Sharon N. Kioko

Impact of State-Level Tax and Expenditure Limits (TELs) on Government Revenues and Aid to Local Governments

This article investigates the impact of state-level tax and expenditure limits (TELs) on state government revenues and aid to local governments. Using an instrumental variable approach to control for endogeneity, the authors find that the general fund TELs (i.e., revenue and expenditure limits) have led to substantial increases in tax and nontax revenues. States with procedural limits (i.e., those with voter approval and/or legislative supermajority requirements votes) have significantly lower tax revenues. For states with these procedural limits, their ability to impose new or higher taxes is limited by the rules for passing such legislation. This study also finds that states with general fund TELs have higher levels of aid to local governments, while those with procedural TELs have lower levels of aid. Local government property tax limits do not have any impact on taxing authority of states and have only marginal impacts on the state-aid programs.

Impact of Unfunded Pension Obligations on Credit Quality of State Governments

This study reviews the funding status of state‐administered pension plans and their impact on state credit quality. As the fund ratio (actuarial assets/actuarial accrued liability) of state‐administered pension plans decreases, states are more likely assigned a lower rating. Moreover, rating outlooks are sensitive to the fund ratio, especially for migration between stable and negative outlooks for states with lower fund ratios. These results are a timely pretest to the 2013/2014 implementation of GASB Statements No. 67 and 68, serving as a benchmark to assess whether new reporting requirements will yield information to alter the markets response to unfunded pension liabilities.

Evaluation of the education sector enhancement program in Barbados

ABSTRACT Drawing on the education production function literature, we examine the short-run impact of comprehensive education reforms in Barbados on primary school student outcomes. Using a variety of specifications to test the robustness of our results, we find modest and mixed changes in student test scores. Our findings are discussed in the context of management challenges that resulted from the need to coordinate a multi-faceted project in a rapidly developing nation; alignment of goals and schedules of two multi-national development banks, the Ministry of Education, Youth Affairs and Sports (MES), and the Government of Barbados; and, a very rapidly changing information technology environment that led, in part, to changes in planned capital improvements in schools, equipment needs, and had implications for teacher training.

Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

While bankruptcy protection remains an instrument of last resort, a recent wave of petitions has aroused the interest of key participants in the municipal bond market. To date, 12 states unconditionally authorize municipalities to file for bankruptcy protection, 15 states require that municipalities satisfy certain threshold requirements, while the remaining 23 states either explicitly prohibit or have not specifically provided this authority to municipal governments. As bankruptcy protection rules influence bondholder risk exposures, we empirically test the significance of the state-specific bankruptcy eligibility requirements on borrowing costs. In a representative sample of general obligation bonds, empirical results suggest that municipalities eligible to file for bankruptcy protection pay a premium. The premium is higher if issuers are unconditionally authorized to file for bankruptcy protection, especially for debt with longer maturities. Findings also show that there are benefits associated with statutory liens; however, these benefits diminish with maturity.

Impact of Tax and Expenditure Limits on Local Government Use of Tax-supported Debt

This study seeks to broaden our understanding of the impact tax and expenditure limits (TELs) have had on local governments. We chose to focus on local government use of tax-supported debt as TELs are limits on the property tax base and related revenues, two essential components used to determine a government’s legal authority to issue tax-supported debt and its fiscal capacity to maintain long-term solvency. Using county-level data, our analysis finds TELs have a negative impact on local government use of tax-supported debt, especially if the government is subject to a limitation on assessed valuation or the property tax levy.

Determinants of the Credit Rating Fee in the Municipal Bond Market

Improving transparency of prices paid by government can improve market and government efficiency. Governments regularly pay to access capital markets, yet municipal bond issuance costs remain largely hidden from public view. This study examines factors associated with credit rating fees using a decade of Texas municipal bond issuance data. We find that rating fees are lower in a competitive environment, when issuers have experience and a relationship with the rating agency, and higher when the issue is large and more complex. The findings provide evidence that credit rating agencies (CRAs) retained pricing power following the credit crisis despite reduced reputational quality.

Impact of Tax and Expenditure Limitations on Local Government Savings

Local governments serve a pivotal role in the delivery of public services. However, since the late 1970s, their ability to deliver essential public services has been curtailed by widespread adoption of limits on taxing and/or spending authority. Studies show these limits fundamentally altered the fiscal landscape of municipal governments. Using data on county governments for the period 1970–2004, this analysis shows TELs had a negative impact on unrestricted cash reserves. This has wide-ranging implications on fiscal performance including the government’s ability to cope with negative revenue and expenditure shocks and their ability to retain resources for strategic purposes.