Municipal Finance Series

Should Every Town And Village Have Unfettered Access To The Municipal Bond Market?

Kent Hiteshew and Ivan Ivanov write that the United States municipal bond market suffers from fragmentation, poor liquidity, and inadequate disclosure due to the dominance of small, infrequent issuers who struggle to meet regulatory disclosure requirements. They argue that greater involvement of state-backed municipal bond banks could help address these issues by pooling smaller issuances, reducing borrowing costs, and streamlining disclosure obligations for local governments.

Banking Consolidation Raises the Costs for Local Governments to Issue New Debt

New research from Renping Li finds that consolidation among investment banks has produced higher underwriting costs for local governments in issuing muni bonds. Importantly, Li says these costs are not offset by efficiency gains and that the result is a deterioration in local government finances.

Local Governments Have Limited Ability or Incentive To Control Spending on Union Wages and Benefits

Many cities across the United States are experiencing structural budget deficits. However, in part due to salary and benefit promises to public-employee unions, there is little capacity to control spending. Local politicians have few electoral incentives to push back against union bargaining demands to address these rising costs.

Government Influence in Accounting Rulemaking Has Led to Understated Costs and Worse Financial Outcomes

Municipal and state governments provide input to the organization that creates their accounting standards. Such input by stakeholders can be helpful, but their influence has produced some accounting rules that diverge from both economic reality and private sector rules. These deviations allow governments to understate budget liabilities, including pensions plans, and put at risk the financial health of states and cities across the United States.

The State of the $2 Trillion Local Government Checkbook

Local governments in the United States spend trillions of dollars each year delivering essential services and infrastructure, with enormous implications for our economy and quality of life. Chris Berry and Justin Marlowe examine the links between municipal governance structures and fiscal outcomes, revealing the state of municipal finances today.