The Week in Public Finance: Clear Skies, Bad Moons and Superstorm Sandy
A roundup of money (and other) news governments can use.
Blue skies are gonna clear up
For all the handwringing and finger pointing of local and state governments regarding economic uncertainty with regard to the federal government, Fitch Ratings Agency has issued a new report saying it appears the storm has passed.
Revenue and spending have so far been in line with budget forecasts and concerns over the impact of health care reform – while difficult – have not had a negative impact on budgets. Additionally, the federal stalemates of last year don’t look likely to happen again soon.
“Congressional spending agreement has alleviated the threat that federal developments could derail the economic recovery or lower funding to states,” said Laura Porter, managing director, public finance at Fitch. She added that April income tax returns will be the “final test” of the accuracy of budget forecasts. But despite the negative economic impact of the harsh winter weather on many places, “states generally are seeing more upside than downside potential for revenue results."
But in New Jersey there’s a bad moon rising
Gov. Chris Christie isn’t the only one struggling in New Jersey. March brought several bad financial omens. For one, amid talk of a potential state takeover of Newark’s budget, Moody’s Investors Service rubbed salt in the open wound by announcing that it was contemplating lowering Newark’s A3 rating (the lowest in the top, “A,” tier) to Baa1, just two steps above junk status. A downgrade in the city's bond rating would mean it would cost the city more to borrow money due to higher interest rates.
But the state might not be the best financial steward for the Brick City’s troubled budget. Fitch ratings followed up the Moody’s announcement by declaring it was revising the outlook for $2.4 billion of New Jersey’s outstanding debt from "stable" to "negative."
Fitch cites “ongoing budget strain” and economic performance “that is providing insufficient support to meet the growing demands of the state's high long-term liabilities” as key reasons for the negative outlook. (A negative outlook means a rating agency could downgrade a state or municipality's bond rating, though it does not necesserially mean that it will.)
An ironic kicker is that Fitch warns the Garden State’s budget isn’t structurally balanced because officials are relying on one-time measures to balance the budget (including the 2014 budget) while it isn’t fully funding pension contributions. And these are the guys who want to fix Newark’s financial problems?
Check out this disappearing act
A new audit released by New York State Comptroller Thomas DiNapoli has found that nearly half of $1.2 million in equipment purchased by the Division of Homeland Security and Emergency Services, designed to keep polling stations open after Superstorm Sandy kind of, well, disappeared. The equipment “was not received, not recovered or not properly disposed of,” DiNapoli says in his news release. He is, not shockingly, recommending that the division “improve how it purchases and tracks equipment during emergencies.”
The audit is the first of a series of state audits in the wake of the massive storm, which hit the Northeastern coastline more than a year and a half ago. The audits primarily examine whether state agencies received goods and services at the appropriate price. DiNapoli’s office also tracks Superstorm Sandy contracts on its website.