Muni sweeps: How much job creation?

May 27, 2011

Job creation or program pass-through?

The Congressional Budget Office has published a new report entitled “Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from January 2011 Through March 2011.” It makes some large claims about how many jobs stimulus funds have created:

Various recipients of ARRA funds (most recipients of grants and loans, contractors, and subcontractors) are required to report, after the end of each calendar quarter, the number of jobs funded through ARRA. The law also requires CBO to comment on those reported numbers.

During the first quarter of 2011, recipients reported, ARRA funded more than 571,000 full-time-equivalent (FTE) jobs.

The CBO figure of 571,000 full-time-equivalent (FTE) jobs is slightly higher than the total non-farm jobs reported by the Bureau of Labor Statistics of 524,000 (see above chart). Something doesn’t add up!

Note how California distributed their Recovery Act funds. Many of the dollars were just “passed through” to support Medicaid and unemployment insurance in California. I’m not sure how to account for job creation for passing through funds.

‘Enormous Buying Opportunity’

Who were buying the municipal bonds that sold off in the winter panic? Mainly smart investment advisers. has an interview with one of them — Rick Ashburn, chief investment officer for Creekside Partners LLC, in Lafayette, California:

“The news cycle has been very negative. That translates into a perception of increased risk for bondholders. But that created an enormous buying opportunity,” Ashburn said. “We tripled our holdings of municipal bonds” over three months during the spring.

The key, according to Ashburn, is to choose bonds that have almost no risk of default, namely revenue bonds that fund infrastructure projects. They are supported by the income generated by those projects, such as water bonds to support water works.

Another important element, Ashburn said, is that his company plans to hold the bonds to maturity, typically five or 10 years in the future. That means even if the market stays relatively weak for a while, his firm will receive the stated interest rate when the bonds mature. Bond prices tend to rise and fall with interest rates, but that doesn’t matter if the bonds are held to maturity.

Poverty concentrations

From Stateline:

Some of the states that saw the highest increases in welfare rolls during the recent recession are making the deepest cuts to their welfare programs, according to a new report.

Welfare caseloads jumped more than 30 percent in New Mexico, South Carolina and Washington State during the 2007-09 recession, and all three have cut monthly welfare cash assistance by 15 to 20 percent, says the Center on Budget and Policy Priorities, a liberal-leaning group that studies policies affecting the poor.

Arizona wants to charge fat smokers for Medicaid

The New York Times has a great Q&A with Monica Coury, spokeswoman for Arizona’s Medicaid program about the proposal:

Arizona, like many others states, says it is no longer able to adequately finance its Medicaid program. As part of a plan to cut costs, the state has proposed imposing a $50 fee on childless adults on Medicaid who are either obese or who smoke.

In Arizona, almost half of all Medicaid recipients smoke; while the number of obese people is unclear, about one-in-four Arizonans is overweight, according to the Centers for Disease Control and Prevention. The state’s plan must ultimately be approved by the federal government.

Mini sweeps

Bond Buyer: Mica Calls for Northeast Rail Corridor Privatization

IBM Center for The Business of Government: Weekly Round-up: May 27, 2011

Ipreo: Muni Deal Calendar (w/o May 30, 2011) Attraction of munis drops for investors

The Infrastructurist: Report: Wisconsin Gov Scott Walker to spend up to 2 billion on new roads

Bond Buyer: California TIFs May Be the New RDAs

McClatchy: California bill limiting political gifts dies in state Senate committee

Stateline: Court ruling upends Nevada governor’s no-tax stand

GoverningPeople.comSeattle Invests In Municipal Broadband Infrastructure

Reuters: DC move to tax out-of-state bonds may face rocky time

McClatchy: Gov. Scott’s $615 million budget veto hits Florida’s most vulnerable

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