Rachael's Public Finance Blog

The data I chose to look at referenced differences in K-12 education spending, an enormous $611 billion (2015) industry at the state and local level. It has been the largest sector dedicated to direct spending by such governments ever since 1977. There are also looming questions about not just the funding, but how the funding is being used, and its progressivity and “fairness.” To start, it helps to see the patterns of spending. In 1977, the state and local governments spent less than half of today’s spending. Even still, it’s lessened as an overall cost from 26% of direct expenditures to 22% in 2015, due to the excess of spending in other sectors outweighing any sense of growth. Today, about 40% of local funds are dedicated to education spending, and more interestingly- 99% of state and local K-12 spending comes out at the local level- only 5 states have state governments also provide for some of their total education spending. The federal government is also involved, but relative...

McKinsey Advises Puerto Rico on Debt. It May Profit on the Outcome. McKinsey has been advising Puerto Rico on its various debts, but it has come to light that the company actually is in a conflict of interest, as they own many of the bonds issued to PR through an independent arm. When writing the financial restructuring laws of PR, Congress had omitted some of the disclosures that are normally required in the US, resulting in this situation. It has already seen a surprisingly beneficial return on sales tax bonds. Now, it stands to be seen if there will be a file of bankruptcy, or if a judge may get involved in these affairs- especially as some have called this involvement by the firm unprecedented. Feds Raise Rates for 3rd Time This Year with 1 More Expected The central bank has raised interest rates for the 3rd time this year, and the 8th time since 2015. The rate is now 2.25%, and with scheduled rate raises in the year to come, is expected to peak around 3.4%. The choice to r...

The Trump Tax Cuts Were Supposed to Depress Housing Prices. They Haven't.  The tax cuts were predicted to have big repercussions on the housing market, but as of yet, the effect hasn't been seen. The tax cuts did the following - limited the tax break on mortgage interest at debts of $750,000 or less, as well as capped state and local taxes that can be deducted from federal taxes to $10,000. There were predictions that home values would drop over 10% as a result. It coincides with a doubling of the standard deduction, which is predicted to drastically reduce the amount of people who claim itemized. Small changes have been seen in very expensive markets due to the change in SALT (state and local taxes), but most markets haven't seen a dent. Some economists say that rising incomes will counteract it, and some just say, it's a matter of time to really see. 3 Tax Breaks That May Be Better in the Long Run Some analysts are worried that people may be getting ahead of ...

Tax Breaks for Luxury Towers Spur Redevelopment, and Backlash Many smaller to mid-size municipal markets have been recently issuing tax breaks in order to fuel growth in their downtowns. The most disconcerting element of this is the fact that the breaks are going to luxury housing. Proponents of the move have claimed that it's necessary to bring development to their cities, while those hesitating lament over the loss of revenue that they'd like to use for schools or infrastructure. It's hard to tell if cities will successfully be able to wean off of such incentives, when other cities are still offering such tax treats. The argument stands that future taxes will offer the funding that cities need, but it's hard to say when some abatements, like one in Kansas City, last for 25 years. Sooner to tell, will be if the luxury towers will actually draw in more commercial development- giving the cities valuable property taxes in the interim. The Controversial Tax Bill, E...

It's Time to Rewrite Fair Lending Rules (Just Not Like This.) This discusses a potential change in the 40 year old Community Reinvestment Act, which originally helped to prevent discrimination in mortgage lending by requiring that low income households were served. However, the update proposed by the Trump administration is threatening to remove the nuances that make the CRA effective. The resulting changes would set concrete numbers, which make it easy for banks, but obscure the diverse needs of communities- and, importantly, in setting a uniform standard across different types of banks, many would get away with a lower standard of accommodation that allows for segregation patterns. As Jesse Van Tol is quoted - "Making a better mousetrap doesn't get around the fact that it's a mousetrap." Houston's Multi-Billion Dollar Bet to Survive the Next Harvey Houston is still reeling from the devastation from Harvey, especially when considering how to move f...