Washington, DC — As Congress prepares to take on the issue of comprehensive tax reform, Congressmen Randy Hultgren (IL-14) and C.A. Dutch Ruppersberger (MD-02), Co-Chairmen of the Congressional Municipal Finance Caucus, have again sent a bipartisan letter to leaders of the House Ways and Means Committee in support of a critical tool that helps local and state governments finance new roads, schools, hospitals, fire stations and more. Also signed by 154 of their colleagues (95 Democrats, 61 Republicans total), the letter asks leadership to reject any proposal to cap or eliminate the deduction on tax-exempt municipal bonds used to finance the vast majority of infrastructure projects in America’s communities.
Nearly two-thirds of core infrastructure investments in the United States are financed with municipal bonds. Proposals previously submitted by federal officials have limited the value of tax benefits for municipal bonds, or eliminated the tax exemption on municipal bond interest altogether.
“Municipal bonds are a lifeline to local communities looking to expand a hospital or repair their infrastructure,” said Congressman Hultgren. “These tools of ‘fiscal federalism’ allow municipalities to raise their own funds tax-free, using their own expertise and avoiding the heavy bureaucracy of the federal government. We should preserve this Main Street financing tool for municipalities intimately connected to the needs of their communities.”
As a former county councilman, county executive and president of the Maryland Association of Counties, Congressman Ruppersberger believes that tax-exempt bonds are among the most efficient ways to fund critical infrastructure projects that have created hundreds of thousands of jobs.
“If the federal income tax exemption is eliminated or limited, states and localities will pay more to finance projects, leading to less infrastructure investment and fewer jobs,” Congressman Ruppersberger said. “Worse, they will be forced to shift costs to their main revenue source – property taxes – hitting the already-suffering real estate market and the wallets of American homeowners.”
Municipal bonds have funded more than $1.9 trillion worth of infrastructure construction. This financing went to the construction of schools, hospitals, airports, affordable housing, water and sewer facilities, public power utilities, roads and public transit. In 2015 alone, more than $400 billion in municipal bonds were issued to finance the projects that touch the daily lives of every American citizen and business.
In Illinois, municipal finance has helped fund key infrastructure improvements:
· Red Gate Bridge, St. Charles: Without the tax exemption, the City of St. Charles would pay an additional $619,000 in interest costs following the construction of the bridge in 2011.
· Illinois water infrastructure: Communities across the state in 2016 issued bonds to fund improvements in drinking water and wastewater projects. Cities and towns would pay an additional $262.3 million in debt service costs without the exemption, a 25 percent increase.
· Presence Health: This Illinois-based hospital and senior living care provider last year was issued $1 billion in bonds by the Illinois Finance Authority for facility improvements that are critical to serving Illinois residents. Presence is among the largest Medicaid providers in northern Illinois.
The full letter signed by all 156 Members of Congress is below:
Dear Chairman Brady and Ranking Member Neal:
As Congress considers tax reform and infrastructure financing, we, the undersigned, write to express our strong support for an already potent tool already in hand – the tax-exempt municipal bond. For more than a century, states and local governments have depended on this reliable and efficient means of financing.
Nearly two-thirds of core infrastructure investments in the United States are financed with municipal bonds. In 2015 alone, more than $400 billion in municipal bonds were issued to finance the projects that touch the daily lives of every American citizen and business. They are the roads we drive on, schools for our children, affordable family housing, water systems that supply safe drinking water, courthouses, hospitals and clinics to treat the sick, airports and ports that help move products domestically and overseas, and, in some cases, the utility plants that power our homes, businesses, and factories. These are the pro-growth investments which spur job creation, help our economies grow, and strengthen our communities.
A combination of local control and local responsibility makes municipal bonds an incredibly effective and efficient tool. Voters throughout the country overwhelmingly support tax-exempt municipal bonds, which are either approved by locally-elected officials or directly through bond referenda – fiscal federalism at its finest. This must help explain why the default rate is less than 0.01%. Federal tax exemption reduces the cost of issuing municipal bonds, but it is these voters who will pay the interest and principle on this debt. As a result, over the last decade overall state and local borrowing has actually declined in proportion to the economy, while still financing more than $2 trillion in new infrastructure investments. And, if simply left alone, municipal bonds likely will finance another $3 trillion in new infrastructure investments by 2026.
