More and Better Uses Ahead for Governments’ Financial Data

Link: https://www.governing.com/finance/more-and-better-uses-ahead-for-governments-financial-data

Excerpt:

In its lame duck session last month, Congress tucked a sleeper section into its 4,000-page omnibus spending bill. The controversial Financial Data Transparency Act (FDTA) swiftly came out of nowhere to become federal law over the vocal but powerless objections of the state and local government finance community. Its impact on thousands of cities, counties and school districts will be a buzzy topic at conferences all this year and beyond. Meanwhile, software companies will be staking claims in a digital land rush.

The central idea behind the FDTA is that public-sector organizations’ financial data should be readily available for online search and standardized downloading, using common file formats. Think of it as “an http protocol for financial data” that enables an investor, analyst, taxpayer watchdog, constituent or journalist to quickly retrieve key financial information and compare it with other numbers using common data fields. Presently, online users of state and local government financial data must rely primarily on text documents, often in PDF format, that don’t lend themselves to convenient data analysis and comparisons. Financial statements are typically published long after the fiscal year’s end, and the widespread online availability of current and timely data is still a faraway concept.

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So far, so good. But the devil is in the details. The first question is just what kind of information will be required in this new system, and when. Most would agree that a complete download of every byte of data now formatted in voluminous governmental financial reports and their notes is overwhelming, unnecessary and burdensome. Thus, a far more incremental and focused approach is a wiser path. For starters, it may be helpful to keep the initial data requirements skeletal and focus initially on a dozen or more vital fiscal data points that are most important to financial statement users. Then, after that foundation is laid, the public finance industry can build out. Of course, this will require that regulators buy into a sensible implementation plan.

The debate over information content requirements should focus first on “decision-useful information.” Having served briefly two decades ago as a voting member of the Governmental Accounting Standards Board (GASB), contributing my professional background as a chartered financial analyst, I can attest that almost every one of their meetings included a board member reminding others that required financial statement information should be decision-useful. A key question, of course, is “useful to whom?”

Author(s): Girard Miller

Publication Date: 17 Jan 2023

Publication Site: Governing

Government Worker Shortages Worsen Crisis Response

Link: https://www.governing.com/work/government-worker-shortages-worsen-crisis-response

Graphic:

Excerpt:

States and cities all over the country have seen a loss of workers over the past several years, and many are struggling to hire new ones. According to the Bureau of Labor Statistics, state and local governments lost more than 600,000 workers between the start of the pandemic and June of this year. Those shortages have begun to affect basic services, including many that are critical to safety and quality of life. According to a Center for American Progress report from March, there were 10,000 fewer water and wastewater treatment plant operators in 2021 than there were in 2019.

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The obvious reason why governments have struggled to hire and retain workers over the past few years, says Brad Hershbein, senior economist and deputy director of research at the W.E. Upjohn Institute for Employment Research, is that they can’t improve pay rates as quickly as the private sector can in response to worker demands for better wages. Another reason is that lots of government work has become newly politicized during the pandemic — public workers can be “heroes one day and villains the next,” he says. And a third factor is that staff shortages tend to make work that much more difficult for people who remain, contributing to unattractive working conditions.

“The burnout gets worse,” Hershbein says. “You get a spiral, where fewer people are stuck trying to handle the same amount of work and the whole thing collapses. That’s a real risk at a lot of agencies.”

Author(s): Jared Brey

Publication Date: 3 Oct 2022

Publication Site: Governing

Texas Maternal Death Data to Be Published Post-Midterms

Link: https://www.governing.com/now/texas-maternal-death-data-to-be-published-post-midterms

Excerpt:

Texas health officials have missed a key window to complete the state’s first major updated count of pregnancy related deaths in nearly a decade, saying the findings will now be released next summer, most likely after the Legislature’s biennial session.

The delay, disclosed earlier this month by the Department of State Health Services, means lawmakers won’t likely be able to use the analysis, covering deaths from 2019, until the 2025 legislative cycle. The most recent state-level data available is nine years old.

In a hearing this month with the state’s Maternal Mortality and Morbidity Review Committee, DSHS commissioner Dr. John Hellerstedt said the agency wanted to better align its methodology with that of other states, and that there hadn’t been enough staff and money to finish the review for a scheduled Sept. 1 release.

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Ortique said the state has already identified 149 potential maternal deaths in 2019, of which 118 have been analyzed by the committee to see if they were pregnancy-related. Six newly identified deaths may be added to that group, she said. The numbers cover deaths during the pregnancy through one year after giving birth.

