The Week in Public Finance: Independence Day Edition
A roundup of money (and other) news governments can use.
Life, liberty and the pursuit of happiness
A new Pew research study notes a distinct generational gap between public workers when it comes to retirement: older workers are more apt to favor more generous retirement benefits in exchange for somewhat lower salaries, while younger workers were more likely to favor the reverse. Perhaps not surprisingly, 36 percent of younger workers couldn’t even identify what their retirement plan was. Still, the millennial generation's emphasis on quality of life gives it something in common with older workers. Although public employees said they place high importance on their retirement and pension plans, Pew found that these workers were more likely to list job security, work-family balance and health care as extremely important than to list retirement benefits as extremely important.
Puerto Rico’s shaky finances took a turn for the worse this week as the commonwealth’s overall credit rating was delivered a three-notch blow from Moody’s Investors Service on July 1 and another rating agency could take similar action. Now rated B2 (from Ba2) by Moody’s, the downgrade affects $14.4 billion in debt and is a result of Puerto Rico passing a bill that would allow it to restructure the debt of some of its public utilities. Already at junk bond status, the B2 rating means that Moody's does not have confidence that Puerto Rico has made enough progress in recent months to meet its financial commitments.
Earlier this week, Standard & Poor’s announced it was placing the commonwealth and its related utilities on a negative credit watch for the same reason. Although Puerto Rico's legislation excluded General Obligation bond debt and many other of the commonwealth’s entities, S&P Analyst David Hitchcock said “the introduction of the bill by Governor Alejandro Garcia Padilla and its approval by the legislature is indicative of the growing economic and fiscal challenges for the commonwealth as a whole.” He added there were concerns about whether Puerto Rico could have enough short-term cash available in the future and how that might affect its "willingness to continue to meet its obligations to bondholders."
Following the Moody’s downgrade, Puerto Rico issued a spitting statement. In addition to noting that the commonwealth passed the first balanced budget in 22 years this week (after many were worried that some financial shortfalls would inhibit that), Gov. Padilla called the action “unfair” and that it “disregards the hard work” the commonwealth has done to get its finances in order. “I’m extremely disappointed that Moody’s has ignored the facts in their decision to downgrade Puerto Rico’s credit,” Padilla said, adding that the economy and crime rates have improved while his government has made fiscal sustainability a priority.
Padilla concluded with a thinly veiled threat, saying that he’s asked his attorney general to “clear the good name” of the commonwealth and, “that credit agency, and any other entity acting alike, will have to answer for this offense.”
Let the facts be submitted
A new report by Texas Comptroller Susan Combs took a look at school construction spending in the state between 2007 and 2013 and found that secondary schools were more expensive to build than middle or elementary schools, but that costs also varied by year and metro area. Middle and elementary schools averaged $149 per square foot to build while secondary campuses averaged $163 per square foot. But overall, the most expensive schools were opened in 2009 and 2010, “meaning they likely were initiated during the building boom prior to the recession,” the report said. Over the six year period, the Houston area, which accounts for 169 campuses was the least expensive, while the San Antonio area had the highest costs.
Construction didn’t necessarily follow enrollment growth: School districts in the Houston area had 30 percent of statewide enrollment growth, but only 20 percent of the campuses built from 2007 through 2013. The comptroller’s report recommended that the commissioner of education establish data collection and reporting standards for school construction costs and that those stats be reported publicly. Data should include things like total construction cost, cost per square foot and per student so that districts and taxpayers can compare projected construction projects with other districts.
Imposing taxes without our consent
A full 238 years ago, a bunch of farmers, lawyers and other businessmen gathered in Philadelphia to sign the Declaration of Independence, officially marking the colonies' desire to separate from the British Empire. Their main complaint? Taxes! Just a friendly reminder that public finance matters. Click here to read the full declaration and try find the subtitles for today's WIPF within the document.
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