4 ms·

Is that actually a thing that states aren’t allowed to borrow?

ralph84 6y ago
State and local governments are allowed to borrow and they do quite a lot of it. The difference is they don’t have a guaranteed buyer for their debt like the federal government does with the federal reserve.
- kyboren 6y ago
  > The difference is they don’t have a guaranteed buyer for their debt like the federal government does with the federal reserve. That is no longer true: https://www.federalreserve.gov/monetarypolicy/muni.htm https://www.federalreserve.gov/monetarypolicy/muni.htm On April 8, 2020, the Board of Governors of the Federal Reserve System (the Board), by the unanimous vote of its five members and with the approval of the Secretary of the Treasury, authorized the establishment and operation of the Municipal Liquidity Facility (MLF) under section 13(3) of the Federal Reserve Act (12 U.S.C. § 343(3)). The MLF is intended to support lending to state, city, and county governments. Under the MLF, the Federal Reserve Bank of New York (Reserve Bank) will commit to lend on a recourse basis to a special purpose vehicle (SPV). The SPV will purchase eligible notes directly from eligible issuers at the time of issuance. [...] The Department of the Treasury, using funds appropriated to the Exchange Stabilization Fund under section 4027 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), will make a $35 billion equity investment in the SPV in connection with the MLF. https://www.federalreserve.gov/publications/files/municipal-liquidity-facility-4-16-20.pdf https://www.federalreserve.gov/publications/files/municipal-...
projektfu 6y ago
States borrow but almost all must balance the budget. When they borrow it should be a project, not to cover a shortfall. This is not a federal requirement but a restriction the states put on themselves. https://www.ncsl.org/research/fiscal-policy/state-balanced-budget-requirements.aspx https://www.ncsl.org/research/fiscal-policy/state-balanced-b...
- pmiller2 6y ago
  How many of those states have emergency powers provisions that would allow them to override that restriction?
  - projektfu 6y ago
    I don’t have any special insight beyond what’s in the article. This is likely why state governments have been talking about federal aid.

State and local governments are allowed to borrow and they do quite a lot of it. The difference is they don’t have a guaranteed buyer for their debt like the federal government does with the federal reserve.

kyboren 6y ago
> The difference is they don’t have a guaranteed buyer for their debt like the federal government does with the federal reserve. That is no longer true: https://www.federalreserve.gov/monetarypolicy/muni.htm https://www.federalreserve.gov/monetarypolicy/muni.htm On April 8, 2020, the Board of Governors of the Federal Reserve System (the Board), by the unanimous vote of its five members and with the approval of the Secretary of the Treasury, authorized the establishment and operation of the Municipal Liquidity Facility (MLF) under section 13(3) of the Federal Reserve Act (12 U.S.C. § 343(3)). The MLF is intended to support lending to state, city, and county governments. Under the MLF, the Federal Reserve Bank of New York (Reserve Bank) will commit to lend on a recourse basis to a special purpose vehicle (SPV). The SPV will purchase eligible notes directly from eligible issuers at the time of issuance. [...] The Department of the Treasury, using funds appropriated to the Exchange Stabilization Fund under section 4027 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), will make a $35 billion equity investment in the SPV in connection with the MLF. https://www.federalreserve.gov/publications/files/municipal-liquidity-facility-4-16-20.pdf https://www.federalreserve.gov/publications/files/municipal-...

projektfu 6y ago

States borrow but almost all must balance the budget. When they borrow it should be a project, not to cover a shortfall. This is not a federal requirement but a restriction the states put on themselves. https://www.ncsl.org/research/fiscal-policy/state-balanced-budget-requirements.aspx https://www.ncsl.org/research/fiscal-policy/state-balanced-b...

pmiller2 6y ago
How many of those states have emergency powers provisions that would allow them to override that restriction?
- projektfu 6y ago
  I don’t have any special insight beyond what’s in the article. This is likely why state governments have been talking about federal aid.