The state has published a maternal death report every other year since 2014, often based on preliminary data updated later. For example, the maternal death report in 2018 identified 29 deaths in 2012 that were not included in the previous report. The committee also released updating findings from its most recent report, studying deaths from 2013, at the Sept. 2 meeting.

Out of 175 potential maternal deaths in 2013, 70 have since been determined to be pregnancy-related.

Author(s): Julian Gill and Jeremy Blackman, San Antonio Express-News

Publication Date: 14 Sept 2022

Publication Site: Governing

Bill Would Tighten Pension Rules for Convicted Public Workers

Link: https://www.governing.com/finance/bill-would-tighten-pension-rules-for-convicted-public-workers

Excerpt:

New Jersey would make it harder for public employees who commit crimes to collect their pensions under a bill legislators are fast-tracking through the state Assembly.

The proposed reforms to the state’s pension law were recommended without discussion Thursday, Sept. 29, by the Assembly Judiciary Committee, just one week after they were introduced. That allows the measure to move to the Assembly floor for a vote expected on Monday.

The legislation would tighten the criteria under which pension boards decide whether former government workers convicted of on-the-job misconduct should lose some or all of their pensions. It would also expand the list of offenses that automatically disqualify public employees from receiving those benefits.

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That change would take more pension decisions out of the hands of the state’s retirement boards, which are often reluctant to strip officials of their full pensions, under a process in which they weigh offenders’ misconduct against the good they did throughout their careers. The proposal would also revamp how boards consider those factors, making it easier for them to refuse to grant benefits.

To become law, the bill would have to pass the Assembly and Senate and be signed by Gov. Phil Murphy. So far, no Senate version has been introduced, and its potential fate in the upper chamber remains unclear.

Author(s): Riley Yates, NJ.com

Publication Date: 30 Sept 2022

Publication Site: Governing

How Deceptive Lobbyists Are Exploiting the Goodwill of Public Employees

Link: https://www.governing.com/finance/how-deceptive-lobbyists-are-exploiting-the-goodwill-of-public-employees

Excerpt:

If you followed the saga of the route to passage of the Inflation Reduction Act, you already know that a last-minute maneuver by Arizona Sen. Kyrsten Sinema torpedoed a provision in the Senate compromise bill that would have finally closed the so-called “carried interest loophole.” That’s where savvy real-estate financiers and managers of private partnerships such as hedge funds and private equity deals are able to cut their income taxes as much as 40 percent by masquerading their compensation as a capital gain that enjoys much lower income tax rates.

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Public pension funds, public employees and their associations need to put a stop to this, and they have both the moral high ground and the clout to do so. It’s high time for political and financial blowback. The PR firms orchestrating this nonsense will just keep it up until their profiteering clients get called out.

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The reality is that if the fund managers had to pay standard tax rates on their income, it would have zero impact on pension systems’ returns. What are the managers going to do? Cook up fewer deals? Pull up stakes and move to a tax haven? Demand even higher fees on top of their already cushy income? They can huff and puff all they want, but pensioners would lose nothing if the loophole were plugged.

Author(s): Girard Miller

Publication Date: 13 Sept 2022

Publication Site: Governing

What We’ve Learned — and Failed to Learn — from a Million COVID Deaths

Link: https://www.governing.com/now/what-weve-learned-and-failed-to-learn-from-a-million-covid-deaths

Excerpt:

The pandemic is not done. The number of new infections — surely an undercount due to unreported home tests — again tops 75,000 per day. The number of hospitalizations has climbed 20 percent over the past two weeks. The Biden administration has warned there could be 100 million more Americans infected by early next year. Yet Congress seems unwilling to provide more money for basic responses such as tests and vaccines, even as it becomes increasingly clear that even mild cases can lead to dangerous long-term damage.

Yet there are positive developments to consider as well. Vaccinations and certainly boosters are not where they should be, but three out of four Americans have received at least a single dose and two-thirds are fully vaccinated. The Commonwealth Fund has estimated that, absent vaccines, an additional 2.3 million Americans would have died, and 17 million more would have been hospitalized. Public health measures such as masking have largely fallen out of favor, but they helped prevent a death toll that could have been even more terrible.

“A million is way too many people, but as a result of the work that has been done, through public health and vaccination, it’s a number that’s a lot lower than it might have been,” says David Fleming, a distinguished visiting fellow at the Trust for America’s Health. “If we did not do those things, we would not be looking at the 1 million death threshold, we’d be looking at the 3 million death threshold.”

