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Showing posts with label public finance. Show all posts
Showing posts with label public finance. Show all posts
Tuesday, May 21, 2024
Tuesday, March 22, 2016
From the Houston Chronicle: City bond rating downgrade reflects oil bust, pension problems
What is impacting the state, is also impacting cities.
- Click here for the article.
For more on the subject:
- Moody’s Downgrades Houston’s Bond Rating, Cites Low Oil Prices & High Debt.
- Moody's Downgrades Houston's Credit but Mayor Turner Has a Plan. Sort Of.
- Houston Undaunted by Downgrades Ahead of $600M Deal.
- Click here for the article.
The sluggish oil market and Houston's underfunded pension funds led Moody's to downgrade the city's credit rating this week, a move that underscores the challenges Mayor Sylvester Turner faces in wrestling the city's finances into shape.
The change, the first time Moody's has revised Houston's rating in at least a decade, is expected to marginally increase the city's borrowing costs. But the announcement's real weight, observers said, will be the psychological impact at City Hall. Turner announced Friday about 40 layoffs will be needed to balance the budget he is preparing to submit to the City Council.
"It only reinforces the need for us to address these long term systemic problems we have," said Controller Chris Brown, the city's elected financial watchdog. "It heightens the sense of urgency."
Turner agreed the Moody's report - which chiefly highlighted continued weakness in oil prices, the pension burden, and a cap on city property tax collections - "without question" underscores the need for a fiscal fix.
While Turner said the oil market is outside his control, he pointed to the praise the Moody's analysts gave his administration for beginning work on a longterm plan to shore up the budget.
"They did note ... that we are taking conservative projections," Turner said. "The road map to balance the city's budget is already finished on my part. In the absence of the changes that we have already taken, it probably could have been worse."
Turner said he hopes to present council members with a plan in mid-April explaining how he will bridge a budget deficit that had been estimated at $126 million. Falling sales tax collections have pushed projections as high as $160 million.
The revenue cap, which voters approved in 2004 and modified two years later, lets Houston collect more property taxes each year than the year prior, but limits the increase to the combined rates of inflation and population growth.
For more on the subject:
- Moody’s Downgrades Houston’s Bond Rating, Cites Low Oil Prices & High Debt.
- Moody's Downgrades Houston's Credit but Mayor Turner Has a Plan. Sort Of.
- Houston Undaunted by Downgrades Ahead of $600M Deal.
Friday, February 25, 2011
Standard and Poor's Comments on the Texas Budget Shortfall
From the Austin American Statesman:
Texas’ cuts-only approach to its budget shortfall won’t solve the state’s long-term fiscal problems, according to Standard & Poor’s, a major bond rating agency.
“We believe that a balanced approach that includes both revenue enhancements and expenditure cuts has a higher potential of success in preserving the state’s long-term structural budget balance than a strategy that relies solely on expenditure cutbacks,” wrote S&P credit analyst Horacio Aldrete-Sanchez in a report released last week.
Though S&P is not likely to join the Texas Forward coalition, the analyst’s language mirrors that of the education groups, health and human service advocates and faith leaders that have decried the deep budget cuts.
Aldrete-Sanchez also emphasized that the state’s budget hole is not a one-time problem that will go away as the economy improves.
“In our view, the state’s budget imbalance is likely to reappear or persist beyond the upcoming biennium unless other sources of revenue or additional budgetary flexibility are identified to fill this growing funding gap,” the analysis continues.
As we discussed in 2302, Texas is a "pay as you go" state so it cannot run deficits, but recent amendments to our constitution have allowed for bonds to be sold to fund certain items like prisons. While Standard and Poor's still rates Texas bonds at a high level, this could change.
- Relevant state agency: Texas Bond Review Board.
- Commentary from Paul Burka:
The refusal of Texas’s leaders to raise revenue is imperiling the state’s fiscal stability. We raise money only by the most expensive means–borrowing. Our revenue and tax structure is untenable. We have a nonperforming business tax that has created a permanent structural budget deficit, and our state leaders, who have known about this since 2006, when they paid no heed to the comptroller’s fiscal note, continue to pretend that it doesn’t exist.
Texas’ cuts-only approach to its budget shortfall won’t solve the state’s long-term fiscal problems, according to Standard & Poor’s, a major bond rating agency.
“We believe that a balanced approach that includes both revenue enhancements and expenditure cuts has a higher potential of success in preserving the state’s long-term structural budget balance than a strategy that relies solely on expenditure cutbacks,” wrote S&P credit analyst Horacio Aldrete-Sanchez in a report released last week.
Though S&P is not likely to join the Texas Forward coalition, the analyst’s language mirrors that of the education groups, health and human service advocates and faith leaders that have decried the deep budget cuts.
Aldrete-Sanchez also emphasized that the state’s budget hole is not a one-time problem that will go away as the economy improves.
“In our view, the state’s budget imbalance is likely to reappear or persist beyond the upcoming biennium unless other sources of revenue or additional budgetary flexibility are identified to fill this growing funding gap,” the analysis continues.
As we discussed in 2302, Texas is a "pay as you go" state so it cannot run deficits, but recent amendments to our constitution have allowed for bonds to be sold to fund certain items like prisons. While Standard and Poor's still rates Texas bonds at a high level, this could change.
- Relevant state agency: Texas Bond Review Board.
- Commentary from Paul Burka:
The refusal of Texas’s leaders to raise revenue is imperiling the state’s fiscal stability. We raise money only by the most expensive means–borrowing. Our revenue and tax structure is untenable. We have a nonperforming business tax that has created a permanent structural budget deficit, and our state leaders, who have known about this since 2006, when they paid no heed to the comptroller’s fiscal note, continue to pretend that it doesn’t exist.
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