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Federal Policy
By Brett Bolton, BDA
BDA Bonding Time podcast with NAST
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Brett Bolton:
Brett Bolton:
Welcome to another episode of Bonding Time. I'm Brett Bolton with the BDA. Today we have a guest from the National Association of State Treasurers, Dillon Gibbons, who is the policy director at NAST. Dillon, how are you?
Dillon Gibbons
Dillon Gibbons
I'm doing great, Brett. Just getting ready for Christmas and looking forward to the new year.
Brett Bolton:
Brett Bolton:
Somehow it's already late December, but here we are. I assume, Dillon, we'll release this right after the new year. So I want to clearly start in the current mindset here, late 2023, then we'll turn to 2024. But generally speaking, I assume most of my membership knows what the National Association of State Treasurers is, so I don't think we really need to dig too much into that. But speaking more broadly, as policy director at NAST, what is NAST's main advocacy goals here in DC?
Dillon Gibbons
Dillon Gibbons
Well, we've got essentially four main pillars of issues that we work on with the state treasurers, there's a few more ancillary issues. But the four main issues are related to unclaimed property, so returning unclaimed property to the hands of the rightful owners. We work on college savings issues, so 529 programs. Many of those are run out of state treasurer's offices. As well as ABLE savings accounts, those are the savings accounts for disabled individuals. Then state debt management, so bond issuance.
Brett Bolton:
Brett Bolton:
Yeah, and I know we have a lot of crossover there with bonds and we do a lot of work together here in DC in the public finance network. So digging into 2023, when I wrote this question to you, I started to laugh in my mind, I forget that former speaker McCarthy had 15 votes to get the gavel and that set the tone, I think, for 2023. It's been a lackluster legislative year to put it mildly. As I'm sure most of our membership and listeners know, he was removed from the office fairly recently and there's a new speaker, speaker Mike Johnson, who's a bit more of a legislative, I don't want to say newbie here in DC, but more of an unknown, let's say, how he's going to proceed, especially in 2024. So with that big windup and lead in, 2023 did not bring much joy for the muni advocacy community here in Washington DC. Does 2024, from your perspective, look any brighter for any or all of NAST legislative priorities?
Dillon Gibbons
Dillon Gibbons
I think there's a couple of issues that I think we have an opportunity for success in 2024. I think a number of them will wait until 2025. But with regard to unclaimed property, one of the things we're working on right now is related to returning unclaimed savings bonds to the public. The US Treasury is sitting on over $30 billion in unclaimed savings bonds. What we're trying to do is work with the federal government to grant access to the state unclaimed property administrators to the records and the title of that. So we can return that. The state treasurers and the unclaimed property divisions have shown that they're really good at getting this unclaimed property out to individuals. So that's an issue that I don't think requires a lot of legislative agreements. So that's a policy that there's not a lot of conflict there to where I think we may be able to get some success there.
Then it's mostly working with US Treasury on our college savings issues. We're trying to make some expansions to 529 savings programs. One of those is to ensure that parents assets aren't counted towards a student when it comes to the FAFSA and determining the amount of tuition or funds that a student can receive. So that as well is an issue that if we can get some movement with Congress may be able to get through in 2024.
But a couple of our other issues I think are going to struggle. We've got some provisions that were passed as part of the Tax Cuts and Jobs Act related to ABLE savings accounts, and there's three provisions that were part of that that are set to expire with the Tax Cuts and Jobs Act that is able to work contributions the saver's tax credit for ABLE and 529 ABLE rollover. So, that allows 529 accounts to roll over to IRAs. But I think we'll probably dive into this a little bit more with the Tax Cuts and Jobs Act, they're likely not going to be doing anything to that in 2024. So I believe those issues we're going to have to work on, but I don't know that we're going to see success there.
But we are going to be working on some regulatory issues related to the Financial Data Transparency Act this next year with the SEC. That was passed by Congress at the end of last year in 2022. The way it impacts debt issuers is it requires them to submit financial records to the MSRB in a structured data format. We don't know what that format is going to be. We don't know what records those are going to be, so we don't know what kind of investments public agencies are going to need to make in the form of an unfunded mandate. So that's one of the issues that we are going to be working on and I hope to make some progress on. But again, that's on the regulatory side.
In Congress, I think we're going to see a lot of what we saw in 2023, maybe even less. We've got an election coming up and when in election years, folks tend not to make big changes or any compromise or any sort of agreement on legislation. It's the opportunity to hold up legislation and then point to the other side as being unreasonable and use that as part of the platform to push their agenda and get their party officials elected. So I think we're going to see a lot more of that this year. So any of the big changes we're looking to make, I think we're going to have to wait until 2025.
Brett Bolton:
Brett Bolton:
We should just stop recording and redo this next Christmas. Is that what I'm hearing?
Dillon Gibbons
Dillon Gibbons
I think we're going to be talking about the same issues, all the same things that we care about now and the same things that we cared about last year. We are going to need to work. Now, that's not to say that there's nothing to do. So I think when we look back at the last election in 2022, we saw 84 new members elected to Congress, seven in the Senate, 77 in the house. I think I got that right. Yes, that adds up to 84.
Brett Bolton:
Brett Bolton:
That's an incredible number. I think we're probably on track to do the same in the house, if not more, this election cycle.
Dillon Gibbons
Dillon Gibbons
Right. So we have a responsibility to educate these folks who probably don't come in with a strong public finance background. So it is our responsibility to go in, let these new members know about our top issues when it comes to tax-exempt advanced refundings, when it comes to tax-exempt municipal bonds. These issues are not things that the general public is knowledgeable on. That includes members of Congress. So we have to go in and let them know. So if they're not going to be passing anything this year, what we need to be doing is educating them this year in the hopes that we can get it done in future years.
