State and local pension plans' equity holdings and returns

This article explores recent trends in the size and performance of the equity investments of state and local pension plans. It also provides a context for the discussion about investing Social Security trust fund reserves in private equities. Equity holdings and returns for five of the largest private pension plans were compared with those of state and local pension plans. Key findings discussed in the article include: Equities were the largest investment in the aggregate portfolio of state and local pension plans in 1999 and represented 67 percent of the $3 trillion in aggregate state and local pension assets. Equity allocation of the five private plans resembled that of the aggregate. About 80 percent of state and local pension plan holdings were domestic equities in 1999. The five largest plans had about the same domestic/foreign allocation of equity investments during that same period. In 1999, state and local pension plans held about 11 percent of the U.S. equity market, which includes foreign equities held in the United States. State and local pension plans held about 10 percent of domestic equities in the U.S. equities market that same year. Returns on equity investments over a 10-year period were more than 17 percent for both private pensions and state and local pension plans. Although private plans tend to have slightly higher total returns, the difference stems from the higher equity asset allocation of the private pensions that were studied.     

SUB‐NATIONAL GOVERNMENT CAPITAL SPENDING IN INDONESIA: LEVEL,STRUCTURE, AND FINANCING

Sub‐national government capital spending is important for both public service delivery and economic development. Currently, Indonesian sub‐national public capital spending appears barely sufficient to cover the annual depreciation of its fixed assets. A substantial proportion of local government investment spending goes to create relatively unproductive assets, such as administrative office buildings. Sub‐national governments finance their capital acquisitions out of gross operating budgets and have thus far not used, to any great extent, either borrowed funds or their significant cash reserves for such purposes. Indonesian sub‐nationals need to spend more on capital than they do now and also need to focus that spending on more useful types of infrastructure. The major constraints to increasing capital spending at the sub‐national level are not related to a dearth of finance, but regulatory rigidities in budget preparation and implementation and, most importantly, a lack of capacity to plan, design and implement investment projects. Copyright © 2010 John Wiley & Sons, Ltd.     

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 Effects of Cash Management Assistance by States to Local Governments

In 1985 North Carolina's Local Government Commission (LGC) began a program to evaluate the percentage portfolios of the funds invested and the diversity of the investment governments and public authorities. The LGC established state's local five evaluation criteria and notified the governments and authorities of deviations from the five investment norms. This article discusses what was reported to the LGC and changes in invested funds occuring after LGC's evaluation. Principal findings include: cities over 10,000 population and counties in general are investing a high percentage of their funds; small-sized cities and public authorities tend to avoid the higher yielding, but more complex to purchase, instruments: and most governments and authorities experienced a considerable increase in the percentage of funds invested after review by the LGC. Based on the marked increases in funds invested, other states should consider helping local governments and public authorities with cash management.     

State Infrastructure Banks and Intergovernmental Subsidies for Local Transportation Investment

This study reviews State Infrastructure Banks (SIBs) as an innovative financing mechanism for federal and state governments to support transportation financing for local governments, and determines the cost savings realized by local governments from receiving SIB loans rather than financing through the municipal bond market. The study finds that SIBs provide a mechanism through which local governments receive subsidized loans for their transportation investments. With the Ohio SIB, localities realized average borrowing cost savings between 34 and 184 basis points. Under the worst‐ and best‐case scenarios, 83 and 98 percent of projects, respectively, benefited from lower borrowing costs.     

Financing the German Federal System in the 1980s

Public finance is a crucial issue in any federation. In thesystem of shared public financing in Germany, no unit of governmentis fiscally dependent on the other. The federal and Land governmentsshare the personal income tax, the corporation tax, and thevalue-added sales tax. Because the Bundesrat approves of theshares of these tax yields granted the federal and Land governments,the Länder are deeply involved in the public finance system.Fiscal equalization occurs both vertically and horizontally.The federal government provides the Länder with grants-in-aid,and also shares the financing of a number of "joint tasks."The Länder share their tax yields with their local governments.Fiscal transfers also take place among the richer and poorerLänder and among the municipalities within the boundariesof individual counties. Controversy exists over the shares tobe given the respective governments from the value-added taxand over fiscal equalization between the richer (South) andpoorer (North) Länder.     

