices of other goods, but people with fixed rate mortgages before the pandemic would have experienced much lower housing cost increases.

This paper offers new insights in a few important ways. First, it looks at how high inflation after the COVID-19 pandemic has impacted people's health habits, especially alcohol and tobacco use. Second, it explores the two-way relationship between financial struggles and substance use by examining how local housing regulations affect housing costs. Finally, it sheds light on how local housing regulations impact the housing market and the financial decisions of households.

The research also highlights the importance of considering the broader public health implications of housing policies. By demonstrating a link between housing affordability, financial stress, and alcohol consumption, the study suggests that addressing housing market supply constraints could not only alleviate high housing costs but also improve household financial security and influence health-related behaviors. The negative impacts of alcohol consumption are well established, and this research underscores the need for policymakers to consider the unintended consequences of housing policies on public health.

This study shows how seemingly disparate aspects of public policy can be intertwined. Housing policy is health policy. These researchers have shown how economic pressures can influence health-related behaviors and how housing policies can be a tool to address public health concerns. This study serves as a reminder of the far-reaching effects of economic stress and the need for policies that support both affordability and well-being.