This document provides an overview of Puerto Rico's financial challenges, including:
1) Puerto Rico has experienced 12 consecutive budget deficits and has a high and growing debt burden of 90% of GDP.
2) The economy entered recession in 2006 and has yet to emerge, exacerbating the financial problems.
3) Puerto Rico relies heavily on federal subsidies and has limited prospects for long-term growth due to its dependence on these subsidies and transfers.
The Peter G. Peterson's State of the Union's Finances: A Citizen's Guide provides a comprehensive look at America's finances. The guide is broken out in the three sections 1.) Executive Summary 2.) Our Growing Fiscal Challenge 3.) Solutions
The Case for AAA Underlying Municipal BondsIan Welch
4
Intent
• Create AAA Underlying Portfolio
• Create Default Resistant Portfolio
• Take advantage of sell side pressure
• Take advantage of negative perception of municipal bond market to amass AAA bonds
ISSUE: Control the Debt - RBA NYS Economic Survival GuideUnshackle Upstate
1) New York State has significantly increased its debt over the past 5 years to pay for services, with state-funded debt rising 25% to over $60 billion.
2) This growing reliance on borrowing hurts taxpayers by increasing debt service costs and preventing leaders from making difficult spending cuts.
3) The state's debt per capita of $2,925 is the second highest among the 10 largest states, trailing only New Jersey, and reforms are needed to limit future debt growth.
The Case for AAA Underlying Municipal Bondsmauiwelch
This document provides an overview of the municipal bond market and makes a case for investing in bonds with underlying AAA credit ratings from states and municipalities. It notes that there is currently limited supply of bonds directly rated AAA. The strategy proposed is to create a portfolio of only AAA-rated underlying bonds to take advantage of their strong credit quality and limited supply. Key data on default rates and credit fundamentals are presented for AAA-rated states and municipalities to demonstrate the historically strong credit performance of these issues.
This document outlines 10 essential reforms needed to improve New York's financial situation. It discusses capping property tax increases and state spending, ending the double standard of higher pay for public employees, and trimming Medicaid costs. The state's Medicaid program is the most expensive in the nation at $47.6 billion annually despite serving fewer people than California or Florida. Immediate action is needed from state leaders to control costs and ease New York's heavy tax burden in order to stop the flow of jobs and residents to other states.
In recent years, businesses and families have left
Upstate New York in record numbers. Private
sector job losses have devastated our communities.
New York State’s leaders have not shown a
commitment to job creation and economic
development. In fact, our image over the last
decade has been quite the opposite – we have one
of the worst business climates in the nation.
It is beyond dispute that the state’s policies have
contributed to our economic problems by failing
to meet the economic challenges we face. In
many cases, Albany hasn’t just failed to act – state
government has actually adopted policies that have
made our economic situation even worse.
This report takes a hard look at what New York
State has done right since the beginning of 2011,
and what additional steps will address the high cost of doing business in the state.
The document discusses the growing fiscal challenges facing the United States, including rising budget deficits and national debt levels. It notes that while near-term deficits are largely due to temporary factors like the recession and stimulus measures, long-term structural deficits pose a serious threat if left unaddressed. In particular, rising healthcare costs and spending on entitlement programs like Medicare and Medicaid are projected to account for an unsustainable portion of the federal budget going forward. Urgent action is needed to put the country's fiscal policies on a more sustainable path.
Reporting on Pensions: 2010-2011 state legislationsabew
In 2010 and 2011, 41 states enacted legislation to reduce pension costs by increasing employee contributions, raising the age and service requirements for retirement, reducing post-retirement benefit increases, and lengthening vesting periods. While some states have replaced defined benefit plans with hybrid or defined contribution plans, most states have revised rather than replaced traditional plans. States have shifted more costs to employees through higher contributions and less generous benefits while seeking to balance pension funding with budget pressures.
The Peter G. Peterson's State of the Union's Finances: A Citizen's Guide provides a comprehensive look at America's finances. The guide is broken out in the three sections 1.) Executive Summary 2.) Our Growing Fiscal Challenge 3.) Solutions
The Case for AAA Underlying Municipal BondsIan Welch
4
Intent
• Create AAA Underlying Portfolio
• Create Default Resistant Portfolio
• Take advantage of sell side pressure
• Take advantage of negative perception of municipal bond market to amass AAA bonds
ISSUE: Control the Debt - RBA NYS Economic Survival GuideUnshackle Upstate
1) New York State has significantly increased its debt over the past 5 years to pay for services, with state-funded debt rising 25% to over $60 billion.
2) This growing reliance on borrowing hurts taxpayers by increasing debt service costs and preventing leaders from making difficult spending cuts.
3) The state's debt per capita of $2,925 is the second highest among the 10 largest states, trailing only New Jersey, and reforms are needed to limit future debt growth.
The Case for AAA Underlying Municipal Bondsmauiwelch
This document provides an overview of the municipal bond market and makes a case for investing in bonds with underlying AAA credit ratings from states and municipalities. It notes that there is currently limited supply of bonds directly rated AAA. The strategy proposed is to create a portfolio of only AAA-rated underlying bonds to take advantage of their strong credit quality and limited supply. Key data on default rates and credit fundamentals are presented for AAA-rated states and municipalities to demonstrate the historically strong credit performance of these issues.
This document outlines 10 essential reforms needed to improve New York's financial situation. It discusses capping property tax increases and state spending, ending the double standard of higher pay for public employees, and trimming Medicaid costs. The state's Medicaid program is the most expensive in the nation at $47.6 billion annually despite serving fewer people than California or Florida. Immediate action is needed from state leaders to control costs and ease New York's heavy tax burden in order to stop the flow of jobs and residents to other states.
In recent years, businesses and families have left
Upstate New York in record numbers. Private
sector job losses have devastated our communities.
New York State’s leaders have not shown a
commitment to job creation and economic
development. In fact, our image over the last
decade has been quite the opposite – we have one
of the worst business climates in the nation.
It is beyond dispute that the state’s policies have
contributed to our economic problems by failing
to meet the economic challenges we face. In
many cases, Albany hasn’t just failed to act – state
government has actually adopted policies that have
made our economic situation even worse.
This report takes a hard look at what New York
State has done right since the beginning of 2011,
and what additional steps will address the high cost of doing business in the state.
The document discusses the growing fiscal challenges facing the United States, including rising budget deficits and national debt levels. It notes that while near-term deficits are largely due to temporary factors like the recession and stimulus measures, long-term structural deficits pose a serious threat if left unaddressed. In particular, rising healthcare costs and spending on entitlement programs like Medicare and Medicaid are projected to account for an unsustainable portion of the federal budget going forward. Urgent action is needed to put the country's fiscal policies on a more sustainable path.
Reporting on Pensions: 2010-2011 state legislationsabew
In 2010 and 2011, 41 states enacted legislation to reduce pension costs by increasing employee contributions, raising the age and service requirements for retirement, reducing post-retirement benefit increases, and lengthening vesting periods. While some states have replaced defined benefit plans with hybrid or defined contribution plans, most states have revised rather than replaced traditional plans. States have shifted more costs to employees through higher contributions and less generous benefits while seeking to balance pension funding with budget pressures.
The document provides an overview and analysis of recent developments in the municipal bond market. It notes that while credit quality is currently high, negative factors have caused a decline in recent years. Specifically:
- The outlook for U.S. state governments remains stable, though some indicators are mixed and more downgrades are expected for a few states. Tax revenues have fallen for two straight quarters.
- Both positive and negative rating actions occurred among states recently. However, structural issues continue to negatively impact states like New Jersey, Illinois, and Pennsylvania.
- The outlook for local governments remains cautious as downgrades continue to outpace upgrades, with over 50% of recent downgrades due to structural budget imbalances.
The document summarizes Washington state's financial outlook and implications for K-12 funding. It states that the state is facing a $6.1 billion budget deficit for 2009-2011 that may increase to $8.5-9 billion. K-12 education accounts for 41% of the state budget but the Governor's proposed reductions would cut it by 16%. The Governor proposes eliminating COLA for K-12, reducing programs like I-728 and levy equalization, and cutting other funding. Federal stimulus funds may help but will not solve the entire deficit issue. Budget cuts for schools are very likely but may not be as deep as proposed.
This document discusses the problem of debt servicing for developing countries. It provides an overview of what debt is and outlines some of the root causes of debt crises, such as rising indebtedness from the 1970s-1980s due to economic policies. Debt servicing ratios above 15% of yearly export earnings can cause problems. International debt levels for low and middle income countries decreased 18% in 2014. The document also examines debt issues specifically for India, including an unmanageable accumulation of debt and increased foreign borrowing by large corporations.
This document summarizes the structure and profile of Philippine public debt from 1990 to 2009. It discusses the sources, categories, and maturity of domestic and foreign public debt. Domestic debt is dominated by treasury bills and bonds, with maturities lengthening over time. Foreign debt is primarily from commercial and multilateral creditors, denominated in US dollars and Japanese yen, and remains largely long-term. Both domestic and foreign debt levels increased substantially over this period relative to GDP.
This presentation gives a summary of the National Mortgage Settlement Act, including key provisions of the Act and how it has benefited affected borrowers.
The expanded version of our PowerPoint presentation that clearly lays out the fiscal challenge facing the United States. For more, visit http://crfb.org/go-big.
The brookings institution webinar covid 19 and the economyTatianaApostolovich
With more than 1,000 deaths, 3 million and counting unemployed, and no definite end in sight, the coronavirus has upended nearly every aspect of American life. In the last two weeks, the Federal Reserve and Congress scrambled to pass policies to mitigate what will be a very deep recession. Americans across the country are asking— what exactly is going on economically? Is the government responding effectively? How do we set ourselves up for economic recovery once the pandemic recedes? On Monday, March 30, Brookings hosted an online discussion on the current state of the economy, the federal response, and challenges for state and local governments. After the discussion, speakers answered questions from the audience. This was an exclusively virtual event that was streamed live on the Brookings website
If certain policies currently in place were extended, such as tax cuts and preventing reductions to Medicare physician payments, the US deficit would be much higher between 2012-2021, averaging 4.3% of GDP compared to 1.8% under current law. Extending these policies would also cause debt held by the public to rise to 82% of GDP by 2021, the highest level since 1948, compared to stabilizing around 70% of GDP under current law. Allowing discretionary budget authority to simply grow with inflation would increase spending by around 4% in 2012 and 8% in 2021 above current law caps.
