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Abstract: 

Given the national focus on the condition of school facilities, it is timely to examine the effect of various state programs, such as state guarantee programs, on the costs of school infrastructure programs. Although school bonds guaranteed by the $16 billion Texas Permanent School Fund achieve interest cost savings, there is a “Texas penalty” by not having a state income tax, according to public administration professors Wes Clarke and Robert L. Bland. Municipalities can use the deregulation of energy markets to gain benefits for their constituents and to encourage business location decisions. One approach tried in Texas is to take over the supply and transmission of interstate natural gas and resell the product to the local gas distribution company. Economics and finance professors Paul Hodges, William Buchanan, and John Theis examine the costs and benefits of such intervention, and demonstrate the need for a natural gas demand forecasting model. Paul Maco, Director of the Office of Municipal Securities at the Securities and Exchange Commission, offers points for municipal issuers to keep in mind during good times. His presentation was made to the Fifth Annual Midwest Regional Public Finance Conference held in Wichita, Kansas in February. Since bond ratings should reflect the probability of default, it makes sense to know the history of defaults. Municipal analyst David Litvack provides a comprehensive examination of the default risk of various municipal market sectors over 20 years. Christopher S. Rizek suggests that an excise tax on issuers, computed as a proxy for the tax that would be paid by bondholders on interest payments they received, would preserve tax-exempt treatment for issuers and conduit borrowers without the corresponding market effects and litigation associated with an IRS adverse determination ruling. The complete issue also includes the full text of two regular departments: continuing the school finance focus, the Washington Update column features tax attorney Linda B. Schakel on the use of tax credit bonds for financing public school projects. Accounting professor Catherine L. Staples gives an update on the activities of the Governmental Accounting Standards Board as it continues to refine financial reporting principles applicable to state and local governments.

Keywords: state credit assistance programs; government intervention in energy markets; municipal default risk; municipal finance disclosure and SEC enforcement; loss of tax-exemption

Affiliations:  1: Wichita State University.