Category Archives: State & Local Finance

Police and Fire Pensions in Florida: A Comparison of Conditions After 10 Years

Source: Joseph Vonasek, Robert Lee, Compensation & Benefits Review, OnlineFirst, April 5, 2021
(subscription required)

From the abstract:
This article is an analysis of 31 defined benefit police and fire pension plans of 20 municipalities in Florida. The authors conducted a similar assessment of these same plans ten years earlier to determine the fiscal impact of these plans due to state mandates that accompany state funding for each of these plans. The current study analyzes key measures of fiscal health over the last ten years for these same plans to ascertain whether the fiscal condition of these plans remained constant, that is, whether underfunded plans continued to be questionably managed and whether well-funded plans continued to be fiscally stable considering economic trends and the lessening of state mandates on the use of state funding for these plans. The findings show that the overwhelming majority of the plans neither significantly changed their financial condition nor their general ranking among the plans evaluated.

Key Provisions of the American Rescue Plan Act of 2021

Source: National Association of Towns and Townships (NATaT), March 15, 2021

…The American Rescue Plan Act of 2021 includes $350 billion in direct financial relief for all state, local, tribal, and territorial governments; extends federal supplemental unemployment benefits; increases funding for the Paycheck Protection Program; provides funding to assist schools in safely reopening; provides additional utility assistance; and includes additional funding for COVID-19 testing, vaccination, and treatment, among other provisions that assist many industries, businesses, and individuals.

Many of the federal departments and agencies that received additional or new funding for programs and financial assistance will likely begin issuing guidance for this funding over the coming weeks.

This NATaT Special Report, based largely off summary documents provided by Senate Democratic leadership, covers each title of the American Rescue Plan Act of 2021, including funding levels and provisions that may be of interest to towns and townships.

Across U.S. Public Finance, All Sectors Stand To Benefit From The American Rescue Plan

Source: Robin L Prunty, Marian Zucker, S&P Global Finance, March 18, 2021

Key Takeaways:
– The American Rescue Plan’s funding will support credit quality of issuers across all U.S. public finance sectors.
– The plan’s flexibility will afford issuers the opportunity to address unique financial and economic challenges associated with the pandemic.
– Many of the initiatives will support a more robust economic recovery across the country.

White House Releases State-by-State Fact Sheets to Highlight Nationwide Need for the American Jobs Plan

Source: White House, Press Release, April 12, 2021

Today, the White House released state-by-state fact sheets that highlight the urgent need in every state across the country for the investments proposed by President Biden in the American Jobs Plan. The fact sheets highlight the number of bridges and miles of road in each state in poor condition, the percentage of households without access to broadband, the billions of dollars required for water infrastructure, among other infrastructure needs.

Individual fact sheets for each of the 50 states, the District of Columbia and Puerto Rico are linked below.

Analysis for the States: The American Jobs Plan Act

Source: Council of State Governments, 2021

…According to an official fact sheet released by the White House, the Plan proposes an investment of $2 trillion over the course of the next 15 years, consisting principally of one-time capital investments. Funding sources include an increase in the corporate tax rate to 28% and efforts to better enforce global minimum tax rates on corporations.

As proposed, the Plan constitutes the most extensive federal investment in infrastructure, job and workforce development and technology research and development to date. Furthermore, the Plan is unique in its broad focus, including efforts to address climate change as well as long-standing racial injustice and gender inequity. Notably, nearly 40% of the benefits of climate and clean infrastructure investments will be focused on disadvantaged communities. Proposed advances in job development, specifically within STEM fields1 and the care economy, also will directly benefit women and communities of color.

The remainder of this document breaks down the funding in the American Jobs Plan by its major components:
• Transportation
• Building Upgrades, Modernization, and Repairs
• Jobs Investments
• Other Funding

Analysis for states: The Coronavirus State and Local Fiscal Recovery Fund

Source: Council of State Governments, 2021

The American Rescue Plan Act of 2021, a $1.9 trillion economic relief package, was signed by the president on March 11. Part of this package includes the Coronavirus State and Local Fiscal Recovery Fund, which provides approximately $350 billion in new federal fiscal assistance for states, territories, tribes, counties and municipalities. An additional $10 billion is available to states, territories and tribal governments for critical capital projects that directly enable work, education and health monitoring in response to COVID-19.

The American Rescue Plan: K-12
The American Rescue Plan: Employers

How the COVID-19 Pandemic is Transforming State Budgets

Source: Urban Institute, Last updated April 16, 2021

The COVID-19 pandemic and resulting recession have dramatically reshaped state economies and budgets. But the severity of the pandemic and economic downturn varies significantly across states, creating unique economic and political pressures. We collected health, economic, and fiscal data for all 50 states and the District of Columbia to show how each individual state has changed during this crisis and suggest what might be needed for recovery.

Public Pension Governance and Opportunistic Accounting Choice: A Politico-Economic Approach

Source: Odd J. Stalebrink, Pierre Donatella, The American Review of Public Administration, Volume: 51 issue: 3, April 2021
(subscription required)

From the abstract:
The selection of actuarial assumptions used to value state and local government pension liabilities is an important culprit of the looming state and local pension crisis in the U.S. Due to the impact these selection choices have on the value of pension liabilities and annual required contributions (ARC), pension plans are often said to make these choices opportunistically for purposes of freeing up budget resources and making pension funding look better. Using empirical data on 114 state-administered pension plans, this research shows that the likelihood of such opportunistic pension accounting choices (OPAC) increases when the plan is underfunded, organized as a cost-sharing plan, governed by a politically embedded fiduciary body, and when the sponsoring government is surrounded by a high degree of unionization, and is divided in terms of partisan control. The results also show that the likelihood of OPAC decreases when a pension plan is subjected to an audit by a Certified Public Accountant (CPA), suggesting that professional gatekeepers can play an important role in limiting the adverse effects of OPAC behavior, including insufficient ARC payments and reduced transparency of governmental financial reports.

Outlook improves to stable amid stronger budgetary picture and federal support

Source: Matthew Butler, Emily Raimes, Nicholas Samuels, Timothy Blake, Moody’s, March 11, 2021
(subscription required)

The outlook for US states has improved to stable from negative based on stronger state finances and continued economic and fiscal support from the federal government. Most states have lifted their revenue forecasts for the current fiscal year 2021 and upcoming fiscal 2022, reflecting stronger revenue collections than anticipated at the start of fiscal 2021 (began July 1 for most states). The improved revenue performance, which we expect to continue based on current macroeconomic forecasts, will accommodate budgeted spending and retention of financial reserves. A further fiscal support measure passed by Congress this week will additionally spur consumer spending and, in turn, bolster state tax revenue, as well as provide direct financial aid to states to help cover costs associated with the pandemic.