The Implications of GASB Statement No. 34 for Public Budgeting

This paper discusses a variety of audit issues related to the implementation of GASB Statement No. 34. Ten specific audit issues are addressed. Each issue is defined and discussed, and the relevant professional literature is reviewed. The results of interviews of four experienced auditors of governments are presented with respect to these issues. These auditors identified several additional issues related to the implementation of Statement No. 34. The focus is on gaining insight from the concerns of auditor professionals to assist academics by identifying topics that warrant future research.     

The New Governmental Financial Reporting Model under GASB Statement No. 34: An Emphasis on Accountability

After more than a decade and a half of research, study, and public comment, the Governmental Accounting Standards Board (GASB) in June 1999 issued the standards for a new governmental accounting model, GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments (hereafter Statement No. 34). These new standards introduced significant operational accountability by adding a set of additional government-wide financial statements to the current set of fund-based financial statements, which had previously focused on fiscal accountability. Other changes have resulted in substantially improved accountability in the government reporting model.     

No Guaranties: The Decline of Municipal Bond Insurance

The credit crisis that roiled the financial and housing markets in late 2007 and early 2008 resulted in well‐publicized budget challenges for state and local governments. Less visible has been a dramatic change in the bond insurance market, which alters how governments issue long‐term debt. Debt issuance data from Texas are used to model bond insurance premiums and examine utilization following the crisis. The results provide evidence that insurance premiums rose dramatically following the fiscal crisis, even when controlling for widening credit spreads and changes in the underlying credit quality of issuers.     

Is Management Performance a Factor in Municipal Bond Credit Ratings? The Case of Texas School Districts

Municipal bond ratings are an important determinant of interest costs that a bond issuer must pay. The three major bond rating firms profess that economic and management factors are considered in assigning a bond rating. The management component is of particular interest to public administrators because they can exert more direct control over management factors. Management factors have not been studied empirically in the literature because management performance is generally difficult to quantify. However, the public education sector has seen advances in performance measures and at the same time has increasingly relied on municipal bonds to finance construction. The ordered probit estimation provides support that management performance, as measured in the districts performance on standardized test scores and success in student college admission rates, does influence Texas school district bond credit ratings.     

Accounting for Natural Disasters: The Impact of Earthquake Risk on California Municipal Bond Pricing

While Katrina has raised awareness of the potential impact of hurricanes on municipalities along the Gulf Coast, it remains unclear if the municipal bond market considers other types of natural disaster risk in other areas. We attempt to fill this gap by conducting an analysis to determine if underlying geologic earthquake risk affects interest costs for municipal bond issuers in California. We find that earthquake risk does matter in determining the interest costs for municipalities issuing debt, but not universally—only for municipal bonds issued after Hurricane Katrina and only in relation to underlying geologic earthquake risk.     

An Investigation of the Characteristics of Local Governmental Units Disclosing High Deposit and Investment Credit Risk as Defined by Governmental Accounting Standards Board Statement No. 3

As a result of severe financial losses by local governments in the mid-1980s due to falling interest rates, the Governmental Accounting Standards Board Statement No. 3 was issued. The GASB No. 3 provides information for assessing a government's actual and future deposit, investment market, and credit risks. This article investigates the number of governments disclosing deposits and investments in the high risk category and determines if there are common characteristics among those reporting high risk deposits and investments.     

The Influence of Jurisdiction Size and Sale Type on Municipal Bond Interest Rates: An Empirical Analysis

The authors use data on municipal bond sales in Oregon from 1994 to 1997 to explore whether population (as a proxy for financial-management capacity) and sale type (competitive or negotiated sale) influence interest rates. They find that smaller jurisdictions pay an interest cost penalty in the municipal bond market, and that competitive sales result in significantly lower interest rates compared to negotiated sales. The authors suggest that measures to enhance the financial-management capacity of small governments are warranted and that state laws requiring justification for negotiated sales are appropriate.     

Federal Intervention in the Municipal Bond Market: The Effectiveness of the Build America Bond Program and Its Implications on Federal and Subnational Budgeting

The American Recovery and Reinvestment Act of 2009 (ARRA) included several new federal programs intended ostensibly to “unfreeze” the credit markets as a result of the global financial crisis. One such program, the Build America Bond (BAB) program, aimed to lower the borrowing costs for state and local governments by increasing their access to capital and providing a more generous federal subsidy than the traditional indirect tax exemption subsidy. BABs are taxable bonds sold by subnational governments, which carry a 35 percent direct federal payment subsidy to the borrower. In creating this program, the federal government hoped that the large direct federal subsidy along with greater potential investor interest in taxable securities would result in lower borrowing costs for state and local governments vis‐à‐vis traditional tax‐exempt bonds. This research study examines the relative effectiveness of the BAB program and details the various quantitative and qualitative implications on federal and subnational budgeting by moving from an indirect to a direct federal subsidy approach in facilitating state and local government capital raising.     

收入、健康与医疗保险对老年人幸福感的影响

本文使用中国9个省、2200名55岁以上老年人的微观调查数据,主要检验了收入水平、健康状况与医疗保险对主观幸福感的影响。Ordered Logit回归分析结果表明：收入增加能够显著提高城镇老年人的主观幸福感,收入差距的影响不显著;对农村老年人而言,收入的作用不明显,而收入差距则有显著的负向影响。心理健康和城乡老年人幸福感呈高度的正相关,记忆力、日常生活自理能力等身体健康因素也具有显著的正向影响。公费医疗显著提高农村老年人的幸福感,城镇职工医疗保险和合作医疗分别对城镇和农村老年人幸福感具有积极的作用。总体上,城镇老年人的主观幸福感高于农村,东部老年人幸福感高于中部,中部高于西部。因此,增加老年人的收入水平,完善老年人医疗保险制度,并逐步协调城乡和地区经济发展,有助于从整体上提高老年人的幸福感。     

The effects of state policy design features on take-up and crowd-out rates for the State Children's Health Insurance Program.

We evaluate the effects of state policy design features on SCHIP take-up rates and on the degree to which SCHIP benefits crowd out private benefits. The results indicate overall program take-up rates of approximately 10 percent. However, there is considerable heterogeneity across states, suggesting a potential role of inter-state variation in policy design. We find that several design mechanisms have significant and substantial positive effects on take-up. For example, eliminating asset tests, offering continuous coverage, simplifying the application and renewal processes, and extending benefits to parents all have sizable and positive effects on take-up rates. Mandatory waiting periods, on the other hand, consistently reduce take-up rates. In all, inter-state differences in outreach and anti-crowd-out efforts explain roughly one-quarter of the cross-state variation in take-up rates. Concerning the crowding out of private health insurance benefits, we find that between one-quarter and one-third of the increase in public health insurance coverage for SCHIP-eligible children is offset by a decline in private health coverage. We find little evidence that the policy-induced variation in take-up is associated with a significant degree of crowd out, and no evidence that the negative effect on private coverage caused by state policy choices is any greater than the overall crowding-out effect. This suggests that states are not augmenting take-up rates by enrolling children that are relatively more likely to have private health insurance benefits.