Furthermore, millions of Americans depend on municipal bonds for their economic security, and invest in them because of their low-risk nature. Nearly three-quarters of individual investors earn less than $200,000 per year and more than three-quarters are 55 or older. Businesses also rely on municipal bonds as a safe, stable, long-term investment.
In conclusion, changes to the tax-code should recognize the vital role of tax-exempt municipal bonds. Any changes under consideration to the tax exempt status that would increase the cost of financing for states and local government should be provided very careful consideration. We believe the current tax-exempt status contributes to efficient economic growth that benefits all Americans.
Through the Public Finance Network, NAST recently signed onto a letter sent to members of Congress on the importance of retaining the tax exemption for municipal bonds.
“For more than 100 years, the organizations listed above have consistently depended on the preservation of the municipal bond tax exemption as a fundamental component of our nation’s intergovernmental partnership. It is the bedrock by which State and local governments, authorities and nonprofits of all sizes can cost effectively access the capital markets and in turn provide essential infrastructure for their citizens.”
VIEW THE LETTER
NAST continues to support the development of Electronic Municipal Market Access (EMMA). Transparency and timely disclosure of relevant information in the municipal securities market is in the best interest of all participants. NAST is constantly working with other organizations and associations to better define what financial, operating and other information is relevant and useful to the market recognizing the significant differences of issuers by size, sector and frequency of issuance. We understand that the Government Finance Officers Association (GFOA) has submitted its own comments regarding the MSRB’s Strategic Priorities document. In working with GFOA, we have decided to make some similar suggestions for EMMA improvement.
NOW, THEREFORE BE IT RESOLVED, that the National Association of State Treasurers and its affiliate, the College Savings Plans Network, urge the President and the Congress of the United States to pass these three bills (or substantially similar bills in subsequent Congresses) in a timely manner to enhance and expand opportunities for individuals with disabilities and their families to save for their future needs in ABLE programs.
NOW, THEREFORE BE IT RESOLVED, The National Association of State Treasurers does not support
HR 5311 in its current form and recommends that public retirement funds oppose passage of HR 5311, so as to maintain the integrity and efficacy of the relationship between institutional investors and proxy advisory firms.
Oklahoma State Treasurer Ken Miller Elected 2017 President
SEATTLE, WA – The National Association of State Treasurers (NAST) today elected Oklahoma State Treasurer Ken Miller as its 2017 President during the association’s annual conference in Seattle. Treasurer Miller will succeed outgoing President James L. McIntire, the Washington State Treasurer, on January 1, 2017.
“It is an honor to be chosen by my colleagues to serve as president of this bipartisan national network,” said Treasurer Miller during NAST’s annual conference. “For more than four decades, NAST has addressed some of the country’s toughest fiscal challenges by promoting policies and programs that have proven successful at the state level. I look forward to helping guide this association in its next phase of growth.”
“I would further like to thank Treasurer McIntire for his leadership over the past year. Under his presidency, NAST has pushed to improve America’s aging infrastructure, help families save for the rising cost of higher education, return unclaimed property to its rightful owners and enhance financial literacy across the nation. I am excited to continue working with him and the entire executive committee to build on this momentum.”
Treasurer Miller is the first Oklahoman in NAST’s 40-year history to serve as president of the association. He was elected state treasurer of Oklahoma in 2010 and was reelected in 2014.
Alongside Treasurer Miller, the association also elected Beth Pearce, Vermont State Treasurer, as Senior Vice President of NAST and Mark Gordon, Wyoming State Treasurer, as Secretary-Treasurer of NAST.
Other 2017 NAST Executive Committee members elected include:
· Past President, James McIntire, Washington Treasurer
· President, Ken Miller, Oklahoma Treasurer
· Senior Vice President, Beth Pearce, Vermont Treasurer
· Secretary-Treasurer, Mark Gordon, Wyoming Treasurer
· Western Region Vice President, Pamela Leary, Alaska Treasurer
· Midwestern Region Vice President, Don Stenberg, Nebraska Treasurer
· Southern Region Vice President, Curtis Loftis, South Carolina Treasurer
· Eastern Region Vice President, Deborah Goldberg, Massachusetts Treasurer
Today, Senators Richard Burr (R-NC) and Bob Casey (D-PA) introduced the Boost Saving for College Act, which will enhance 529 college savings accounts to help more American families save for college. This legislation would provide a tax credit to low-income and middle-income families who might not ordinarily save for college, encourage employers to match the college savings of their employees, allow savings that aren’t needed for college to be rolled over into a Roth IRA for retirement, and enable families with a disabled child to rollover a 529 account into an ABLE account.