This document discusses the history and current state of county highway departments in New York State. It begins by looking back fondly at a time when working for the county provided job satisfaction, security and good retirement benefits. However, it notes that today there are fewer jobs in county government, less security, and declining compensation and benefits. It then examines factors like declining tax revenues, state mandates consuming county budgets, and new policies like "Forward Four" that are impacting highway departments. Representatives from Chemung and Essex counties provide examples of how their departments have adapted by reducing staff, sharing equipment between agencies, and taking on more work in-house. The document emphasizes the challenges faced but also the innovative solutions county highway departments are developing
The document discusses national debt and deficits. It notes that the US national debt was $5.6 trillion in 1999 and $12.8 trillion in 2010. It explains that debt is the accumulation of yearly deficits and surpluses, with deficits added to the debt and surpluses reducing it. The document also discusses "pork barrel" spending projects by Congress and debates around taxation and proportional versus progressive tax systems.
The document discusses Washington state's $9 billion budget shortfall from 2008-2009 due to declining revenues during the recession, how the shortfall was addressed through cuts to programs, use of federal stimulus funds, and fund transfers. It notes the state now faces a further $2 billion shortfall and that options to close it are limited due to constitutional and federal spending requirements, requiring narrow choices like further cuts to higher education, health care, and social services. Revenue is expected to continue lagging the economic recovery.
This document provides an overview of Colorado's fiscal education network toolkit. It discusses Colorado's structural budget challenges, including growing demand for services like education, healthcare and transportation that outpaces limited revenue growth. It outlines options like reducing services, changing the tax code, and doing nothing. The goal of the network is to engage nonprofits to have productive community conversations about fiscal issues and help voters make informed choices through discussing values and considering long-term impacts.
This presentation looks at the issues involved in determining whether a state might become unable to pay its bills and what might happen if it does. It explores the history of state insolvency and the merits of adding a new chapter to the federal bankruptcy laws to accommodate such a situation.
The document examines whether rising household debt or energy costs were more responsible for the 2008 economic crisis. It analyzes three ratios: 1) household financial obligations as a percentage of income, which includes debt payments but not energy costs; 2) household energy expenditures as a percentage of income; and 3) total household obligations, which combines 1) and 2). While the financial obligations ratio rose in recent decades, the total obligations ratio declined from 1980 to 2000 due to falling energy costs. The total ratio surged in 2008, possibly better explaining the recession than the smaller rise in just the financial obligations ratio. The total obligations ratio has since declined substantially, suggesting consumer recovery may be quicker than expected.
The Democratic sweep scenario assumes that if Democrats control the presidency and both houses of Congress after the election, the Bush tax cuts would be extended only for households earning less than $250,000 per year. This would result in a moderate reduction in the budget deficit over the next few years, falling from 7.3% of GDP in 2012 to 6.3% by 2013 and 5.3% by 2014. However, higher taxes on dividends and capital gains could reduce after-tax cash flows from equities, partially offsetting the benefits from less fiscal austerity. Municipal bonds may benefit from increased value of their tax breaks and smaller cuts to discretionary spending.
Learn about the expiring tax breaks and automatic spending cuts scheduled to take effect at the end of 2012 in the United States, including the forecasted economic impact and where Democrats and Republicans stand.
The document summarizes the impact of the Great Recession on state pension funding shortfalls. It finds that between 2008-2009, state pension funding levels declined from 84% to 78% funded and the total funding gap grew by 26% to $1.26 trillion. 31 states were below the recommended 80% funding level in 2009, up from 22 states in 2008. The recession severely impacted state revenues and constrained their ability to make required pension payments. Total annual pension costs grew from $27 billion in 2000 to $68 billion in 2009 but states only paid 83% of the required amount in 2009. Looking ahead, slow revenue growth may limit states' ability to fully fund pensions.
CDFA Annual VC Report for 2014 20150821Pete Mathews
The document analyzes 2014 private activity bond and volume cap trends based on a survey of state allocating authorities. Key findings include:
- Total national volume cap increased to $92.1 billion, up from $87.3 billion in 2013.
- Total private activity bond issuance increased to $11.6 billion after declining for three years, reversing the shrinking bond market trend.
- Industrial development bond issuance decreased to $270 million after being below $300 million in 2012 but over $1 billion as recently as 2009.
Take an in depth look at the bankruptcy trends in Virginia, as well as find out more about the types of bankruptcy options. For more visit http://www.tbrclaw.com
09 federal deficits and the national debtNepDevWiki
The national debt is the total amount owed by the federal government to holders of government securities. It has more than tripled since 1980 as a result of accumulating budget deficits. Approximately 17% of the debt is held by foreign entities, representing a burden as it transfers purchasing power overseas. Crowding out occurs when government borrowing to finance deficits causes interest rates to rise, reducing private sector consumption and investment.
Given the city’s relative fiscal health, is there a need to look to budget options? The simple answer is, “of course.” There is never enough money to meet all of the needs expressed by the city’s communities. And besides the need for more funds, there can be changes that could help improve equity and efficiency in the city’s spending and taxation—a benefit that could be associated with some of the budget options we present.
School districts are highly dependent on local revenue generated through property taxes. The declining housing market has therefore taken a toll on school districts. Property values have declined in nearly 88 percent of the school districts located in the Long Island and Mid-Hudson regions. Since these districts derive roughly 75 percent of their revenue locally, reduced property values lead to revenue stress.
The document provides an overview and analysis of recent developments in the municipal bond market. It notes that while credit quality is currently high, negative factors have caused a decline in recent years. Specifically:
- The outlook for U.S. state governments remains stable, though some indicators are mixed and more downgrades are expected for a few states. Tax revenues have fallen for two straight quarters.
- Both positive and negative rating actions occurred among states recently. However, structural issues continue to negatively impact states like New Jersey, Illinois, and Pennsylvania.
- The outlook for local governments remains cautious as downgrades continue to outpace upgrades, with over 50% of recent downgrades due to structural budget imbalances.
The document summarizes Washington state's financial outlook and implications for K-12 funding. It states that the state is facing a $6.1 billion budget deficit for 2009-2011 that may increase to $8.5-9 billion. K-12 education accounts for 41% of the state budget but the Governor's proposed reductions would cut it by 16%. The Governor proposes eliminating COLA for K-12, reducing programs like I-728 and levy equalization, and cutting other funding. Federal stimulus funds may help but will not solve the entire deficit issue. Budget cuts for schools are very likely but may not be as deep as proposed.
This document discusses the problem of debt servicing for developing countries. It provides an overview of what debt is and outlines some of the root causes of debt crises, such as rising indebtedness from the 1970s-1980s due to economic policies. Debt servicing ratios above 15% of yearly export earnings can cause problems. International debt levels for low and middle income countries decreased 18% in 2014. The document also examines debt issues specifically for India, including an unmanageable accumulation of debt and increased foreign borrowing by large corporations.
This document summarizes the structure and profile of Philippine public debt from 1990 to 2009. It discusses the sources, categories, and maturity of domestic and foreign public debt. Domestic debt is dominated by treasury bills and bonds, with maturities lengthening over time. Foreign debt is primarily from commercial and multilateral creditors, denominated in US dollars and Japanese yen, and remains largely long-term. Both domestic and foreign debt levels increased substantially over this period relative to GDP.
This presentation gives a summary of the National Mortgage Settlement Act, including key provisions of the Act and how it has benefited affected borrowers.
The expanded version of our PowerPoint presentation that clearly lays out the fiscal challenge facing the United States. For more, visit http://crfb.org/go-big.
The brookings institution webinar covid 19 and the economyTatianaApostolovich
With more than 1,000 deaths, 3 million and counting unemployed, and no definite end in sight, the coronavirus has upended nearly every aspect of American life. In the last two weeks, the Federal Reserve and Congress scrambled to pass policies to mitigate what will be a very deep recession. Americans across the country are asking— what exactly is going on economically? Is the government responding effectively? How do we set ourselves up for economic recovery once the pandemic recedes? On Monday, March 30, Brookings hosted an online discussion on the current state of the economy, the federal response, and challenges for state and local governments. After the discussion, speakers answered questions from the audience. This was an exclusively virtual event that was streamed live on the Brookings website
If certain policies currently in place were extended, such as tax cuts and preventing reductions to Medicare physician payments, the US deficit would be much higher between 2012-2021, averaging 4.3% of GDP compared to 1.8% under current law. Extending these policies would also cause debt held by the public to rise to 82% of GDP by 2021, the highest level since 1948, compared to stabilizing around 70% of GDP under current law. Allowing discretionary budget authority to simply grow with inflation would increase spending by around 4% in 2012 and 8% in 2021 above current law caps.
This document discusses the history and current state of county highway departments in New York State. It begins by looking back fondly at a time when working for the county provided job satisfaction, security and good retirement benefits. However, it notes that today there are fewer jobs in county government, less security, and declining compensation and benefits. It then examines factors like declining tax revenues, state mandates consuming county budgets, and new policies like "Forward Four" that are impacting highway departments. Representatives from Chemung and Essex counties provide examples of how their departments have adapted by reducing staff, sharing equipment between agencies, and taking on more work in-house. The document emphasizes the challenges faced but also the innovative solutions county highway departments are developing
The document discusses national debt and deficits. It notes that the US national debt was $5.6 trillion in 1999 and $12.8 trillion in 2010. It explains that debt is the accumulation of yearly deficits and surpluses, with deficits added to the debt and surpluses reducing it. The document also discusses "pork barrel" spending projects by Congress and debates around taxation and proportional versus progressive tax systems.
