Connecting state and local government leaders
COMMENTARY | The federal government hurt state and local governments’ ability to invest in our failing infrastructure last year; now they have a chance to correct that mistake.
It’s no secret that infrastructure in the United States is crumbling. That is why public finance officials applaud U.S. Reps. Dutch Ruppersberger (D-MD) and Steve Stivers (R-OH) for their leadership in introducing the Investing in Our Communities Act in Congress to begin tackling this problem in earnest.
Significant funding will be required to fully and responsibly address this nationwide problem, which is why the federal government must pass this bipartisan bill and reinstate the tax-exempt status for advance refunding bonds—and must also protect that same status of municipal bonds so that state and local governments can improve their infrastructure under the best financial terms possible.
This attention to tax-exempt advance refunding and municipal bonds comes not a moment too soon.
A recent study by the American Society of Civil Engineers (ASCE) stated that, nationwide, we need an estimated $4.6 trillion to address infrastructure. The only way to reach that number is by giving state and local governments access to every tool in the shed, including the use of tax-exempt advance refunding bonds.
In 2018, Congress eliminated our ability to utilize tax-exempt advance refunding bonds, essentially putting the brakes on a system that empowered state and local governments to reinvest billions back into vital infrastructure projects in 2017. This has exacerbated a real crisis and, if there is any hope to really tackle the country’s infrastructure problem, state and local governments need this option restored.
As chairman of the State Debt Management Network (SDMN) within the bipartisan National Association of State Treasurers (NAST), and as deputy treasurer for Public Finance of California, my job is to ensure that states have the capacity to finance their infrastructure spending at the lowest cost possible to state and local taxpayers. Our members know firsthand the positive impact tax-exempt municipal bonds have had and can continue having on our decaying infrastructure.
For more than a century, such bonds have been the primary financing vehicle for state and local infrastructure projects. In fact, 75 percent of all public infrastructure projects in the country are funded by state and local governments using these types of bonds. Congress should protect the tax-exempt status of municipal bonds because they enable state and local governments to rebuild the systems that make this country work, especially when paired with investment from the federal level.
In this year’s State of the Union Address, President Trump said that he was eager to work on legislation with both parties of Congress to pass an infrastructure bill that would deliver new and important infrastructure investment. But on Wednesday both the president and Democratic congressional leaders said a deal to come up with a big federal package is off. One way to move forward without that kind of direct federal investment would be passing the bi-partisan Investing in Our Communities Act to allow states to fully utilize the tools to unleash their ability to rebuild vital infrastructure systems.
Members from both parties agree on the urgent need for infrastructure reform. It might even be the one issue that Congress can come together on to craft, propose, and pass real and effective policy. We cannot miss the opportunity that Reps. Ruppersberger and Stivers have presented us, and we are confident that Congress and the White House will work together to pass legislation that will allow state and local governments the power to rebuild this country, brick by brick.
Tim Schaefer is the chairman of the State Debt Management Network, an affiliate of the National Association of State Treasurers, and serves as deputy treasurer for Public Finance of California.