Brett Bolton:
Brett Bolton:
Yeah, I cannot say that better. So I appreciate that sentiment and it's something to look forward to in 2024. I think at least from our perspective, get some of our members up here for multiple fly-ins to further along that educational process. So building off what you just said and what I think teed up perfectly there, December 31st, 2025, a lot of the personal provisions and the Tax Cuts and Jobs Act sunset.
Just looking purely at the numbers, the cost figures for those provisions, as well as other things such as the state and local tax cut. I mean... Excuse me. Yeah, the SALT provision that is really expensive, and I don't think you can pass another tax bill without major changes to that provision. How concerned are you for, say, the tax exemption being used as a pay for or other bond financing provisions, at least being in the discussion as I think the tax exemption is a top 10 tax expenditure for the federal government at this juncture. So how concerned are you about that?
Dillon Gibbons
Dillon Gibbons
Brett, I got to be honest, I'm very concerned. I know that you've worked with local governments in the past. I've worked closely with local governments in the past what we've seen is when the state or the federal government needs more money, what they usually do is they just pass that along to the locals. If they can't raise revenues by eliminating this tax-exempt municipal bonds, local governments and state governments will have to raise additional revenues to cover that added expense. They're going to do that from the locals.
But when they do that, it's not going to show up as a tax from the federal government. So it's a way that the federal government can raise funds, with their fingerprints off of the actual increase in taxes and revenues that they're going to be passed along to the general public. So I think absolutely it is a threat, as the federal government looks for ways to generate revenue.
The topic comes up every few years, it's going to come up again, it will be part of the discussion. Again, it just comes down to what is it that we can do between now and then to try and safeguard the tax-exempt bond status.
I think going in and sharing a very personal and individual level with representatives in Congress about the projects that are happening in their communities and how those projects would be impacted, that their constituents would be personally impacted by the elimination of the tax-exempt municipal bonds, I think there's projects all across the nation. I just don't know that their representatives are aware of them and what those impacts would be. So taking and putting some numbers to the actual projects and sharing with representatives is the best and most effective way to prevent this from being eliminated. It's definitely going to be on the menu. We just don't want it to actually be part of any kind of final tax legislation.
Brett Bolton:
Brett Bolton:
Yeah, it is a blessing to be able point at a tangible benefit, especially at the state level. I know that's definitely a helpful anecdote for members up there on the hill. Quick follow up there. I had an interesting discussion with somebody who doesn't think there's much chance that the Tax Cut and Jobs Act sunsets get extended. I assume we'll have a split Congress and who knows who's going to be at the White House. Is that a rational thought or do you think there's no way they let personal tax cuts raise?
Dillon Gibbons
Dillon Gibbons
That's a lot of guessing Brett, I can't actually get this wrong and that it is just a guess. There is requests from both sides of the aisle to extend the tax cuts. The Tax Cuts and Jobs Act, there's legislation to just renew it wholesale, there's legislation to piecemeal parts that folks like and parts that folks don't. The idea that Congress will want to knowingly raise taxes on individuals, well, again, this comes as they're not raising taxes. If they do nothing, it's just sunsets. Somebody else did it. But there is going to be a lot of pressure to renew many of the provisions. And there is going to be a tax bill, a major tax bill in 2025. Congress has indicated that that's what they're going to do. All the leaders have indicated that they're going to do that. The administration is aware of that, and they have indicated that they are going to be looking in 2024 to determine what goes into that tax package.
So we're going to see a lot of the provisions introduced in 2024, scored, evaluated, and using this next year to determine what ends up in a 2025 tax package. So we're going to basically see the roadmap in 2024 of what's going to happen in 2025.
Brett Bolton:
Brett Bolton:
Yeah, well said. Thanks for that. So finally, I like to give our guests a second or two here to plug any upcoming events or something NAST is working on that you think the BDA membership might be interested in participating or hearing about.
Dillon Gibbons
Dillon Gibbons
Well, thanks Brett. So first thing we've got coming up is in mid-March NAST is going to be holding our annual legislative conference in DC. We're inviting all our treasurers out and their staff, and we're going to spend a couple of days going over our NAST priorities and then essentially doing a fly in, having folks go and visit the hill and talk about these different issues. We're going to be talking about renewing tax-exempt advanced refundings. We're going to be talking about maintaining the tax-exempt status bonds, working on ABLE issues, college savings and unclaimed property.
We're really going to be working to have our members set an example of how to advocate. Going into the capitol on a regular basis, reaching out to their representatives, providing them the education before they're being contacted and asked for questions. We want to be a resource to members of Congress. We have the experts in our offices who can provide the tools and resources to Congress. We want them to know that they can call us if they have questions. We don't want them operating in a vacuum, making decisions on our behalf without our input. So that's a big thing that we're going to be working on this year.
We've got a couple of training programs throughout the year, and we're going to be working to set up additional educational programs for our treasurers and their staff to educate them on municipal finance issues. We are going to be expanding our debt management training program so that all new debt managers have essentially a resource to go to for bonds 101, 201, and everything a bond manager needs to know to do their job. Those are some of our big priorities for next year and what's going to be happening in 2024.
Brett Bolton:
Brett Bolton:
Yeah. Well, I know we're going to have a lot of crossover in our work in DC and with our membership, so I look forward to a productive 2024 and beyond. So thanks for your time today, I do really appreciate it. It was great to hear from the treasurers and what you guys are working on and your outlook. So it's been very beneficial for myself and I can only imagine for our membership. So Dillon, thank you so much.
Dillon Gibbons
Dillon Gibbons
Brett, thanks for having me on.