Author(s): Alan Greenblatt

Publication Date: 12 May 2022

Publication Site: Governing

Public Pensions’ New Quandary: Coping With Geopolitical Turmoil

Link: https://www.governing.com/finance/public-pensions-new-quandary-coping-with-geopolitical-turmoil

Excerpt:

Arguably, trustees and investment teams need a serious conversation with portfolio managers who are overweight in companies and countries that could foreseeably lose favor and stock exchange value. To ground that dialog, some form of risk analysis is required. One protocol could be as primitive as routinely identifying which major corporate equity and debt holdings in a system’s portfolio have cost and revenue exposure of more than 10 or 15 percent in such potentially at-risk regimes, and prodding managers to trim down those geopolitically vulnerable positions unless there is a clearly compelling undervaluation thesis. Another sensible approach would be to require underweighting of major companies relative to a benchmark index, based on their percentages of autocrat-nation revenues.

Ultimately at a fiduciary level, if a pension fund’s total worst-case exposure to all earnings and income derived from autocratic nations is an insignificant fraction of its total portfolio, the composite risk is probably not worth losing sleep over, on purely financial grounds. But politics could still enter the theater stage for pension boards that ignore this issue.

Pension consultants and risk advisers have a new role to play in this dialog. ESG investing is now under fire, so a healthy ESG+G discussion is especially timely. If nothing else, informed advisers can help investment teams and trustees identify where their portfolios might contain a blind-side risk that hasn’t received enough attention.

Author(s): Girard Miller

Publication Date: 10 May 2022

Publication Site: Governing

Here’s Why Cutting Gas Taxes Doesn’t Work When Prices Soar

Link: https://www.governing.com/now/heres-why-cutting-gas-taxes-doesnt-work-when-prices-soar

Graphic:

Excerpt:

A new report from the Urban Institute catalogs state-level responses and finds that 20 different states have introduced legislation to suspend gas taxes, which are often used to fund infrastructure projects. (Florida, Georgia, and Maryland have already passed gas tax holidays.) There are 16 states considering legislation to provide payments to residents — in the form of tax rebates, credits or stimulus checks — to counteract pain at the pump. Only three are considering changes to help people avoid driving: California, Connecticut, and Hawaii.

“Of the three main categories of policy solutions we could be considering, cutting gas taxes is the worst,” says Jorge González-Hermoso, research associate with the Urban Institute. “It’s very popular, it will get you headlines, but it only creates a simulation that the government is providing a solution.”

González-Hermoso says the problems with gas tax holidays start with the premise that they help consumers. The average gas tax across all states, he reports, is 31 cents a gallon or 7.75 percent of the average price. By one estimate, a driver would have to use 20 gallons of gas a week to save just $30 over the course of Maryland’s one-month holiday. There is no guarantee that station owners wouldn’t pocket the difference, and keep prices roughly the same.

In addition to being ineffective, this policy imperils future infrastructure projects. State and local gas taxes comprise 26 percent of highway spending and often contribute to mass transit as well. They also have the disadvantage of incentivizing driving, as residents in nearby jurisdictions try to take advantage and local consumers know relief is contingent upon buying gas.

Author(s): Jake Blumgart

Publication Date: 26 Apr 2022

Publication Site: Governing

The Fed Is ‘Normalizing.’ Here’s What Public Financiers Need to Know.

Link: https://www.governing.com/finance/the-fed-is-normalizing-heres-what-public-financiers-need-to-know

Graphic:

Excerpt:

Of the $8.3 trillion of liquid marketable securities in the Fed’s portfolio (see the chart below), 37 percent are overnight repos and Treasury securities maturing in one year or less, 26 percent are T-notes maturing in one to five years, and another 30 percent are mortgage-backed securities issued by Fannie Mae and Freddie Mac, which pay down principal and interest monthly. So all it takes to pull back the excessive monetary stimulus left over from the COVID-relief era is to let such holdings roll off in 2022-24 without replacing them with new purchases. Operationally, it’s really not rocket science — it’s just a matter of conviction and messaging. Unlike the rising stairstep expected in the Fed’s overnight rates, its bond portfolio runoff won’t make nightly news headlines; it’s like watching paint dry. In this regard, doing nothing is actually doing something quite constructive on the inflation front, despite the lack of fanfare.

What would be the impact on interest rates? Little doubt they must go higher, barring an exogenous shock like a global virus lockdown or a Ukraine-war flight-to-safety. The key question is really how much higher, and how fast. My best guess is that markets have recently discounted about one-third of the potential move higher in long-term rates.