The document discusses Washington state's $9 billion budget shortfall from 2008-2009 due to declining revenues during the recession, how the shortfall was addressed through cuts to programs, use of federal stimulus funds, and fund transfers. It notes the state now faces a further $2 billion shortfall and that options to close it are limited due to constitutional and federal spending requirements, requiring narrow choices like further cuts to higher education, health care, and social services. Revenue is expected to continue lagging the economic recovery.
This document provides an overview of Colorado's fiscal education network toolkit. It discusses Colorado's structural budget challenges, including growing demand for services like education, healthcare and transportation that outpaces limited revenue growth. It outlines options like reducing services, changing the tax code, and doing nothing. The goal of the network is to engage nonprofits to have productive community conversations about fiscal issues and help voters make informed choices through discussing values and considering long-term impacts.
This presentation looks at the issues involved in determining whether a state might become unable to pay its bills and what might happen if it does. It explores the history of state insolvency and the merits of adding a new chapter to the federal bankruptcy laws to accommodate such a situation.
The document examines whether rising household debt or energy costs were more responsible for the 2008 economic crisis. It analyzes three ratios: 1) household financial obligations as a percentage of income, which includes debt payments but not energy costs; 2) household energy expenditures as a percentage of income; and 3) total household obligations, which combines 1) and 2). While the financial obligations ratio rose in recent decades, the total obligations ratio declined from 1980 to 2000 due to falling energy costs. The total ratio surged in 2008, possibly better explaining the recession than the smaller rise in just the financial obligations ratio. The total obligations ratio has since declined substantially, suggesting consumer recovery may be quicker than expected.
The Democratic sweep scenario assumes that if Democrats control the presidency and both houses of Congress after the election, the Bush tax cuts would be extended only for households earning less than $250,000 per year. This would result in a moderate reduction in the budget deficit over the next few years, falling from 7.3% of GDP in 2012 to 6.3% by 2013 and 5.3% by 2014. However, higher taxes on dividends and capital gains could reduce after-tax cash flows from equities, partially offsetting the benefits from less fiscal austerity. Municipal bonds may benefit from increased value of their tax breaks and smaller cuts to discretionary spending.
Learn about the expiring tax breaks and automatic spending cuts scheduled to take effect at the end of 2012 in the United States, including the forecasted economic impact and where Democrats and Republicans stand.
The document summarizes the impact of the Great Recession on state pension funding shortfalls. It finds that between 2008-2009, state pension funding levels declined from 84% to 78% funded and the total funding gap grew by 26% to $1.26 trillion. 31 states were below the recommended 80% funding level in 2009, up from 22 states in 2008. The recession severely impacted state revenues and constrained their ability to make required pension payments. Total annual pension costs grew from $27 billion in 2000 to $68 billion in 2009 but states only paid 83% of the required amount in 2009. Looking ahead, slow revenue growth may limit states' ability to fully fund pensions.
CDFA Annual VC Report for 2014 20150821Pete Mathews
The document analyzes 2014 private activity bond and volume cap trends based on a survey of state allocating authorities. Key findings include:
- Total national volume cap increased to $92.1 billion, up from $87.3 billion in 2013.
- Total private activity bond issuance increased to $11.6 billion after declining for three years, reversing the shrinking bond market trend.
- Industrial development bond issuance decreased to $270 million after being below $300 million in 2012 but over $1 billion as recently as 2009.
Take an in depth look at the bankruptcy trends in Virginia, as well as find out more about the types of bankruptcy options. For more visit http://www.tbrclaw.com
09 federal deficits and the national debtNepDevWiki
The national debt is the total amount owed by the federal government to holders of government securities. It has more than tripled since 1980 as a result of accumulating budget deficits. Approximately 17% of the debt is held by foreign entities, representing a burden as it transfers purchasing power overseas. Crowding out occurs when government borrowing to finance deficits causes interest rates to rise, reducing private sector consumption and investment.
Given the city’s relative fiscal health, is there a need to look to budget options? The simple answer is, “of course.” There is never enough money to meet all of the needs expressed by the city’s communities. And besides the need for more funds, there can be changes that could help improve equity and efficiency in the city’s spending and taxation—a benefit that could be associated with some of the budget options we present.
School districts are highly dependent on local revenue generated through property taxes. The declining housing market has therefore taken a toll on school districts. Property values have declined in nearly 88 percent of the school districts located in the Long Island and Mid-Hudson regions. Since these districts derive roughly 75 percent of their revenue locally, reduced property values lead to revenue stress.
a) Maintaining approximate compensation parity among employees within the same employment categories (for example, among junior software engineers);
b. Maintaining certain compensation relationships among employees across different employment categories (for example, among junior software engineers relative to senior software engineers)
This handbook is a key document that sets out the financial framework for academy trusts reflecting their status as companies, charities and public bodies.
Most recently, the strengthening economy has improved the budgetary outlooks of most state and local governments, leading them to reduce their pace of fiscal tightening. At the same time, though, fiscal policy at the federal level has become significantly more restrictive. In particular, the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of the sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year. The Congressional Budget Office (CBO) estimates that the deficit reduction policies in current law will slow the pace of real GDP growth by about 1-1/2 percentage points during 2013, relative to what it would have been otherwise.
This document examines how susceptible jobs are to computerization. It develops a new methodology to estimate the probability of computerization for 702 occupations based on their characteristics. The study finds that about 47% of US jobs are at risk of computerization. It also finds that wages and education levels are negatively correlated with an occupation's probability of being computerized. The document provides historical context on technological unemployment and reviews literature on how computerization has impacted jobs.
Investment in inland transport infrastructure across the OECD has declined to a record low of 0.8% of GDP in 2013, falling back to 1995 levels. Investment levels in Central and Eastern European countries halved since 2009, accounting for 1% of GDP compared to 1.9% in 2009. Mature economies increasingly invest in rail while transition economies focus on roads. The volume of investment doubled in India since 2005 but its share of GDP declined as GDP grew faster than investment.
The document summarizes Novell's roadmap for Open Enterprise Server 2 (OES2), including upcoming support pack 3 (SP3). SP3 will include enhancements to Domain Services for Windows, CIFS, QuickFinder, and iFolder. It also discusses the "Remote Office Appliance" which will help centrally manage remote sites. Long term, Novell is focusing on simplification, interoperability, and the "Ponderosa" vision of decoupling workloads and deploying appliances for the cloud or on-premise.
Nearly half of the City’s property is
tax exempt – 49.5 percent, compared to 32.0 percent for
the median city. This is due to the presence of Syracuse
University and other colleges, as well as hospitals and
government buildings. Meanwhile, eight percent of the
properties are tax delinquent.3 These factors limit the ability
of the City to fully collect property taxes, and force it to be
more dependent on other revenue sources.
The document summarizes the fiscal challenges facing the small city of Salamanca, NY. It notes that Salamanca has a declining population and tax base, with high poverty and unemployment rates. The city had benefited from revenues from a nearby casino but lost this funding source due to a dispute. As a result, the city depleted its reserves and now faces a $2.5 million budget shortfall. The state provided a one-time $5 million loan but the city will require ongoing assistance.
There are five primary reasons for charter closures – financial (41.7 percent), mismanagement (24 percent), academic (18.6 percent), district obstacles (6.3 percent) and facilities (4.6 percent).
This document provides a summary of collective bargaining units in New York City government as of December 31, 2012. It includes the union name, job titles covered, headcount of positions, average compensation for those titles, and the estimated cost of a 1% salary increase for each bargaining unit. In total it represents 292,096 employees across 85 different unions with an average compensation of $103,239 and a total estimated cost of $301,556,939 for a 1% salary increase across all units.
Puerto Rico's true deficit has been shrinking and the Krueger Report shows that Puerto Rico can generate growing fiscal surpluses starting in 2017 through fiscal and structural reforms. The report outlines revenue increases of $3-4 billion annually by 2020-2025, expense cuts of $2-2.5 billion annually in the same period, and structural economic reforms. Puerto Rico has room to increase revenues through improved tax collection rates and increasing taxes in line with U.S. states. It also has opportunities to lower expenses given spending growth outpacing population decline. Historical examples show countries can achieve strong economic growth while implementing fiscal adjustments of 2% of GDP.
The Churchill School and Center (Churchill), located in New York City, is a private not-for-profit education corporation that includes the Churchill School (Churchill), the Churchill Center (Center), and a Development Office. Churchill provides special education services, pursuant to Section
853 of the State Education Law (Law), to children from kindergarten through the 12th grade
classified as having a learning disability and/or speech-language impairment. The Center offers
educational programs to non-Churchill students and professional development workshops to parents, teachers, and other service providers. The Development Office administers the fundraising,
endowment, marketing, special events, and alumni activities for the affiliated entities.
On average, California’s public sector workers are more highly educated. Of full-time workers, 55% hold a four-year college degree in the public sector compared to 35% in the private sector. Educational attainment is the single most important predictor of earnings—thus it plays a vital role in this analysis. On average, California state and local governments pay college-educated labor less than private employers. The earnings differential is greatest for professional employees, lawyers and doctors. On the other hand, the public sector appears to set a floor on compensation. The earnings of those with a high school degree or less is higher in state and local government than it is for similar workers in the private sector. There are other significant personnel differences between the public and private sector workforces. The age (median) of a typical worker in state and local government is 44 compared to 40 in the private sector. Furthermore, the state and local government workforce has more women (55%) compared to the private sector (40%).
