BDA’s Bonding Time Podcast with Emily Brock of GFOA – Capitol Hill Dysfunction While Advancing Municipal Bond Provisions

Now, there's a lot of things on the table. Of course, there are discussions about impeachment proceedings, there are discussions about a lot of international affairs that we're involved in that are taking up a large part of this discussion in a lot of different directions. And when you talk about an omnibus that funds all the different varieties of a federal government, you're going to have a lot of interest coming to the table. And when you don't even have a House that's put together on their priorities, we're going to have a little bit of a potential for a shutdown.

A lot of folks are saying, "Well, what does that mean for munis?" Well, I think fundamentally there are lots of federal spending programs that have impacts on local governments. So we do depend a lot of our operating budgets and capital planning budgets on funding from the federal government. So when the federal government does come to a shutdown, we are concerned about that. But in addition, we can talk about the federal subsidy programs like Build America Bonds and the potential for a shutdown would have on those types of things, which again, there's still significant amount of BABs outstanding, so we're watching it.

That said, I mean, Brett, you shared, we've got a House document that's talking about delaying it until Halloween, spooky, which is very appropriate. We've also seen in our lifetime continuing resolutions that last until the end of the year, the calendar year, not just the federal fiscal year. So I wouldn't be surprised if the can gets kicked a couple of times while decisions are being made on a much larger omnibus.

Just reading through the Continuing Resolution document for our listeners, that's just an extension of government spending at current levels, not the typical appropriation process where you can adjust. But PAYGO, the pay-as-you-go mechanism. Section 101 was a discussion on PAYGO and reports. You got to think, especially with Conservatives in charge and even the Democrats are making noise at this point, deficit and debt is out of control, many believe, at this point in time. Pay-for’s. When is that going to become a conversation? And you got to think PABs, if that conversation pops up, are going to be part of the conversation.

However, when direct pay subsidies like Build America Bonds are lumped together with fundamental spending of the federal government, fundamental sequestrable spending, like farm subsidies, like medical and hospital subsidies are kind of lumped together with us, we are as a community going to be rallying for support to ensure that PAYGO continues.

By the time I think this comes out, we'll probably have a sense of whether or not we will be heard by the Supreme Court. But it's been a while and maybe many of your listeners probably know, it's been a while since we've been at the Supreme Court, but this is a unique opportunity for municipal bonds to become front and center at the highly volatile third branch of the federal government that is the Supreme Court.

But truly the question is whether or not these subsidies are constitutionally able to be sequestered. We had this conversation when BABs were being proposed, throughout the implementation of BABs. We lost those arguments at the Treasury, but I think that this case in particular has a really interesting sort of backing. Now, one thing that I did note when I was talking with AMP-Ohio and with Indiana public power, this isn't just a public power case. And so what we were able to do is to write an amicus brief with a ton of issuer organizations, including National Association of State Treasurers, school budget officials, public gas, public power. We've got a lot of varieties of issuers out there who are impacted by this, and we were able to write an amicus brief that showed the variety of issuers that are out there.

So if we can dream that the Supreme Court hears our case and we can dream the Supreme Court allows for us to confirm that the sequestration of direct pay subsidies is unconstitutional, what does that mean for back pay? What does that mean for potential future pay? What does that mean for the variety of issuers that are affected? At the end of the day, I mean, we are certainly talking about the billions of dollars of interest over the last 14 years. We certainly are hopeful that we at least get the chance for the time to shine in the Supreme Court.

Let's turn real quick to another piece of legislation that passed last year. The Financial Data Transparency Act honestly passed at midnight with the National Defense Authorization Act. Yes, we're talking about issuer disclosure in the National Defense Authorization Act. I know it doesn't make a whole lot of sense, but it's where we are. Anything happening there? I know we're, what, a couple months into the two-year period, the first two-year period as you like to say, of implementation and rule writing. Anything our members, our listeners may be interested in hearing?

But the second part of it, which I think is especially interesting, especially for the broker dealer community, is we have to pick technically what's called a legal entity identifier. Now, they don't capitalize L, E, and I in the legislation. They say you have to pick a legal entity identifier. And the hard thing for issuers about the notion of the legal entity identifier is that we already have several entity identifiers. We've got our tax identification number, we've got a unique entity identifier, which is the federal government grant tracking system. If we add an LEI on top of that in addition to the CUSIPs that we maintain, that's a lot of tracking and maintaining of identifiable information.

Now, I think another thing that needs to be said is that LEIs, while they've been assigned to entities that have issued swaps over the past decade or so, this would be a new mandate that does come at a cost. And so that's going to be a part of our conversation with the Securities and Exchange Commission and Treasury is that another categorical identifier that really doesn't do a whole lot with the challenges that we've noted with the naming conventions of EMMA or challenges that we've had with searchability of EMMA. It's only going to add just another layer of complexity. We'd like to try to make sure that it's not just another number and instead it is more deliberate than that.

And so while we are continuing to hear from members, especially our allies in Congress, that ensuring the strength of the municipal bond market and restoring advancer fundings is a priority for them, the ability to find something to ride on is probably the biggest challenge. If there's even this much contention that's happening over the budget, where in the world do we stick advancer funding, which actually does come at a price tag. It's under the $10 billion mark, but it's still under the $10 billion mark. I think what's the most important strategy right now is to try to ensure that when we come to the 119th Congress that starts in 2025, that we come at it with a fully prepared, fully engaged freshman congressional member class, but also longstanding congressional member class to make sure that we have the support that we need from the tax writing committee when there may be opportunities.

We have to do that in conjunction with also helping for the Administration to understand that we need at least the base to be restored. We need for the municipal market to be there, even in the event that there are these stimulus funds available for us for transportation and transit, for economic recovery, and for renewable and green infrastructure as well. So we're dancing that dance between and among Congress and the Administration. There's a lot of that going on. In so doing we're also having the fifth Annual Mini Muni Conference will be on October 11th through the 13th. And we've got, at this point, many dozen issuers who are going to be speaking on issues of a wide range all across the municipal market and in all of our mutual interests. So we'd love to see you guys there and excited for what the future may hold.