Heavy Traffic: Trucking Deregulation, Federalism, and Canadian-U.S. Trade

Trucking deregulation, in the interest of competition and efficiency,removes rate controls and grants free entry to the market. Whenthe United States deregulated trucking in 1980, it opened theinterstate market to Canadian carriers. Heavy volumes of tradeby trucking between the two countries make entry conditionsan important bilateral issue. Deregulatory symmetry betweenthe two countries would produce a de facto regime of free tradein trucking services. In 1987 the Canadian federal governmentadopted deregulatory measures similar to those of the UnitedStates, but with more complex and problematic results. The reasons,broadly characteristic of the evolution of Canadian federalism,lie in the ability of the provinces to thwart federal initiatives.Trucking regulation is under provincial control, and to achievea practical effect, the federal government depends upon theprovinces to bring their practices into accord with its policy.Because of differing provincial views about deregulation andpressures from Canadian truckers for continued protection fromAmerican competition, much diversity and contention have delayedand compromised the federal governments purpose. Regulatoryreciprocity is also a question of the provinces and states,with a mixture of strict and easy entry policies complicatingthe achievement of bilateral balance and equity. The largerimplications of deregulation and transborder trucking for Canadalie in the ability of a decentralized federal system to pursuenecessary initiatives coherently.     

The Macdonald Commission Report and Canadian Federalism

The Macdonald Commission report is the latest in a series ofreports on Canadian federalism. Its proposal for free tradewith the United States has attracted the most public attentionand has already raised the issue of the appropriate role ofthe provinces in the negotiations. This proposal, together withproposed domestic economic and social policies directed at greaterreliance on market forces, would have a significant impact onthe relative roles of the federal and provincial governments.The institutional reforms advocated are intended to make thecentral institutions more representative and responsive, toensure federal leadership within the economic union, to clarifythe distribution of responsibilities between governments, andto facilitate intergovernmental relations. The proposals arebased on an underlying conception that while interdependencebetween governments in a federation is unavoidable, federalismis essentially competitive rather than cooperative in character.     

The Dangers of Relying on a Legal List: A Case Study of the West Virginia Consolidated Investment Fund

Since the mid 1970s, many local governments have begun using state-run local government investment pools for their cash management needs. Some pools operate under statutory limitations on investment instruments known as "legal lists," other pools operate either under a "Prudent Person Rule" standard, while others use a combination of the two. This article examines the potential dangers of an investment pool relying too heavily upon a legal list fiduciary standard, by examining the West Virginia Consolidated Investment Fund, which lost nearly 25 percent of its principal in a financial scandal during the 1980s.     

On distinguishing between Leviathan and Public Interest governments in a federal state

The purpose of this paper is to derive testable implications for the proposition that provincial governments in a specific federal system are Leviathans, that is, revenue maximizers. The Leviathan model, associated with Brennan and Buchanan (1980) hypothesizes that governments behave like monopolies who seek to maximize their revenue. This model is contrasted with an alternative hypothesis, the Public Interest Theory. A theoretical model of a federal state, based on the Canadian system, is constructed and testable implications are derived. The principal feature of the model is that it is set in the context of a particular game involving the federal government, provincial governments and a consumer. In attempting to model this situation, care has been taken to try to incorporate as many institutional features of the Canadian federal system as possible, while still allowing the model to be somewhat parsimonious. With some modification, the model may be applicable to other countries with similar federal systems.     

Public Managers as the Missing Variable in Policy Studies: An Empirical Investigation Using Canadian Data

The article draws on survey data from a 2007–09 study of Canadian policy analysts to assess several propositions concerning the role of public managers in policy‐making. It is argued that little is known and much taken for granted concerning the role public managers play in policy making. The discussion begins with a conceptual discussion of the nature of policy advice systems in modern governments and situates public managers among the range of actors who affect different stages of policy making activity. Propositions derived from this conceptual discussion are then subject to empirical analysis using a large‐n 2007–09 Canadian federal, provincial, and territorial dataset.     

Creating Public Value with Tax and Spending Policies: The View from Public Economics

According to the framework rooted in public economics, governments can create public value by focusing tax and spending policies on remedying market failures and addressing concerns about fairness embodied in a social welfare function. By pursuing optimal tax and spending policies, governments navigate the omnipresent trade‐offs between equity and efficiency. Of course, in practice, the process by which policies are adopted does not resemble the planner's problem in social choice theory. In addition, real fiscal policies do not look much like the recommendations that arise from the optimal tax literature. Governments operate in public choice environments that are not conducive to focused remedying of market failure, and they suffer from their own tendencies to fail to achieve their objectives. Nevertheless, many of the tools are in place to help the federal and state governments focus tax and spending in ways that can maximize public value.     

Frances Harriet Williams: Unsung Social Equity Pioneer

Frances Harriet Williams was an unsung social equity pioneer in the field of public administration. Long before the Minnowbrook I Conference convened in the 1960s to discuss the importance of fairness in the provision of public services, Williams successfully promoted values of social equity and racial fairness within public administration scholarly and practitioner communities. Raised by progressive parents in the South, Williams was the only high‐ranking African‐American woman in the federal government during President Franklin D. Roosevelt's administration. She was directly involved in leading the Office of Price Administration to a staff that was at least 13 percent black when the rest of government was no more than 1 percent black. This work was the focus of her 1947 article in Public Administration Review, the first publication on racial equity to appear in the field's flagship journal. Her efforts and accomplishments undergird many of the ideals and practices that constitute the concept of social equity in public administration today.     

