Muni agenda a no-go for 2022; Stock drop impacts pension funds, NYC

West Virginia Sen. Joe Manchin’s wholesale refusal to back the climate and tax measures in Democrats’ Build Back Better bill deals a final blow to any hopes of passing any provisions of the muni agenda before the November election. Build Back Better has gone through many iterations since Biden took office, with key muni provisions such as the restoration of tax-exempt advance refunding, expansion of bank-qualified debt and a direct-pay bond program included in the bill for about six weeks in September and October 2021.

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The stock market decline of 2022 is projected to push the unfunded liabilities of state-run pension systems to $1.3 trillion for the fiscal year, according to a Reason Foundation analysis. The steps taken by states to bolster pension funds by lowering anticipated return rates during boom years combined with record-setting investment returns in 2021 isn’t providing cover, said Zachary Christensen, managing director/senior policy analyst with the Pension Integrity Project at the Reason Foundation.

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And New York is not faring the storm well either. Rising inflation and falling stock prices are getting ready to take a big bite out of the Big Apple's economic recovery. According to a report released this week by New York City Comptroller Brad Lander, June’s personal income tax data are showing the effects the sagging stock market and volatile bond market are having on city tax collections. June’s estimated payments were 31% lower than in 2021, dropping to the lowest level since 2017. The payments are closely tied to capital gains realizations and are hurt as Wall Street falters.

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The Bond Buyer’s Rising Stars program’s return for a seventh year will include the inaugural inductions into The Bond Buyer Hall of Fame at an awards ceremony at the close of The Bond Buyer’s Infrastructure event November 15. Visit our website to make nominations in either category.

With its coffers bursting due to record revenue collections, Texas has canceled a summer trip to the short-term note market for a second year in a row. Texas will not be selling tax and revenue anticipation notes this August, according to Kevin Lyons, a spokesman in the comptroller’s office. Texas last issued notes totaling $7.2 billion in August 2020. The lack of a TRANs deal will put off a test of how competitive bidding for the debt may be impacted by the state’s pro-firearm and fossil fuel policies that have sidelined a few big underwriting firms.

Investors will be greeted Monday with a new-issue calendar estimated at $7 billion. While issuance will likely come in above average this month, negative net issuance is still expected. Municipals fared well the past week, digesting a large new-issue calendar amid big economic indicator releases that moved other markets. While USTs have been rather volatile the past several weeks, Barclays strategists Mikhail Foux, Clare Pickering and Mayur Patel said high-grade tax-exempts have been "seemingly well-anchored, supported by heavy bond redemptions, low supply and slowing outflows.”