“College savings accounts are incredibly popular because they are a smart way for families to save for a child’s future,” said Senator Burr. “In the past few years, I have advocated for making college more affordable, including getting legislation signed into law that has saved student loan borrowers $36 billion. The Boost Act is a commonsense bill that will expand ways for families to save and prepare for college so that they don’t have to rely so much on debt to get a college education.”
“Saving for a college education is a substantial challenge for families that Congress should be working to make easier,” saidSenator Casey. “A college education is the surest ticket to the middle class and a family sustaining income. This bill will help more families save and ensure that more young Americans have a fair shot to attend college.”
College savings accounts, also known as “529 accounts,” enable families to better prepare financially for the cost of sending their child to college. These accounts allow families to save tax-free, and they can use these savings to pay for higher education expenses, such as tuition, fees, books, room and board, and computer equipment.
As the cost of higher education continues to rise, 529 accounts have become an increasingly popular and necessary tool for families to save for college so that they do not have to rely so heavily on student loans. Today, the average cost of obtaining a degree from a two-year institution is more than $19,000, and it is nearly $100,000 from a four-year university.
The Boost Saving for College Act would make 529 accounts a more attractive option by adding some significant enhancements, such as:
Millions of Americans do not have the financial resources they need to access higher education, buy a home or retire comfortably. If we want to continue to compete globally, it is time for Congress, state governments, the private sector and communities to renew our effort to raise the level of financial literacy and security in our country.
Many Americans are in a perilous financial situation today, with nearly 75 percent reporting that they live paycheck to paycheck. Only 40 percent of US adults keep a budget and track their spending, while 27 percent of families have no savings at all. Alarmingly, only one-third of parents have a plan to pay for college expenses, even as student loan debt has skyrocketed 235 percent in the past decade. And only 26 percent of people are expected to be able to retire in a traditional way.
Like all state treasurers we are on the front line of these issues, overseeing financial tools such as 529 college savings plans and pensions, and we are deeply troubled by these statistics. This month – Financial Literacy Month – we will continue our efforts to raise awareness of the importance of financial literacy and work with the private sector and our government partners to do the same.
SPRINGFIELD – Illinois families planning for the future well-being of a loved one with a disability will be able to leverage the investment power of a multi-state consortium to invest their money for disability‑related expenses, Illinois Treasurer Michael Frerichs announced today.
The consortium will manage a tax‑advantage investment portfolio similar to those currently used to save for college, such as Illinois’ Bright Start or Bright Directions program. Without the consortium, individual states would lack the market share to ensure low cost and high quality investment options.
“Every parent wants the best for their son or daughter. That feeling weighs a bit heavier on parents of children with a disability or blindness,” Frerichs said. “By working together with other states, we can accomplish what would be impossible if we were to go it alone.”
The federal Achieving a Better Life Experience Act (ABLE) of 2014 authorized these tax-advantaged investment accounts similar to college savings programs such as Illinois’ Bright Start or Bright Directions. College investment programs are able to provide low fees and quality investment options by leveraging investments from the hundreds of thousands of individuals who participate.
The opposite is true with ABLE because individual states typically do not have enough potential participants to solicit a competitively priced and structured program. However, with states working together and leveraging resources, an economy of scale is created to drive down cost and attract quality investment products.
Nine states so far have agreed to work together to help these individuals and families – Alaska, Illinois, Iowa, Kansas, Minnesota, Missouri, Nevada, Pennsylvania and Rhode Island. The states represent more than 47 million residents and cover four time zones. Consortium membership remains open and other states are considering joining. Nationally, more than 40 states have passed ABLE legislation. None have yet to open an ABLE program.
The consortium is unique in that each state will have its own ABLE program over which it will exercise authority but will offer common program elements such as investment options. The next step is to seek public bids for investment services, record keeping, and marketing services.