NYC Comptroller's Office: Annual Summary Contracts Report for Fiscal Year 201...Luis Taveras EMBA, MS
The New York City Charter (“Charter”) requires that all contracts and agreements entered into by City agencies be registered by the Comptroller prior to implementation. This requirement also extends to all agreements memorializing the terms of franchises, revocable consents or concessions. The Comptroller’s Office is charged with a number of Charter-mandated responsibilities intended to safeguard the City’s financial health, including contract registration. The contract registration process ensures there is adequate funding in the City’s treasury (or under the control of the City) to cover the cost of contracts as well as to ensure that both the contracted vendors and process are free from corruption. The Bureau of Contract Administration (“BCA”) within the Comptroller’s Office fulfills this registration responsibility on behalf of the Comptroller by serving as the final oversight in the City’s procurement process.
Texas has more immigrants than Oklahoma and New Mexico have people. Among states, only California has more immigrants than Texas; New York has a similar number.
MPI TechCon 14 - The Evolution of Audience Response SystemsJohn Pytel
This document discusses the evolution of audience response systems (ARS) and compares different types of ARS technologies. It begins with an introduction to ARS and their purpose in facilitating real-time engagement and participation between presenters and audiences. It then examines the advantages and disadvantages of the three main types of ARS: hardware-based systems, SMS-based systems, and web-based systems. It concludes that while all ARS types have improved, web-based systems now provide the best balance of accessibility, functionality, cost, and scalability.
While the non-oil private sector is relatively small in Saudi Arabia, it has potential to drive much of the growth. Already during the 2003–13 period, the non-oil private sector outperformed the economy as a whole, albeit starting from a low base. It grew at about 10 percent annually, much faster than the overall 6 percent GDP growth rate. Growth was broadly based, with consumption-based sectors such as transport, communications, retail and wholesale trade, and business services growing the fastest.
"In 2013, the Non-Profit Revitalization Act was signed into law, and requires the adoption by non-profit corporations of robust financial oversight requirements, conflict-of-interest policies, and whistleblower policies. Although the Non-Profit Revitalization Act improved the accountability of New York’s non-profit corporations, including the CUNY college foundations, the New York Not-for-Profit Corporation Law (which the Act amended) does not provide specific guidance regarding how non-profit foundations use their assets."
Economic activity in Puerto Rico remains generally flat at a depressed level and there are no strong signs that a meaningful recovery is taking hold. While Puerto Rico’s economy has historically paralleled the U.S. mainland economy, the Island’s latest downturn started earlier and was much steeper and more prolonged. Puerto Rico has now been in a slump since 2006.
The document discusses the national debt of the United States, which currently stands at over $18 trillion. It explores the history of rising US debt levels and the economic effects of increasing versus consolidating the debt. Increasing debt leads to higher interest rates, less investment, and reduced GDP growth. Consolidating debt has short-term negative effects but long-term benefits like lower interest rates and more funding for programs. The document also examines threats of sovereign default and financial crises based on examples from other countries.
Evaluating Sovereign Risk: Debt and Capital Markets. Derrill Allatt, Managing Partner, NewstatePartners, LLP
The panel will address the current state of sovereign capital markets, the realities of issuing government debt, and the future state of financing government expenditure.
FRB-Richmond_ unsustainable fiscal policy_ implications for monetary policyFred Kautz
Economic research suggests that high debt levels ultimately could overwhelm a central bank’s efforts to keep prices stable. This essay will argue that these outcomes should be avoided in the United States by putting fiscal policy on a sustainable path.
1) Puerto Rico's economy has contracted for most years since 2007, with real GNP declining by 13.8% total over that period. Persistent fiscal deficits and high levels of public debt exceeding 100% of GNP are major issues.
2) Out-migration, especially of working age residents, has increased substantially in recent years, reducing Puerto Rico's tax base. The population declined by around 8% from its 2004 peak.
3) The fiscal year 2016 budget assumes no deficit but revenues have frequently fallen short of projections, suggesting another deficit is likely. Cash flow problems necessitate short-term borrowing to start the fiscal year.
The document discusses Puerto Rico's recent economic performance and challenges. It notes that Puerto Rico's economy has contracted in most years since 2007, with real GNP growth of -1.8% on average from 2007-2014. Two other major issues facing Puerto Rico are its high and growing public debt level, which represents 103.2% of nominal GNP, and increasing out-migration of residents to the US mainland. Puerto Rico also faces difficulties with its healthcare system due to large cuts to Medicare and Medicaid funding compared to US states.
The document discusses the growing federal budget deficit and debt in the United States. It notes that the fiscal year 2008 deficit of $455 billion was the largest ever for a single year, and that the total federal debt exceeded $10 trillion for the first time. It argues that while current deficits and debt levels alone may not be problematic, the underlying structural imbalance indicated by long-term deficits signals a need for entitlement reform given the unsustainable obligations of programs like Social Security.
1) The document discusses the ongoing process of deleveraging (reducing debt levels) in developed countries since the 2008 financial crisis. It focuses on the experiences of the US, UK, and Spain.
2) US households have reduced their debt levels the most so far (4% decrease), possibly being halfway through the deleveraging process. UK and Spanish households have deleveraged much less (under 1% decrease).
3) Historical examples suggest countries can take 5-7 years to complete deleveraging. Private sector debt reduction typically precedes public sector deleveraging, which usually only occurs after GDP growth rebounds.
This document summarizes the debate around India issuing sovereign bonds for the first time. It notes that India already has high levels of domestic debt totaling Rs. 350-400 lakh crore. Issuing dollar-denominated sovereign bonds would expose India to currency and inflation risks given its lower-medium credit rating. While sovereign bonds could raise large funds, India may struggle to find projects that generate enough return to pay the estimated 6-7% coupon rate required due to these risks. The document argues for reforms like reducing government ministries, increasing foreign portfolio investment limits, and privatizing some state projects before relying too heavily on sovereign bonds.
The document discusses India's debate around issuing sovereign bonds. It notes that India's high levels of domestic debt could amount to 45-50% of the government's budget annually. Issuing sovereign bonds in US dollars also presents risks like currency fluctuations, inflation risks, and lower credit ratings increasing interest rates. While sovereign bonds could raise large funds, there are doubts around India's ability to repay its obligations without impacting domestic debt payments or leading to a debt crisis. Alternative domestic funding options that avoid sovereign bond risks need more exploration.
The document provides an update from Agcapita on various economic issues in April 2010. It discusses the large fiscal deficits governments have incurred to deal with the financial crisis and how this has made governments insolvent. It argues that to finance deficits, governments will likely resort to inflation. It also notes Americans are underestimating how much they need saved for retirement and that demographic trends may make it difficult for governments to fund programs like social security and Medicare. Overall the update discusses rising government debt levels, the risk of higher inflation, and challenges with funding entitlement programs.
This document analyzes the real effects of different types of debt, including government, corporate, and household debt. The authors find that beyond certain thresholds, debt becomes a drag on economic growth. Specifically, their analysis of OECD countries from 1980 to 2010 finds that government debt above 85% of GDP, corporate debt above 90% of GDP, and household debt above 85% of GDP can negatively impact growth. The authors conclude that highly indebted countries need to reduce their debt levels to avoid harming long-term growth, which is made more difficult by aging populations in advanced economies.
The next President will need to confront a number of budgetary challenges and will likely sign into law many federal tax and spending changes. Yet too often, election campaigns are about telling voters what they want to hear rather than what they need to know. To separate fiction from reality, the new Fiscal FactChecker series will monitor the 2016 Presidential campaign on an ongoing basis. To start with, we have identified 16 myths that may come up during the campaign.
The document provides a summary of 16 common budget myths that may come up during the 2016 US presidential campaign. It aims to fact check these myths by presenting data and analysis from nonpartisan groups like the Congressional Budget Office and Committee for a Responsible Federal Budget. The myths are grouped into categories on issues like the national debt, taxes, healthcare/Social Security, and proposed "easy fixes". For each myth, the summary counters arguments with evidence about risks of high debt and limitations of proposals to solve budget problems through tax cuts, targeting only the wealthy, or closing only narrow loopholes.
County Budget Forecast FY 2014 and FY 2015Fairfax County
County Budget Forecast FY2014 and FY 2015
Joint Meeting of the Fairfax County Board of Supervisors and the Fairfax County School Board
November 27, 2012
The document discusses federal spending and the upcoming debates around raising the debt ceiling and passing a fiscal year 2012 budget. It notes that while both political parties agree deficit reduction is needed, they disagree on the extent and nature of spending cuts versus tax increases. The document summarizes two major budget proposals - the House GOP plan from Paul Ryan focusing on large spending cuts, and President Obama's plan relying more on a mix of cuts and tax hikes. It expects the final fiscal year 2012 budget will include substantial outlay reductions but the composition remains unclear.
The document analyzes debt levels across various sectors in the US economy following the 2008 financial crisis to determine if conditions are ripe for a sequel to the book and film "The Big Short." It finds that household, financial institution, corporate, and state/local government debt all improved significantly from crisis levels. While federal debt ballooned, interest payments remain a small percentage of spending for now. With debt trends healthier overall, the conditions that caused the crisis are unlikely to reoccur, so a sequel called "The Big Short 2" would lack a true story to be based on.
After the US dollar replaced gold, the US debt became the attention worldwide, thus the demand for the US dollar continued, furthermore the extremely low interest of the dollar. This helped the US government to borrow great amounts of debt as well as kept the creditors pleased. Due to the pandemic, the US economy retrograded because of the tax cut and unproductive rescue spending plan plus surpassing spending of the government. The rising inflation starts to increase to high levels, which certainly the government must cut back spending or its patterns, while this will lead to uncertain consequences for the long future. This paper discusses several different perspectives on the US government's sustainability as its ability to settle the debt in future, the fate of growth burdened with that debt through the neoclassical mode of growth, and also the effect of anxiety of defaults and unfunded obligations. Inversely, it explores the strength of the dollar with a low-interest rate and its sustainability worldwide. We also propose ways helping of strengthen the fiscal government position and solutions to help the economy recover in long term and to easiest the situation. In the synopsis, we propose something that could affect and shake the global market.
