Muni sweeps: California’s first budget veto

By Cate Long
June 17, 2011

Some thorny action in California on the state budget:

California Governor Jerry Brown, who failed to win Republican support of tax extensions in six months of negotiations, said he’d “move heaven and earth” in another attempt after vetoing a budget without the provision.

Brown, a Democrat who pledged to solve California’s fiscal malfunctions without gimmicks, didn’t say how he’d get the Republican backing needed to pass his plan. His budget veto was the first in state history.

Rocking back and forth

Chip Barnett of Reuters brings us the weekly numbers on muniland flows:

U.S. municipal bond funds posted $172 million of net outflows in the week ended June 15, according to Lipper data issued on Thursday.

In the previous week, muni funds had inflows of about $274 million, in a buying spree that broke 29 straight weeks of outflows.

But with the latest data, the four-week moving average stayed negative, remaining about $157 million in the red after a decline of around $141 million in the previous week. The average has been negative for 31 weeks. The last time the four-week average was positive was in the week ended Nov. 10, 2010.

SEC’s direction unclear as muni director retiring

Unfortunately Congress has not given the SEC funding to establish the new municipal securities oversight office, and now the SEC’s chief of the office of municipal securities is leaving. How will this enormous market be regulated? Reuters reports:

The head of the municipal bond unit [Martha Mahan Haines] at the Securities and Exchange Commission said on Thursday she will retire by the end of June.

“I’ve been saying I wanted to get EMMA [the Electronic Municipal Marketplace Access] done and when EMMA’s done, I’ll probably leave. But then the market melted down and things got wild and crazy. And then Dodd-Frank came along. It’s just time,” Haines said.

Haines said she was unsure about how the SEC would proceed when she left. The financial regulatory overhaul passed last year known as Dodd-Frank for its congressional authors, called for a strong muni oversight office, but legislation to fund the reorganization is caught up in committee.

Mini sweeps

Counterpunch: Revamping the WPA

Earth Times: Water scarcity could damage municipal bond ratings

eGovFutures Group: Municipal Open Government Framework – Beta Version

ProPublica: Introducing #MuckReads: A Social Way to Share the Best Accountability Reporting

Investment News: States with the worst credit ratings

Ipreo: Muni Deal Calendar (w/o June 20, 2011)

FT Alphaville: LA Conduit-fidential

Felix Salmon: Yankee Stadium’s conduit-bond boondoggle

Markit Magazine: Municipal CDS

WPRI: Firefighters picket outside city hall

Minnapolis Star Tribune: Cities turn to a new, green path for street designs

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Statnard & Poor’s June 17 comment

The budget package passed by the legislature and vetoed by the governor does not affect the rating on the state (A-/Negative).

Thus far in the budget negotiation process, political agreement among legislators and the governor has proved elusive on fiscal and policy matters we consider key, such as temporary tax extensions, pension reform, and a
stricter spending cap or “rainy day” fund mechanism.

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