Joseph Krist

Publisher

STATE BUDGETS

We observed some trends resulting from the state’s budget processes away from the pure dollars and cents aspect. While there were expected efforts to lower state income tax rates, we also saw efforts to lower or eliminate property taxes. It’s not clear whether these efforts are purely fiscal in nature or rather a manifestation of the “starve the beast” philosophy championed by conservatives. Those efforts are concentrated in the South.

At the same time, New York passed a second home tax, Washington State’s millionaire’s tax will be on the ballot as will the billionaire’s tax in California. As is the case with the efforts to eliminate property taxes, it’s not clear whether these proposed taxes reflect fiscal concerns or policy concerns. All this is occurring while the Trump administration blatantly targets the budgets of states like Minnesota and California for political purposes.

Overhanging all of this are cutbacks in Medicaid funding and obstacles to enrollment. The impacts of the changes to Medicaid eligibility are only now becoming clear. A significant segment of the patient base will now rely on charity care in emergency rooms which will pressure both providers and states. We see Medicaid as a potential source of credit pressure for states as the health sector will look to the states to fill at least some of the federal gap.

MASS TRANSIT CUTS

Denver’s Regional Transportation District has proposed significant cuts to its budget as it faces an estimated $250 million budget shortfall. Those cuts would include staff reductions and service cutbacks. They would also eliminate some existing fare free service. An RTD spokesperson said, “Operating costs are increasing faster than total revenue, and federal relief funds that supported transit agencies in prior years are no longer available.”

RTD has identified dozens of routes it could eliminate to save up to $62 million. The options include discontinuing the 16th Street FreeRide around downtown. If RTD’s Board of Directors were to enact the full 20% service cut, the agency would save $62 million by eliminating 39 routes. Those routes combined for 5 million boardings last year. 

In Wisconsin, the Milwaukee County Transit System (MCTS) is planning to reduce service by 25% next year to stabilize the system. MCTS is at the edge of a budget cliff and does not have funding to preserve existing service levels. In March, the Office of the Comptroller forecast an MCTS budget deficit of $15.7 million in 2027, growing to $37 million by 2031. The system implemented major service cuts in 2026 to close a $9.3 million budget gap.

Here’s the rub. When MCTS implemented those budget cuts in 2026 they were focused on frequency. Across the system, bus frequency was reduced by 14%, but these changes led to an even greater loss of ridership, which declined 20%, according to MCTS data. 

PORT OF LOS ANGELES

The Port of Los Angeles moved 1,002,734 Twenty-Foot Equivalent Units (TEUs) in June, making it the busiest June in the Port’s 118-year history and the third time monthly cargo volume has ever exceeded 1 million container units. No other port in the Western Hemisphere has ever surpassed the 1 million container mark in a single month. June cargo was 12% higher than a year ago, driven by strong import demand as retailers and manufacturers continued advancing shipments while navigating evolving trade policy, rising fuel costs and global supply chain uncertainty.

Loaded imports reached 530,558 TEUs, an increase of 13% compared with last year and the Port’s third-highest import month on record. Loaded exports totaled 126,365 TEUs, unchanged from a year ago. Empty containers came in at 345,811 TEUs, up 17% year over year as equipment returned to Asia to support continued demand. During the first six months of 2026, the Port handled 5,122,603 TEUs, 3% ahead of the same period last year.

MILLIONAIRE TAX ON THE BALLOT

Washington Secretary of State Steve Hobbs confirmed that Initiative 645, which would repeal the high-earner income tax, received enough signatures to be placed on the Nov. 3 ballot. Initiative 645 would repeal a 9.9 percent income tax on households earning more than $1 million annually that was signed into law earlier this year. The tax is slated to take effect on income earned by Washington state residents beginning in 2028, with the first payments due the following year. State officials projected it could generate more than $3 billion in tax revenue per year.

WESTERN WATER DEAL

The Metropolitan Water District of Southern California’s board of directors approved an agreement in which the U.S. Bureau of Reclamation will pay the agency to leave up to 200,000 acre-feet of water from the Colorado River in Lake Mead. By December, MWD’s deal will add three feet of water to the reservoir, according to MWD. Per the terms, the federal agency will pay MWD up to $65 million for the water, or $325 per acre-foot. Each acre-foot is about 326,000 gallons. 

MWD also approved agreements that will allow federal officials to pay the Quechan Tribe and Bard Water District to send up to 19,000 acre-feet of conserved agricultural water to the lake in 2027 and 2028. It is all part of an effort by the Lower Basin states – California, Arizona and Nevada – to achieve some 700,000-acre feet of increased water in Lake Mead. The lake sat at close to 1,043 feet above sea level this week, or only two feet above the record low set recorded in 2022.

Lake Mead has already cut Hoover Dam’s generating capacity by an estimated 5% to 8.5%. 

In the Upper Basin, the situation is more advanced. The Wayne N. Aspinall Unit, Colorado’s only stake in a federal hydropower system that sells power across the West, is on pace to generate nearly 30% less electricity than its historical average dating to 1978, according to the Bureau of Reclamation. The unit’s three dams on the Gunnison River — including Blue Mesa, Morrow Point and Crystal — make up Colorado’s only piece of the Colorado River Storage Project.

This Depression-era network of federal dams sells power to municipalities, cooperatives, tribes and irrigation districts across the West. Blue Mesa Reservoir, the largest body of water entirely within Colorado, is expected to end the year at just 17% of its live storage capacity. At its current elevation of about 7,446 feet, the reservoir’s generating capacity is approximately 18% below the amount for which it was designed. Electricity generation stops entirely at 7,393 feet, Blue Mesa’s minimum power pool.

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