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GFOA Newsletter
June 29, 2017
EMPLOYMENT ADS  |  TRAINING  |  BEST PRACTICES
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Caution Needed: Pension Obligation Bonds

GFOA urges governments to avoid issuing pension obligation bonds (POBs). The use of POBs rests on the assumption that the bond proceeds, when invested with pension assets in higher-yielding asset classes, will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds. However, POBs involve considerable investment risk, making this goal speculative. Failing to achieve the targeted rate of return burdens the issuer with both the debt service requirements of the taxable bonds and the unfunded pension liabilities that remain unmet because the investment portfolio did not perform as anticipated. In recent years, local jurisdictions across the country have faced increased financial stress as a result of their reliance on POBs, demonstrating the significant risks associated with these instruments for both small and large governments.

For more information about the risks associated with POBs, see GFOA’s Pension Obligation Bonds advisory.

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Association News
Senate Unveils Health-Care Reform Bill, Early Hurdles Arise

On June 22, 2017, Senate Republicans released draft text of their health-care reform bill – the Better Care Reconciliation Act (BCRA) of 2017 – that would substantially roll back parts of the 2010 Affordable Care Act (ACA). In many areas the Senate draft resembles what the House did in its health-care reform bill. For example, the BCRA eliminates the employer mandate, retains the ability of young adults to remain on their parent’s health insurance until age 26, and ends the cost-sharing subsidies intended to help some ACA customers cover deductibles and copayments. Of note to GFOA members, the BCRA also delays the Cadillac tax until 2025 rather than permanently repealing it. GFOA has worked and will continue to work with other employer groups to seek permanent repeal of this tax, as it will have a detrimental impact on the ability of state and local governments to offer health-care benefits to public employees.

In other areas, however, the BCRA notably differs from the House version. For example, the BCRA bases its insurance premium subsidies for individuals on age, income, and geography, but the subsidies would cover skimpier health plans, and individuals would need to be in lower income brackets than what the ACA currently has in place. As far as changes to Medicaid, the Senate bill would block grant the funding beginning in 2021 and use a slower annual growth rate for payments to states, resulting in deeper cuts to the program.

Senate Leader Mitch McConnell (R-KY) had hoped to bring the BCRA up for a vote before Congress left for the July 4 recess, but in an unexpected development earlier this week, it was announced the vote would be postponed to sometime after the recess. Even in the days following the draft’s initial release, Senate GOP leaders were already scrambling to make revisions in the hope of shoring up the necessary votes needed to pass it. With only a 52-seat majority, Leader McConnell cannot afford to lose more than two Republican votes. Thus, with several Senators already expressing that they were likely not going to vote to even begin debate on the bill, the plans to hold a vote were delayed and additional revisions will certainly be made in the coming days.

Looking to Enhance Your Professional Skills? Register for GFOA Training in Minneapolis

Take advantage of an early discounted rate when you sign up by July 12 to participate in GFOA training next month at the Hilton Minneapolis:

If you register with three or more colleagues for the same seminar, you will receive 10% off each registration fee. (Discounts cannot be applied to online training registrations. Registrations must be paid and submitted together via mail, fax, or scanned and e-mailed to GFOA Training.)

Register online or by submitting the registration form. To learn about activities for your stay, visit Meet Minneapolis. If you have any questions about GFOA’s training seminars, e-mail GFOA Training.

A block of rooms has been reserved for GFOA attendees at the Hilton Minneapolis. Based on availability, GFOA’s group rate has been extended until July 6. Click here for more information about available rates.

For additional training opportunities, go to GFOA’s training schedule

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New CPFOs Announced

The following individuals earned the Certified Public Finance Officer (CPFO) designation in summer 2017: Jeffrey Beatty, Finance Manager, Mammoth Community Water District, CA; Jennifer Charneski, Finance Director, Darien, CT; Thomas Darling, Director of Financial Services, Troy, MI; Erika Langhans, Controller, St. Petersburg, FL; Linli Moat, Sr. Financial Analyst, Bothell, WA; Natalie Morrison, Manager of Financial Planning and Analysis, WaterOne, KS; Joseph Porche, Attorney, California State Auditor’s Office; C. Alan Smith, Senior Accounting Manager, Boulder County Colorado Government; and Tammy Todd, Assistant Director of Finance, Salem, VA.

There are now 698 individuals who have received the CPFO designation.

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News Links
States’ Budgets for FY2018 Show Caution on Spending

Governors’ budgets for fiscal 2018 are extra cautious as states contend with slow revenue growth, limited budget flexibility, and substantial federal uncertainty, according to the latest Fiscal Survey of the States by the National Association of State Budget Officers.

Key findings from the report include:

  • State general fund spending would increase just 1%, compared to current estimated spending levels under governors’ fiscal 2018 budgets.
  • States experienced sluggish general fund revenue growth in fiscal 2017 – 2.4% – with 33 states reporting collections below budget projections.
  • At least 23 states have already made net mid-year budget cuts totaling $4.9 billion in fiscal 2017.
  • General fund revenues are projected to grow 3.1% in fiscal 2018, based on governors’ budgets.
  • States continue to strengthen their reserves, despite slow revenue growth.
  • General fund spending on Medicaid grew at an estimated median rate of 5.2% in fiscal 2017, with a median growth rate of 4.3% projected for fiscal 2018.
  • States that expanded Medicaid expect to spend $8.5 billion from state funds on expansion in fiscal 2018.
  • Governors’ proposed tax and fee changes would result in a net increase of $3.7 billion.
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Case Studies Look at Disaster Risk and Resiliency

In “The Geography of Disaster Risk and Resiliency in America,” Route Fifty features a handful of stories and dispatches from recent trips to Alaska, Oregon, and Washington state, featuring locations that provide snapshots of the very real dangers and disruptions that emergency planners, first responders, public officials, and other stakeholders face, plus the strategies and technologies helping communities be more resilient. The 23 short case studies address earthquakes, food security and community development, sinkholes, tsunamis, urban avalanches, landslides, volcanic eruptions, emergency lifelines, disaster relief staging grounds, and more.

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Avoid the Most Common Mistakes New Managers Make

Government Executive provides a list of nine rookie management mistakes you’ll want to avoid:

  1. Assuming you’ve been tapped for this new role to “shake things up.” This is highly unlikely.
  2. Assuming the people on your new team are happy to see you in this role. They have to seem enthusiastic.
  3. Adopting the “I’m in charge” tone. This makes people defensive.
  4. Assuming your team is doing it wrong. It creates unnecessary anxiety.
  5. Requiring everyone to earn your trust. You have to go first.
  6. Letting the loudest voices dominate the narrative. Listen to the quieter employees, too.
  7. Getting caught up in the drama. You can't indulge in gossip anymore.
  8. Failing to meet and listen in a one-on-one setting. Most people feel under-appreciated; this is your chance to fix that.
  9. Failing to match words with actions. Everyone’s watching you, and they need to be able to trust you. 
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Editor: Marcy Boggs  |  Executive Director/CEO: Jeffrey Esser

The GFOA Newsletter (ISSN 1051-6964) is published weekly by
the Government Finance Officers Association of the United States and Canada.
Correspondence regarding editorial and/or business matters should be sent to
GFOA, 203 N. LaSalle St., Suite 2700, Chicago, IL 60601-1210. Phone - 312/977-9700 FAX - 312/977-4806.

 


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