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 House and Senate leadership this week urging them to pass legislation to prevent the elimination of subsidy payments to bond issuers.
These subsidy payments are at risk due to the Pay-As-You-Go Act of 2010 (PAYGO). PAYGO requires that mandatory spending and revenue legislation not impact the federal deficit over the course of 5 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 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.
Congress has historically acted to prevent sequestration by passing legislation waiving PAYGO when legislation is passed that increases the deficit without the required offsets, but they have not yet done so for the American Rescue Plan. APGA signed a similar PFN letter urging them to do so in June, but there has still been no action on this front.
As we approach the end of this Congress and lawmakers are engaged in negotiations over must-pass legislation to fund the government, APGA felt it was important to reiterate the need for action here. This new letter details the importance of protecting payments from the Treasury to bond issuers and explains how a failure to do so would impact communities that rely on bond issuances to finance important public projects.
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 by email at
ewong@apga.org.