“The prosperity the United States enjoys today is due in no small part to investments the nation has made in research and development at universities, corporations, and national laboratories over the last 50 years.”
"Our $559,667 sample also included four coaching-related payment requests, totaling $12,530, for training and meeting expenses. We found that three of the four sampled coaching-related payments, totaling $4,135, were not adequately supported. None of these three payment requests contained copies of the bills for which NYCLA requested reimbursement, such as an invoice from the venue in which a meeting was held."
This audit report summarizes the findings of a follow-up audit to evaluate whether the New York City Department of Education (DOE) implemented recommendations from a prior 2014 audit related to inventory controls over computer hardware. The follow-up audit found that DOE did not improve its inventory controls and that its decentralized inventory records remained inaccurate and incomplete. Specifically, DOE could not account for 4,993 out of 14,329 pieces of computer hardware inspected at 9 sampled sites. The audit makes 19 recommendations for DOE to implement a centralized inventory system, conduct regular monitoring of site inventory records, determine locations of unaccounted hardware, and provide sites with training and resources to improve controls. In its response, DOE did not acknowledge the
"From 2014 through fiscal 2017, for the first time on
record, New York City’s pension contributions exceeded
actual and projected (mostly bond-financed) capital
expenditures. In other words, the city has been spending
more to meet its pension obligations than to build
and renovate bridges, parks, schools, and other public
assets. In fiscal 2018, roughly 57% of contributions will
be needed simply to continue paying down what the
city still owes its pension systems, in order to continue
paying benefits promised to retirees. The rest will
cover the “normal” cost of added benefits earned by
city employees. In other words, if the pension systems
had been fully funded in the past, the city would have
saved more than $5 billion."
American Competitiveness Initiative:Leading the World in Innovation aci06-b...Luis Taveras EMBA, MS
The document summarizes the American Competitiveness Initiative announced by President George W. Bush in 2006. The initiative commits $5.9 billion in 2007 and $137 billion over 10 years to strengthen the United States' position as a global leader in science and technology through increased investment in research and development, education reforms, and workforce training programs. Specifically, it aims to double funding for physical science and engineering research at agencies like the National Science Foundation and Department of Energy, improve K-12 math and science education, and provide training for 800,000 workers annually. The goal is to sustain American innovation, productivity, and economic competitiveness in the face of increasing challenges from abroad.
"Council Speaker Melissa Mark-Viverito, a Manhattan Democrat, and Council woman Julissa Ferreras-Copeland, a Queens Democrat who is chairwoman of the council’s Committee on Finance, praised the administration’s efforts to find cost-saving measures but said they remain concerned about rising shelter and pension costs."
"As consumers, Latinos wield more than $1.3 trillion in buying power, and the number of affluent Hispanic households is growing much faster than for the overall population: In 2015, there were approximately 370,000 US Latino households with incomes over $200,000, an increase of 187 percent since 2005."
" The Success Academy Board of Trustees failed to adequately monitor aspects of the finance affairs of SA and did not consistently follow the procedures for operation required by its bylaws"
This document provides information about a school advisory service firm called Optimization with an Impact (OpIm). It offers three levels of financial advisory services to help schools optimize their budgets and purchasing. The basic service focuses on budget management and purchasing optimization for $25,000. Additional services include budget management optimization for $20,000 and purchasing optimization for $15,000. The goal is to improve instruction, the school environment, and local community through efficient use of school financial resources.
“OpIm relieves instructional leaders of non-instructional tasks so they can focus on student achievement and professional development of the teaching staff.”
New York State depends on Wall Street tax revenues even more than New York City, because the State relies more heavily on
personal and business taxes and does not levy a property tax as the City does.
This document lists 8 references used in another work. The references are books published between 2012 and 2015 that discuss topics such as the relationship between the public and private sectors, the impact of technology on jobs, issues with the sharing economy and capitalism, tax policy, corruption, and national security.
"You would be surprised that in some schools, the restriction appears to be implicitly understood, since they neither have a line for temporarily restricted funds on their balance sheet nor the statement below in their respective financial statement notes".
The Educational Impact of Broadband Sudsidies for Schools Under ERateLuis Taveras EMBA, MS
"The “universal service fund” pays for E-Rate with a 17.9 percent tax on long distance telecommunications. The term may sound odd; “long distance” is an artifact of the past for most Americans. However, international calls over plain old telephone network are still made, mostly by Latin American migrants living in the U.S. The telecommunications levy hits them particularly hard. More affluent households, on the other hand, use Facetime, Skype and other apps that avoid the tax."
http://www.politico.com/agenda/story/2016/08/stop-spending-money-connecting-schools-to-the-internet-000191
A San Francisco tech worker wrote an open letter complaining about the city's homeless population. He referred to them as "riff-raff" and said their "pain, struggle and despair" made commuting unpleasant for "wealthy" residents. The letter sparked backlash for its lack of sympathy. Homeless individuals interviewed expressed frustration with wealthy tech workers who do not care about others and want to "grab anything they can get." While the tech worker apologized for his word choice, he faced criticism for failing to acknowledge the daily challenges of homelessness.
Even among tech companies, Apple's rates are low. And while the company has remade industries, ignited economic growth and delighted customers, it has also devised corporate strategies that take advantage of gaps in the tax code, according to former executives who helped create those strategies.
Gleevec, a drug that treats a rare form of leukemia, was approved in 2001 with a list price of $26,400 per year. Since then, its price has steadily increased, reaching over $120,000 per year currently. While the drug has competition now, its price increases were incremental at first and accelerated even before competitors entered the market. The price hikes have helped make Gleevec a top revenue drug for its manufacturer, Novartis, even though it was initially not expected to be a major moneymaker due to the small patient population. However, critics argue there is a lack of meaningful competition in the drug market that would normally drive prices down.
"Nationwide, charter schools reported an average graduation rate of 70 percent. Hawaii, Arizona, Indiana, Ohio and California have the highest percentages of low-graduation-rate charter high schools."
Examining the stories of successful startup businesses finds each co-founder often brings something special to the table that allowed the company both to get off the ground and then thrive.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
办理美国UNCC毕业证书制作北卡大学夏洛特分校假文凭定制Q微168899991做UNCC留信网教留服认证海牙认证改UNCC成绩单GPA做UNCC假学位证假文凭高仿毕业证GRE代考如何申请北卡罗莱纳大学夏洛特分校University of North Carolina at Charlotte degree offer diploma Transcript
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
South Dakota State University degree offer diploma Transcriptynfqplhm
办理美国SDSU毕业证书制作南达科他州立大学假文凭定制Q微168899991做SDSU留信网教留服认证海牙认证改SDSU成绩单GPA做SDSU假学位证假文凭高仿毕业证GRE代考如何申请南达科他州立大学South Dakota State University degree offer diploma Transcript
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
Discover the Future of Dogecoin with Our Comprehensive Guidance36 Crypto
Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
Delve into the world of STREETONOMICS, where a team of 7 enthusiasts embarks on a journey to understand unorganized markets. By engaging with a coffee street vendor and crafting questionnaires, this project uncovers valuable insights into consumer behavior and market dynamics in informal settings."
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...
Puerto Rico's challenge
1. special Commentary
commentary
Puerto Rico’s Challenge
March 2012
Puerto Rico’s debt has long been attractive to municipal investors. The advisor, and primary lender to the Commonwealth, its political subdivisions,
Commonwealth’s bonds carry high yields and are exempt from local, state, and and its public corporations. Puerto Rico’s growth and financial stability require
federal income taxes. a healthy GDB.
However, the Commonwealth today is flirting with insolvency, and the risk is The “Status Issue”
growing that someday, Commonwealth investors may not be repaid, in full.
Puerto Rico’s financial condition is far worse than any U.S. state’s, and a default – A perennial issue for Puerto Rico and its politicians is whether to support
though unlikely in the immediate future – is a possibility over the next few years. applying for U.S. statehood. The island’s major political parties are divided on
this policy matter, known as the “status issue.” A Commonwealth default would
Breckinridge has long avoided obligations of Puerto Rico, but we believe likely compel a national discussion of the “status issue.” It is uncertain how this
all municipal bond investors should now be cognizant of its problems. A discussion would unfold and what it might mean for Puerto Rico’s bonds. 3
Commonwealth default would have significant ramifications for the municipal However, the Commonwealth’s current Governor supports statehood.4
market.
Economy
In this Special Commentary, we introduce the Commonwealth and its financial
situation, and we speculate on the market impact of a Puerto Rico bond default. The Puerto Rican economy entered recession in late 2006, and it has yet
Our discussion begins with a brief introduction to the Commonwealth’s to emerge. Rising oil prices, government downsizing, and the end of tax
governance, the “status issue,” and its economy. It next moves to an overview advantages for manufacturers were the immediate causes of recession. 5 The
of the island’s poor financial condition. We then discuss how recent reform Great Recession compounded the island’s problems.
initiatives – coupled with the lack of a “trigger event” – make a default unlikely,
at least in the near term. We conclude with a discussion of such a default’s
Puerto Rico’s Real GDP Growth has been
impact on the market and the legal precedents that might emerge from it. Negative or Modest for Several Years
Source: Government Development Bank for Puerto Rico
An Introduction to the Commonwealth: 1.0%
Government, Politics, Economy, & 0.5%
Recession 0.0%
Government 0.5%
2006 2007 2008 2009 2010 2011 2012
Forecast
The Commonwealth closely resembles a U.S. state. It has a bicameral legislature, 1.0%
and its governor is elected to a four-year term. The island’s judicial system is
1.5%
indistinguishable from a state court system.1
2.0%
However, Puerto Rico is unique in its extensive use of public corporations to
2.5%
deliver public services. It directly and indirectly manages 48 public benefit
3.0%
corporations. 2 This governance structure has tended to limit transparency and
fiscal accountability in its public sector. 3.5%
4.0%
The island’s most important public corporation is the Government
4.5%
Development Bank (GDB). The GDB is the fiscal agent, paying agent, financial
200 High Street, Boston, MA 02110 • Ph: (617) 4 43 - 0779 • Fx: (617) 4 43 - 0778 • w w w.bond inve stor.com
2. special Commentary, March, 2012
The island’s recent economic quagmire also results, in part, from decades of A Rising Debt Burden: Annual deficit financing has caused the island’s debt-
industrial policy. Since the 1950s, the Commonwealth has invested heavily in to-GDP ratio to rise. It is now 90%, compared to 57% in 2001.13 In fiscal years
infrastructure, education, and the development of high-tech manufacturing 2011 and 2012, the Commonwealth’s debt load grew while the economy
to spur growth. Concurrently, the federal government has subsidized Puerto contracted.14
Rico’s debt through “triple-tax-free” bonds, 6 Puerto Rican manufacturers
through corporate tax breaks, 7 and Puerto Rican residents through direct
Puerto Rico’s Debt Burden is High and Growing
transfer payments. 8 Note: Figures exclude unfunded pension and retiree healthcare oblications.
