APGA is a member of the Public Finance Network (PFN), a coalition of groups and associations whose members rely on municipal financing tools like bonds. PFN members sent a letter to Congress this week urging them to pass legislation to prevent sequestration from eliminating payments to bond issuers.
The Pay-As-You-Go Act of 2010 requires that mandatory spending and revenue legislation not impact the federal deficit over the course of five or 10 years. If legislation that impacts the deficit is enacted without Congress finding offsets for that spending, the Office of Management and Budget is directed to implement sequestration – across the board cuts to certain types of mandatory spending. Government payments to bond issuers would be one of the categories of spending impacted by sequestration.
The American Rescue Plan, a COVID-19 relief package passed last year, is projected to increase the deficit and trigger sequestration without additional action from Congress. If that happens, state and local entities that issued Build America and other types of bonds will not receive payments from the Treasury.
In the past, Congress has always acted to prevent a PAYGO sequester from going into effect in years when legislation was passed that increased the deficit. The letter PFN sent this week asks them to do so again by passing legislation that exempts the American Rescue Plan from the effects of PAYGO, which will protect vital payments from the Treasury to bond issuers.
Read the letter on the APGA website here
For questions on this article, please contact Emily Wong of APGA staff by phone at 202-470-4262 or y email at email@example.com.