Author(s): Girard Miller

Publication Date: 15 Feb 2022

Publication Site: Governing

Sagging Stocks Aren’t the Only Threat to Pension Plans

Link:https://www.governing.com/finance/sagging-stocks-arent-the-only-threat-to-pension-plans

Excerpt:

You need money to make money, and the programs long in trouble didn’t have enough assets on hand to take full advantage of a banner year. Say your plan started 2021 with a funding level of 80 percent (meaning you had enough assets to cover 80 percent of your anticipated liabilities). With a 30 percent return, your plan would then be 104 percent funded. But if you only started with a 30 percent funding level, the same percentage gain would bump you up only to 39 percent funded.

“The problem of a deeply underfunded plan is that they don’t have a lot of assets, so big returns aren’t as helpful to them,” says Donald Boyd, co-director of the Project on State and Local Government Finance at the University at Albany. “They’ve still got a huge way to go.”

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Maintaining discipline has been hard. When pension plans have a good year, as in 2021, there’s a temptation for legislators to skip contributions. This would be akin to an individual seeing her retirement account gain $10,000 and figuring she can skip that year’s $5,000 contribution.

The problem is that you have to maximize your gains in good years, not fritter them away, because inevitably you’re going to have to make up for bad years at some point. “When politicians have a lot of money around, they tend not to put it in the fund,” says the Urban Institute’s Johnson. “When things are bad, they kick the burden down the road and let future taxpayers worry about it.”

Author(s): Alan Greenblatt

Publication Date: 25 Jan 2022

Publication Site: Governing

Will the OPEB Ostriches Ever Run Out of Excuses?

Link:https://www.governing.com/finance/will-the-opeb-ostriches-ever-run-out-of-excuses

Graphic:

Excerpt:

As one stalwart finance officer once told me, “Our pension funds basically sucked up all the new revenue we’d been hoping to set aside to properly fund OPEB.” Those and other priorities for spending each incremental revenue dollar continued to crowd out the opportunity to institute consistent actuarial funding for OPEB benefits; the path of least resistance for policymakers who lack foresight and a sense of fiscal responsibility has been to keep kicking the can.

So it is that between 2015 and 2019, the state and local sector had clearly sorted itself into three classes of employers: (1) those who had trimmed or modified their OPEB commitments and liabilities to sustainable levels, (2) those who had begun actuarial funding of an OPEB trust fund, and (3) those doing nothing and leaving the problem to their successors and future taxpayers.

Author(s): Girard Miller

Publication Date: 18 Jan 2022

Publication Site: Governing

Do We Really Need States to Be Bankers?

Link:https://www.governing.com/finance/do-we-really-need-states-to-be-bankers

Excerpt:

In 1919, the state of North Dakota established its own bank as a public institution. It’s the only one of its kind in the nation, having operated successfully for a full century through the Great Depression and a dozen recessions. Nine other states tried to follow suit in the following decades, only to fail and close their banks’ doors. Founded to provide capital in a farm-centric economy that was underserved by large regional financial institutions that charged double-digit interest rates for ag loans, the Bank of North Dakota has served as an inspiration and touchstone to political populists, anti-bank politicians and easy-money advocates.

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Even beyond what we call the “global superabundance of capital,” however, what the advocates and professional literature overlook is the spectacular disruptive growth of “fintech” — financial technology — that is bringing capital to previously underserved communities and businesses. It turns out that the capital markets, big data, artificial intelligence and techno-wizardry are filling in many of the niches that supposedly cry out for public banks. But first, there are two other strategic public policy alternatives of note: “linked deposits” and using pension-fund capital for nonbank lending, or “shadow banking” as it’s termed by its critics.

As a young municipal finance officer, while moonlighting in grad econ classes in the late 1970s, I became enamored of the concept of linked deposits. The idea was that municipalities should invest in time deposits with banks that pledge to make local loans promoting economic development. I’ll never forget speaking on a panel at the state finance officers’ conference and watching the state’s most prominent public funds banker scowl and shake his head in disgust at what struck him as a pie-in-the-sky concept. At the time, that idea went nowhere.

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Meanwhile, with interest rates at record low levels, public pension funds have been searching everywhere for ways to get a better return on their fixed-income capital allocations. One of the vehicles that emerged in the past decade has been direct lending through professionally managed portfolios that provide loans to businesses at attractive interest rates.

Author(s): Girard Miller

Publication Date: 7 Dec 2021

Publication Site: Governing