Source: Government Development Bank for Puerto Rico
These investments and subsidies have raised basic living standards.9 However,
median household incomes in Puerto Rico remain at $15,000, and only 35% of
Puerto Ricans are employed.10 Also, dependence on federal tax incentives and
transfer payments has limited the island’s long-term growth prospects.11
Puerto Rico’s Financial Condition is Weak
Poor financial management has contributed to the length and depth of Puerto
Rico’s recession. The Commonwealth is burdened by large annual deficits, a
high debt burden, opaque financial practices, and severely underfunded
pension plans, among other problems. The credit characteristics we highlight
below are not new, but they have worsened dramatically over the last decade:
Annual Deficits: The Commonwealth has not balanced its budget in twelve
years. The FY 2012 deficit (this year) will be roughly $1.4 billion or 17% of
general fund expenditures.12 This calculation excludes the accrual of annual
pension expense.
Inflexible Debt Structure: Puerto Rico’s debt structure is less flexible than
The Commonwealth has Experienced Twelve other municipal issuers’. The Commonwealth repays only 21% of its debt within
Consecutive Deficits 10 years.15 This means there is little potential to free up cash by extending
Source: Official Statements, Public Improvement Refunding Bonds, Series 2012A, p. 11- maturities through refinancing.
3, February 1,2012 and Government Development Bank for Puerto Rico, Senior
Notes, Series 2011A, p. 1-2, February 12, 2011.
Politically Weak Bondholders: Relatively few Puerto Ricans own the island’s
$0
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 bonds.16 Municipal debt is typically owned by resident taxpayers who pressure
their politicians to avoid bond defaults, but Puerto Rico’s creditors have a more
-$500 limited voice in its politics.
Poor Forecasting: Puerto Rico consistently adopts aggressive economic and
$1,000
financial forecasts. The Government Development Bank has missed economic
growth forecasts for three consecutive years.17 Politicians continue to tout
Deficit ($ millions)
-$1,500
progress on relatively weak financial and economic data.18
-$2,000
Puerto Rico’s Growth Forecasts are
-$2,500
Routinely Aggressive
Source: Government Development Bank and Official Statements from bond offerings.
-$3,000
GNP Growth (%)
-$3,500
Forecast Actual
FY 09 -3.4 -4.0
FY 10 0.7 -3.8
Deficit Financing: The Commonwealth has issued debt to finance its annual
deficits. Unlike healthy municipal issuers, the Commonwealth requires market
FY 11 1.0 -0.4
access to meet payroll and other obligations. FY 12 0.7 ?
200 High Street, Boston, MA 02110 • Ph: (617) 4 43 - 0779 • Fx: (617) 4 43 - 0778 • w w w.bond inve stor.com
3. special Commentary, March, 2012
Opaque Intra-governmental Borrowing: The Commonwealth’s major public Recent Reforms and Lack of a “Trigger
corporations have significant and opaque financial relationships to each other Event” Suggest a Near-Term Default is
and to the Commonwealth.19 These intra-governmental capital flows represent Unlikely
a significant portion of the island’s financial activities20 and they are beginning
Despite its poor economic and financial profile, the risk of a near-term default
to impact the island’s larger issuers. Last year, almost 28% of PREPA’s (Puerto
by Puerto Rico appears slim. Recent reforms appear sufficient to delay (if not
Rico Electric Power Authority’s) unpaid bills were owed by delinquent public
forestall) a default. Equally important, the “trigger events” most likely to induce
sector organizations. 21
a Puerto Rico default seem unlikely.
A Strained Government Development Bank (GDB): The Commonwealth’s vital
Government Development Bank (GDB) is under stress. Roughly 35% of the Reforms
GDB’s assets comprise loans to the Commonwealth and its public entities, The Commonwealth has implemented a series of financial reforms during the
and most of these loans are paid late. 22 While the bank’s liquidity is ostensibly past two years that have positively impacted its credit quality and growth
strong, it is weakly monitored. The GDB is unregulated by the Federal Reserve prospects. These reforms (outlined below) include: overhauling the tax
or Federal Deposit Insurance Corporation. 23 system, 27 streamlining the island’s licensing and permitting process, 28 reducing
government expenditures, 29 establishing a framework for public-private
An Increasingly Politicized Government Development Bank: The GDB’s loan
partnerships (essentially privatization of state assets), 30 and several changes to
book has become a bit politicized. In recent years, the GDB has entered
the pension system. 31
into “fiscal oversight agreements” with several of the island’s large public
corporations. 24 These agreements require the public corporations to
implement expense reductions, rate hikes, or submit to increased oversight
Puerto Rico has Enacted Several Important
to ensure the GDB is repaid. The bank’s intervention into areas traditionally
Fiscal Reforms over the Past Two Years
reserved for policymakers increases its repayment risk.
Jan-09
Underfunded Pension Plans: Puerto Rico’s public pension funds were 14% Feb-09
funded in FY 2010, 25 and a staggering 22% of the funds’ assets include loans Mar-09
- Gradual reduction in operating expenditures (Act 7, March 2009)
- Imposition of temporary and permanent tax hikes (Act 7, March 2009)
to members of the fund. The Employees’ Retirement System may deplete its Apr-09
net assets by FY 2014 despite recent reforms. 26 The Commonwealth’s pension May-09
- Creation of a public-private partnership mechanism (effectively a “privatization” law) to raise cash
funding shortfall is far worse than any U.S. state. Jun-09
and restructure the management of state assets. (Act 29, June 2009)
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Puerto Rico’s Pension Shortfall Far Exceeds That Dec-09
- verhaul of burdensome licensing and permitting processes to stimulate growth and entrepreneur-
O
of Other States Jan-10
ship. (Act 161, December 2009)
Note: Figures are for 2010. Data for California reflects plans for state employees, only, Feb-10
and excludes teachers and public agency employees. Excludes pension reforms
Mar-10
made for fiscal years beginning after June 30, 2010
Apr-10
Source: Merritt Research Services, LLC May-10
100% Jun-10
- stablishing an early retirement incentive which had a positive effect on pension systems’ actuarial
E
90% value. (Act 70, July 2010)
% of pension liability actuarilly funded with assets
Jul-10
- reation of a new energy policy to reduce dependence on costly oil and foster renewable energy
C
80% technologies. (Acts 82/83, July 2012)
71% Aug-10
70% Sep-10
63% Oct-10
61%
60% - eduction of corporate and individual income tax rates, enhanced tax compliance, and reduction
R
53% Nov-10 in tax credits and exemptions to spur growth and increase tax collections. (Acts 154/171,
50% 45% November 2010.
Dec-10
40% Jan-11
Feb-11
30%
Mar-11
Apr-11
20%
14% May-11
10% - Immediate capitalization of pension funds with $163 million from the Commonwealth’s Infrastruc-
Jun-11
ture Financing Authority. (Act 96, June 2011)
0% Jul-11 - Increase in employer contributions to the pension system (Acts 114/116, July 2011)
Puerto Rico Illinois Connecticut Rhode Island California New Jersey - Lower the maximim amount a member can borrow from the employees’ retirement system pension
Aug-11 fund from $15,000 to $5,000 to improve the system’s liquidity. (New regulation enacted by the
Board of Trustees of the Employees’ Retirement System, August 2011)
Sep-11
Oct-11
Nov-11
Dec-11
4. special Commentary, March, 2012
Puerto Rico’s economy is now nearing expansion. 32 Tax collections have for Puerto Rican manufacturers in 2006. Many of the companies affected
also improved, and the newfound ability to lease assets has buoyed the by the change moved jobs off the island or restructured their corporate
Commonwealth’s cash flow. 33 Additional leases are planned, which should charter. It is likely a majority of job losses resulting from the 2006 tax
further improve short-term liquidity and limit default risk. change have already materialized.
Trigger Events Market Impact of a Default New Legal
Importantly, the events most likely to set in motion a default seem unlikely in the Precedents
near term. These mostly include risks associated with Puerto Rico’s dependence
on the capital markets and federal government. If the Commonwealth’s financial reforms prove insufficient to correct its financial
imbalances or the above-mentioned trigger events become more plausible, a
Because it borrows frequently to fund operations, the Commonwealth must Puerto Rico bond default will become more likely. This would have a significant
retain market access to avoid a bond default. A ratings downgrade, the impact on the municipal market and might result in legal precedents of interest
elimination of the tax-exemption for municipal bond interest, or an increase to municipal investors.
in mutual fund redemptions would threaten this access. However, all three of
these events seem unlikely: Immediate Market Impact of Default
• atings Downgrade:
R Puerto Rico’s ratings of Baa1/BBB are barely The municipal market would likely react strongly and negatively to such a
investment grade. A downgrade could force some selling and significantly default. The market remains largely dependent on retail demand, and Puerto
limit demand. Fortunately, this scenario is unlikely in the near-term insofar Rico’s debt is held widely by municipal bond mutual funds. Also, bond insurers
as rating agencies generally give struggling issuers time to implement are heavily exposed to the island.
planned reforms.
