Tag: Governing

Public Pensions’ New Quandary: Coping With Geopolitical Turmoil

Mary Pat Campbell

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

Mary Pat Campbell

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

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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.

Mary Pat Campbell

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

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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

Mary Pat Campbell

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.”

….

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?

Mary Pat Campbell

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

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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?

Mary Pat Campbell

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.

…..

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.

…..

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

How Jefferson and Franklin Helped End Smallpox in America

Mary Pat Campbell

Link:https://www.governing.com/context/how-jefferson-and-franklin-helped-end-smallpox-in-america.html

Excerpt:

In the new world, inoculation had a very rough reception. When John Dalgleish and Archibald Campbell began inoculating individuals in Norfolk, Virginia, an angry mob burned down Campbell’s house. Similar incidents occurred in Salem and Marblehead, Mass. In Charleston, S.C., an inoculation control law of 1738 imposed a fine of £500 on anyone providing or receiving inoculation within two miles of the city. A similar law was passed in New York City in 1747. 

The measures in New England were so draconian that Benjamin Waterhouse noted the paradox: “New England, the most democratical region on the face of the earth voluntarily submitted to more restrictions and abridgements of liberty, to secure themselves against that terrific scourge, than any absolute monarch could have enforced.” (This, strangely prescient, anticipates the current debate about liberty versus public health). It was in the middle colonies — Maryland, Pennsylvania, New Jersey — that inoculation was most tolerated in the second half of the 18th century. That’s why Jefferson made the long journey to Philadelphia to be inoculated in 1766. 

Jefferson first became aware of the discovery of a true smallpox vaccine from the newspapers he read in Philadelphia and the new capitol in Washington, D.C. Then, on Dec. 1, 1800, just after Jefferson’s election to the presidency, Benjamin Waterhouse sent him his pamphlet on the vaccine with a lovely cover letter saying that he regarded Jefferson as “one of our most distinguished patriots and philosophers.” Jefferson responded immediately, thanking Waterhouse for the publication and declaring, with his usual grace, that “every friend of humanity must look with pleasure on this discovery, by which one evil the [more] is withdrawn from the condition of man: and contemplating the possibility that future improvements & discoveries, may still more & more lessen the catalogue of evils. in this line of proceeding you deserve well of your [country?] and I pray you to accept my portion of the tribute due you.” 

Author(s): Clay Jenkinson, Editor-at-Large

Publication Date: 29 April 2020

Publication Site: Governing

Why Are Pedestrian Deaths at Epidemic Levels?

Mary Pat Campbell

Link: https://www.governing.com/now/why-are-pedestrian-deaths-at-epidemic-levels

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Excerpt:

For years, transportation consultant and writer Angie Schmitt has tried to pick apart why it works that way and how the U.S. could become a less car-centric and less dangerous place. In 2020 she published Right of Way: Race, Class, and the Silent Epidemic of Pedestrian Deaths in America, an examination of the toll that the nation’s auto-centric infrastructure takes on those who are not encased in steel and glass when they travel.

Schmitt found that even as reported rates of walking among Americans have been on the decline, pedestrian deaths have surged in recent years. Between 2009 and 2019, total driving miles increased by 10 percent but pedestrian deaths increased by 50 percent. In Europe, by contrast, they fell by 36 percent over the last decade. Since then, the U.S. toll has only grown worse.

…..

Schmitt: Design is important, but I think we also need to change cars. We can go a lot of the way there just with better vehicle safety regulations. The RAND Corporation estimated we could be saving at least 10,000 lives a year, maybe 20,000, if we were requiring some existing vehicle technologies in all cars like automatic emergency braking. Or blind spot detection and alcohol ignition interlocks. A combination of things like that already exists, and we could save tens of thousands of lives. We’re just not doing it. There’s been so little attention paid, it’s been hard to generate political will.

Author(s): Jake Blumgart

Publication Date: 23 July 2021

Publication Site: Governing

States Weigh Bans on Ransomware Payoffs

Mary Pat Campbell

Link: https://www.governing.com/security/states-weigh-bans-on-ransomware-payoffs

Excerpt:

As ransomware attacks continue to wreak havoc on police departments, school districts and city and county governments, some state legislators say they’ve had enough.

At least three states—New York, North Carolina and Pennsylvania—are considering legislation that would ban state and local government agencies from paying ransom if they’re attacked by cybercriminals. A similar bill in Texas died in committee earlier this year.

Prohibiting ransom payments would help deter attacks because cybercriminals would know they couldn’t get paid and would have no financial incentive, the legislators say.

“If criminals know that Pennsylvania will not pay ransom, we are going to make ourselves a less likely target for these types of attacks,” said Republican state Sen. Kristin Phillips-Hill, who is sponsoring a no-ransom bill. “Our citizens’ personal information is on the line. We have to do everything we can to protect them.”

Author(s): Jenni Bergal, Stateline

Publication Date: 27 July 2021

Publication Site: Governing

Florida Alters COVID-19 to Show Artificial Decline in Deaths

Mary Pat Campbell

Link: https://www.governing.com/now/florida-alters-covid-19-to-show-artificial-decline-in-deaths

Excerpt:

The downloadable data sets on cases and deaths included the report date as well as the date a person died or got sick, allowing journalists and independent researchers to select the best metric for their purposes. The daily reports showed additional cases and deaths added from one day to the next.

In June, as case numbers dropped and vaccination rates continued to rise, the health department discontinued the dashboard and changed to a weekly report. The only near-daily data was submitted by the health department to the CDC and published on the CDC Trend Tracker website.

At first, the data on the CDC website was updated in a largely predictable manner, similar to the way that the DOH had reported daily changes throughout the pandemic. Then on Aug. 10, without warning or any explanation from the health department or the CDC, the data for nearly every day of the previous year changed. Neither agency immediately explained the changes.

Author(s): Sarah Blaskey, Ana Claudio Chacin and Devoun Cetoute, McClatchy Washington Bureau

Publication Date: 31 August 2021

Publication Site: Governing

Waking from Bankruptcy Shock, Stockton Comes Back to Life

Mary Pat Campbell

Link: https://www.governing.com/now/waking-from-bankruptcy-shock-stockton-comes-back-to-life

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Excerpt:

The metrics on the OGSP give a high-level view of how progress can be measured, but they are just part of the data that Regan’s office collects. Hundreds of other data points are in a performance scorecard that includes factors that contribute to attainment of large targets such as reduced crime rate.

High-level goals may take time to achieve. The StocktonStat portal, scheduled for launch on June 30, will include data on the number of potholes and streetlights repaired, or square feet of graffiti removed, says Regan. “The stat process, and this shared data, are part of a continuous conversation and relentless follow up toward our performance targets.”

Author(s): Carl Smith

Publication Date: 16 June 2021

Publication Site: Governing

Kansas May End Federal Jobless Aid to Encourage Workers

Mary Pat Campbell

Link: https://www.governing.com/work/kansas-may-end-federal-jobless-aid-to-encourage-workers

Excerpt:

Gov. Laura Kelly said Thursday she was weighing whether to end Kansas’ participation in federal unemployment programs started during the COVID-19 pandemic, as many Republican states say they will pull out of the initiatives.

Businesses have complained of difficulties in hiring workers, something many Republicans have chalked up to a slate of programs aimed at cushioning the blow for residents laid off due to the economic turmoil of the past year.

Kelly’s office confirmed in a statement Wednesday that Kansas wasn’t following in the footsteps of Missouri, Iowa and about a dozen other state in ending their participation in the programs.

Author(s): Andrew Bahl, The Topeka Captial-Journal

Publication Date: 14 May 2021

Publication Site: Governing