The retail investors who comprise the bulk of demand for municipal bonds
• limination of tax-exemption: Federal tax exemption has supported retail
E would likely be frightened by a Puerto Rico default. Such a default would
demand for Puerto Rico’s bonds, which are exempt at the local, state, and invite disturbing but inaccurate headlines that Puerto Rico’s predicament
federal level. Without this “triple tax-exemption,” Puerto Rico’s cost of presages U.S. state defaults. Investor skittishness could cause the market to
borrowing would rise, as would the risk of a failed bond sale. Fortunately, underperform. Credit spreads would likely widen and liquidity might suffer.
federal lawmakers seem aware of Puerto Rico’s dependence on triple-tax-
A default would also directly pressure municipal bond mutual funds. Puerto
free bonds, 34 and are unlikely to invite a default by pulling the subsidies
Rico’s $60 billion in debt is held widely across these funds, 35 and a default
for its debt
would decrease their net asset values and share prices, inducing additional
• utual Fund Redemptions: Many state-specific mutual funds are large
M market outflows.
buyers of Puerto Rico bonds, and they have supported the market for
A Puerto Rico default might also place further strain municipal bond insurers.
Puerto Rico’s debt quite well. Strong mutual fund inflows in recent years
Nearly 28% of the Commonwealth’s public debt is insured. 36 To our knowledge,
have given these funds the capacity to do so. However, when interest rates
every major insurer has significant exposure to Puerto Rico. 37
begin to rise, these funds may enter a prolonged period of redemptions
and their capacity to keep buying Puerto Rico bonds may diminish. If
New Legal Precedents
those redemptions coincide with further deterioration in Puerto Rico’s
credit quality, mutual funds could become sellers rather than buyers. A Puerto Rico default might result in new legal precedents. These include (a)
how to restructure a federal territory, (b) whether bondholders can really
A debt crisis in Puerto Rico might also ensue as a result of federal government enforce contract rights against states, (c) whether certain tax secured bonds
austerity measures. Cuts to Puerto Rico’s transfer payments and the end of dilute security for general obligation bondholders, and (d) the extent to which
favorable corporate tax treatment could significantly impact the island’s credit “sovereign immunity” is a viable defense for a state’s non-payment of debt.
profile. However, we believe the negative effects of these austerity policies are
unlikely to materialize in the near future. Because it is a federal territory, there is significant uncertainty surrounding how
Puerto Rico might restructure its debt. The Commonwealth is not a municipality,
• ederal government cuts to Puerto Rico’s transfer payments. Puerto Rico’s
F so it cannot adjust its debts through Chapter 9 of the bankruptcy code. 38 It is
citizenry depends heavily on federal government transfer payments, also not a sovereign state, so it may have limited flexibility to renegotiate debt
including those for food stamps, Medicaid, and social security. However, contracts. Instead, it is possible that Congress would compel Puerto Rico to
the federal government is unlikely to cut these programs independent of adopt restructuring terms to its liking via the Constitution’s Territorial Clause. 39
a wholesale reform, and there are only modest savings to be generated by Some sort of “Congressional receivership” might prove the best option,40 but
reducing payments to Puerto Rico’s residents. it is unclear how this would work.
• ob losses associated with the end of the preferential corporate tax
J A Puerto Rico default might shed light on the extent to which bondholders can
treatment. Congress ended the “Section 936” preferential tax treatment enforce their contract rights against a state. Puerto Rico’s bondholders have
5. special Commentary, March, 2012
a first lien on Commonwealth resources. However, math and politics make it 1
See Sam Garett, “Political Status of Puerto Rico: Options for Congress,” Congressional Research Service,
June 7, 2011.
unlikely that bondholders will be paid, in full, if the Commonwealth cannot 2
For a listing of Puerto Rico’s component units, see the Commonwealth’s FY 2010 Comprehensive Annual
both meet debt service payments and secure the public health, safety, and Financial Report, pp. 66-74.
welfare.41 A ruling validating Puerto Rico’s ability to disregard its first lien
3
Puerto Rico would likely seek federal help if the Commonwealth defaulted. Federal involvement would
necessitate a debate regarding the island’s legal status. Some Americans might support Puerto Rican statehood
pledge could conceivably weaken bondholder protections outlined in other and a financial “bailout” in exchange for fiscal reforms. Others might seek to sever political ties with the island,
altogether.
states’ constitutions. Conversely, a ruling upholding Puerto Rico’s first lien 4
See Fox News Latino, “Puerto Rico Primary Gives a Push to Luis Fortuno’s Statehood Bid,” March 19, 2012.
Available at: http://latino.foxnews.com/latino/news/2012/03/19/puerto-rico-primary-gives-push-to-luis-fortunos-
pledge might strengthen bondholder security. statehood-bid/
5
See “Trends and Developments in the Economy of Puerto Rico, Federal Reserve Bank of New York, “Current
A default might also clarify when, if ever, tax secured bonds dilute security Issues,” Vol. 14, No. 2 (March 2008)
for general obligation bondholders. The Commonwealth’s COFINA bonds are
6
Interest paid on Puerto Rico bonds is not taxed by federal, state, or local governments. This leads to a low
cost-of-capital for the island nation.
backed by a new sales tax levy that arguably diverts revenue away from general 7
Prior to 2006, foreign corporations operating in Puerto Rico could claim a large tax credit under section 936
of the federal tax code. Known as the “possession tax credit,” the favorable tax treatment drew many chemical
obligation bondholders.42 It is unclear if Puerto Rico can segregate these sales and pharmaceutical manufacturers to the island. According to the Federal Reserve Bank of New York, more
than 4% of the island’s private sector workers are employed in the pharmaceutical industry. This is more than
taxes to the detriment of general obligation bondholders’ security.43 A ruling 10 times the mainland average. See “Trends and Developments in the Economy of Puerto Rico, Federal Reserve
Bank of New York, “Current Issues,” Vol. 14, No. 2 (March 2008).
that upholds Puerto Rico’s right to segregate these taxes might induce more 8
Transfer payments include those for social security and food stamps, among others. They are a significant part
tax secured financing by U.S. states and reduce security for some general of Puerto Rico’s economy. In 2009, 32% of the federal government’s food stamp payments went to Puerto Rico.
The island nation represents less than 1.3% of the U.S. population.
obligation bonds. 9
See 2006 Center for the New Economy report. Available at: http://www.grupocne.org/information_bank/
FLMM.pdf
Another question is whether Puerto Rico can defend itself against a suit for 10
This compares to 45% in the U.S. See: United States Bureau of Labor Statistics and Puerto Rico Department
of Labor and Human Resources. Data available at: http://www.grupocne.org/information_bank/FLMM.pdf.
nonpayment of debt by employing a sovereign immunity defense. The State 11
See 2006 Center for the New Economy report (March 2007). Available at: http://www.grupocne.org/
of New Jersey successfully defeated a union-led lawsuit on sovereign immunity information_bank/FLMM.pdf. See slides 24 - 26.
grounds earlier this year.44 Puerto Rico has sovereign immunity rights,45 and it is
12
See UBS Wealth Management Research, Municipal Report Commonwealth of Puerto Rico (January 11,
2012). See also: March 7, 2012 Official Statement for Commonwealth of Puerto Rico Public Improvement
possible (albeit unlikely) that the Commonwealth has retained these rights with Refunding Bonds, Series 2012A, p. 4. Available at: http://emma.msrb.org/EP611148-EP478117-EP878493.pdf.
The Commonwealth reports a lower FY 2012 deficit in the Official Statement because it excludes $685 million
respect to bonds. 46 in refinanced debt service from its calculation. Most financial analysts would include the refinanced amount.
See the UBS report and the Center for the New Economy website note, available at: http://grupocne.org/
cneblog/?p=831.
Conclusion 13
See Government Development Bank (GDB) Statistical Appendix of the Economic Report for the Governor and
Legislative Assembly, Tables 3 and 29, available at: http://www.gdbpr.com/economy/statistical-appendix.html.
Although the threat is not imminent and the risk remains slim, Breckinridge
14
See Government Development Bank (GDB) Statistical Appendix of the Economic Report for the Governor and
Legislative Assembly, Tables 3 and 29, available at: http://www.gdbpr.com/economy/statistical-appendix.html.
believes the possibility of a default by Puerto Rico is sufficient to warrant the See also March 7, 2012 Official Statement for Commonwealth of Puerto Rico Public Improvement Refunding
Bonds, Series 2012A, p. I-56. Available at: http://emma.msrb.org/EP611148-EP478117-EP878493.pdf
attention of municipal investors. 15
Figure includes debt guaranteed by the Commonwealth and revenue bonds. See: Puerto Rico’s FY 2010
Comprehensive Annual Financial Report, pp.137.
A Puerto Rico default would have negative market implications. High grade 16
Most Puerto Rico bonds are held by mainland U.S. residents who are attracted to the island’s “triple-tax-free”
interest payments. Affluent residents of New York City often find the bonds particularly attractive because they
investors should understand the Commonwealth’s fiscal problems because a face high marginal city, state, and federal income tax rates.
default might trigger mutual fund redemptions and bouts of illiquidity.
17
See Government Development Bank data and official statements from latest bond offerings.
18
For example, in February 2012, the Governor of Puerto Rico pointed to a modestly improved economic
report as evidence that the island’s recession was over. His statement ignored the fact that economic growth,
However, Puerto Rico’s debt situation is unique and unparalleled in the United as measured by the Government Development Bank, actually declined on a month-over-month basis. See
“Puerto Rico’s recession is over, Governor says,” Feb. 21, 2012, Reuters. Available at: http://www.reuters.com/
States. A debt crisis in Puerto Rico will have limited impact – if any – on the article/2012/02/21/puertorico-economy-idUSL2E8DLFKI20120221. The GDB’s January 30, 2012 Economic
extremely remote likelihood of a U.S. state default. Indicators report showed that the Commonwealth’s “Economic Activity Index” finished at 128.2 in November
2011 compared to the December 2011 figure of 127.7. See: http://www.gdbpr.com/economy/GDB-Economic-
Activity-Index.html
We end with a graph that illustrates just how different Puerto Rico is compared 19
At the end of fiscal year 2010, the Commonwealth’s public corporations owed $607 million to the primary
government, and $3.6 billion to each other. During that year, the primary government expensed $2.7 billion
a distressed U.S. state: Illinois. Illinois compares very favorably even though it in payments to the Commonwealth’s major public corporations. The Commonwealth’s primary government
budget is roughly $20.7 billion. One expert, Sergio Marxauch, has noted that: “… the Byzantine structure of
faces several years of large structural deficits and large pension and retiree our government, with its manifold executive departments, has generated a complete lack of accountability,
healthcare liabilities. oversight, and transparency in government operations…” See: 2006 Center for the New Economy report.
Available at: http://www.grupocne.org/information_bank/FLMM.pdf
20
See Puerto Rico’s FY 2010 Comprehensive Annual Financial Report, pp. 120 – 125.
21
See Municipal Market Advisors, Weekly Outlook, April 2, 2012.
Puerto Rico’s Economic and Fiscal Condition 22
In FY 2010, $2.3 billion of the GDB’s public sector loans were delinquent by 90 days or more, an amount equal
Compares Poorly — Even to Illinois to 27% of the GDB’s “loans receivable.” This figure is up from $510 million in FY 2006. Delayed loan collection is
one reason the bank’s net interest margins (interest earned on lending less interest paid on borrowings) are low.
* Includes revenue debt and state guarantees See the following sources: Official Statement, Government Development Bank for Puerto Rico, Senior Notes,
GSP = Gross State Product Series 2011A and 2011B, December 21, 2011, pp. 10 and 25; Official Statement, Government Development
Bank for Puerto Rico, Senior Notes, Series 2006A, February 8, 2006, p. 29; and Standard Poor’s January 27,
Source: U.S. Bureau of Economic Analysis, Puerto Rico Planning Board, and 2011 rating opinion for The Government Development Bank for Puerto Rico.
Comprehensive Annual Financial Reports, Illinois and Puerto Rico, FY 2010. 23
Instead, the Commissioner of Financial Institutions of Puerto Rico performs audit examinations of the bank
every 18 months. See Standard Poor’s January 27, 2011 rating opinion for Government Development Bank
Illinois Puerto Rico for Puerto Rico.
24
The bank has fiscal oversight agreements with the Highways and Transportation Authority, the Puerto Rico
Population (millions) 13 3 Aqueduct and Sewer Authority (PRASA), the Electric Power Authority, the Ports Authority, the Puerto Rico
medical Services Administration, and the Puerto Rico Health Insurance Administration. It also has a fiscal
oversight-type agreement with the University of Puerto Rico. See: Official Statement, Government Development
% of Population Employed 47% 35% Bank for Puerto Rico, Senior Notes, Series 2011A and 2011B, December 21, 2011.
GSP per capita $50,938 $15,900
25
See Puerto Rico’s FY 2010 Comprehensive Annual Financial Report, pp. 196.
26
See March 7, 2012 Official Statement for Commonwealth of Puerto Rico Public Improvement Refunding
Bonded Debt*/GSP 4% 90% Bonds, Series 2012A, p. I-56. Available at: http://emma.msrb.org/EP611148-EP478117-EP878493.pdf. However,
note that Moody’s reports suggest a slightly brighter picture. Moody’s believes recent reforms have extended the
Unfunded Pension Retiree Healthcare 16% 44% life of Puerto Rico’s pension funds by roughly six years. See Moody’s Investors Service, Issuer Comment, “Key
Drivers of Puerto Rico’s Downgrade to Baa1,” August 10, 2011. At that time, Moody’s expected pension reforms
Debt/GSP to extend the life of the ERS from 2019 to 2025.
27
Acts 7, 154, 171.
Cumulative General Fund Deficit (FY 10) -16% -9% 28
Act 161.
Federal Aid as % of Budget 30% 32%
6. special Commentary, March, 2012
29
Act 7.
30
Act 29.
31
Acts 114, 116.
32
See Government Development Bank data. Available at: http://www.gdbpr.com/economy/GDB-Economic-
Activity-Index.html
33
The Commonwealth received a lump sum payment of $1 billion as part of a toll road leasing agreement in
September 2011. See March 7, 2012 Official Statement for Commonwealth of Puerto Rico Public Improvement
Refunding Bonds, Series 2012A, p. I-31. Available at: http://emma.msrb.org/EP611148-EP478117-EP878493.pdf
34
See Report by the Joint Committee on Taxation, “An Overview of the Special Tax Rules Related to Puerto
Rico and An Analysis of the Tax and Economic Policy Implications of Recent Legislative Options,” June 23, 2006.
Available at: http://www.jct.gov/publications.html?func=startdownid=1496.
35
Mutual funds own Puerto Rico because it comprises 4% of the Barclays’ municipal market index, and 50%
of the BBB portion of that index. Most funds are benchmarked to the performance of these indexes. See:
Barclay’s Municipal bond Index, March 27, 2012. Note also that the $60 billion figure is from the Government
Development Bank (GDB) Statistical Appendix of the Economic Report for the Governor and Legislative
Assembly, Table 29, available at: http://www.gdbpr.com/economy/statistical-appendix.html
36
Breckinridge analysis of Bloomberg data, 3/23/2012.
37
For example, Assured Guaranty has at least $4.8 billion in exposure to Puerto Rico, and the island’s debt also
comprises six of the top 10 exposures for Financial Guarantee Insurance Company (FGIC). See: Assured and
FGIC’s statutory statements, December 2011.
38
See 11 USC 101(52).
39
Congress is given broad powers under the Territorial Clause of the U.S. Constitution. See: Sergio Marxauch,
“Municipal Fiscal Crises in the United States: Lessons and Policy Recommendations for Puerto Rico,” Center for
the New Economy, April 28, 2006, p. 15
40
See Sergio Marxauch, “Municipal Fiscal Crises in the United States: Lessons and Policy Recommendations for
Puerto Rico,” Center for the New Economy, April 28, 2006, p. 15.
41
Section 8, Article VI of the Constitution of Puerto Rico gives general obligation bondholders a first claim
on all available Commonwealth resources. However, math and the threat of public disorder have a way of
bending seemingly ironclad clauses in state constitutions. For example, the Commonwealth might argue that
its debts are merely those of a federal territory and that bondholders have limited legal recourse against a
federal government sovereign – including its territories. This would be a novel approach, but it might work
in conjunction with a federal bailout. Importantly, Puerto Rico has already demonstrated a willingness to
restructure contracts to ameliorate its financial situation. Last year, the Commonwealth successfully abrogated
a collective bargaining agreement on the grounds that it was reasonable and necessary to tear-up the contract.
See: United Automobile, Aerospace, Agricultural Implement Workers of America International Union, et al. v.
Luis Fortuno, et al., 633 F. 3d 37 (January 27, 2011)
42
The Commonwealth’s most senior debt obligations are its general obligation bonds and its COFINA bonds.
COFINA bonds are sales tax backed bonds that are, at least theoretically, insulated from general fund
obligations. Puerto Rico’s general obligation bondholders have long been secured by the Commonwealth’s
“available” resources, including its taxing power. But when COFINA bonds were created, lawmakers deemed
the sales taxes that backed them as “unavailable” resources.
43
Prior courts have ruled that local governments may carve out specific “available” revenues to the detriment
of pre-existing general obligation bondholders. In fact, “dedicated tax” bonds are routinely issued across the
country. However, Puerto Rico’s COFINA bonds were issued in a time of distress, arguably to the detriment of
general obligation bondholders. Also, the only case we know of in which a carve-out was upheld against a general
obligation bondholder involved a tax increment financing district. In that case, the pledged revenue was never
made available for general fund operations. COFINA bonds are supported by a sales tax, half of which flows
back to the general fund. This fact may have implications for the strength of the COFINA bonds’ dedicated tax
pledge. The tax increment financing case is: Wolper v. City Council of City of Charleston, 287 S.C. 209, (1985).
44
See N.J. Educ. Ass’n v. New Jersey, 2012 U.S. Dist. LEXIS 28683.
45
See Porto Rico v. Ramos, 232 U.S. 627 (1914).
46
Puerto Rico’s constitution certainly implies that the Commonwealth has waived its sovereign immunity
defense. However, the language in Puerto Rico’s Constitution is more vague than language used by U.S.
states. Puerto Rico’s Constitution provides in Article VI, Section 2: “The Secretary of the Treasury may be
required to apply the available revenues including surplus to the payment of interest on the public debt and
the amortization thereof in any case provided for by Section 8 of this Article VI at the suit of any holder of
bonds or notes issued in evidence thereof” (emphasis added). It is unclear from this language whether Puerto
Rico’s Constitution refers to suits in Puerto Rican courts or in Federal courts. The U.S. Supreme Court has held
that sovereign immunity rights are waived only when “the waiver is stated by the most express language or
by such overwhelming implication from the text as will leave no room for any other reasonable construction.”
See: In re Creative Goldsmiths of Washington, D.C., Inc., 119 F. 3d 1140 (4th Cir. 1997), at 1147. In other bond
indentures, we often see a clearer statement of intent that includes words like “sovereign immunity,” “waiver,”
or “governmental immunity,” among others.
DISCLAIMER: The material in this document is prepared for our clients and other interested parties and contains the opinions of Breckinridge Capital Advisors. Nothing in this document
should be construed or relied upon as legal or financial advice. All investments involve risk – including loss of principal. An investor should consult with an investment professional before
making any investment decisions.