Private finance for social housing in Australia

Abstract

A significant change in the finance of social housing in the 1980s was a movement to transfer responsibility for funding to the private sector. This article argues that governments must continue to be involved in social housing finance as this movement progresses. Financing initiatives undertaken in Australia are used to signal the risks associated with the provision of social housing finance, to illustrate the mechanisms employed to manage these risks, and to highlight the conflicts that arise when a mix of public and private funding is attempted.

The article proposes the introduction of “equity bonds” as an innovative way to raise funds for social housing and to overcome inefficiencies arising from the present complex and costly administrative structures. However, a commitment to ongoing subsidies to close the full rental gap is necessary for equity bonds to serve those most in need.     

Risky business? Evaluating market risk of equity investment proposals to reform social security

A number of options have been proposed to address the expected financing shortfall of Social Security in the next century. Most basic aspects of the various reform proposals are captured by the three options offered by the Advisory Council on Social Security in 1996. Common to all three options is that they would permit either public or private equity investment. This article discusses the economic risks involved in public and private equity investments as a funding solution for Social Security. To quantify the risks involved in equity investment, stochastic simulations are based on the economic assumptions of the 1998 Trustees Report of Old Age and Survivors Insurance and Disability Insurance in combination with different assumptions about the rates of return on bonds and stocks. For public equity investment, financial market risk remains significant for at least 40 years. For individual accounts, I find that the chance of doing worse than with Social Security or of falling into poverty in retirement is generally high, yet varies with income level, gender, family status, and employment history. In general, women, married workers with dependent spouses, or workers with incomplete work histories fare worse than men, single workers, or workers with complete work histories when compared either to the current system or to the poverty line. © 2000 by the Association for Public Policy and Management.     

建立社保基金投资管理体系的战略思考

我国社保基金的投资管理一直处于十分混乱状态:沉淀于地方省市的1600多亿缴费余额统账混用,没有统一的投资管理策略,回报率低下,存在巨大的金融风险;“全国社保基金”投资策略不尽合理;中央政府不得不额外每年财政转移予以专项补助。将上述三块资源统筹考虑,提出将账户基金、统筹基金、储备基金分离出来,为其设计了不同的投资策略与制度:账户基金应实施完全的资本市场的投资;储备基金应完全走向国际资本市场;统筹基金增值保值问题是个世界性难题,提出应首先完成省级统筹,实行“三离开”的投资原则,并首次提出须避免和谨防“东亚化”的投资倾向,吸取东亚的教训,应为其设立三个投资管理体系。为配合上述投资体系的建立,提出了调整社保缴费比例的设想,认为这个基本框架既符合国际惯例,又符合具体国情,具有中国特色;既有制度创新,又为未来诸如地方开放地方债市等发展留下了空间;既保持了职工收入替代率没有降低,又增强了社保制度的财政可持续性;同时还减轻了国家的财政负担。     

The political determination of intergovernmental grants in Australia

Intergovernmental grants have been conventionally explained on the basis of either equity/efficiency and/or institutional considerations. This paper seeks to model Australian intergovernmental grants by including both traditional public finance variables and public choice influences; that is, grants are used by federal government politicians to purchase political capital, thereby enhancing their own chances of reelection. The models employed in this paper are tested for six Australian states for the period 1981–82 to 1991–92 using unsystematic grant transfers. The results provide support for these public choice considerations, and highlight the importance of incorporating institutional factors and controlling for misspecification in the error structure in estimates of this type.     

Government Support Programs and Private Investments in PPP Markets

ABSTRACT:

Public-private partnerships (PPPs) have become an important tool for investing in and developing public infrastructure and services. However, many developing countries have failed to attract sufficient private investment from the PPP market. This article uses data from 4,484 PPP projects across 130 developing countries to investigate if and how distinct types of government support can attract more private investment. Results showed that capital, revenue, and in-kind subsidies directly provided from governments attract more private capital, while indirect supports through government guarantee policies do not. The institutional quality of a country enhances the positive relationship between direct government support and private PPP investments. Further, risk allocation plays a mediating role between government supports and private investment.     

Fiscal, Service, and Political Impacts of Indianapolis-Marion County's Unigov

This article describes how city and county governments were,and were not, consolidated under Unigov in 1969, a measure thatfell substantially short of a complete consolidation. The articlethen reviews the available evidence concerning Unigov's effectson service delivery and performance, public finance, economicdevelopment, and voter participation. The available record suggeststhat Unigov has enhanced (1) the stability of Indianapolis'political leadership by establishing one-party control of localgovernment; (2) the effectiveness of its economic developmentstrategy of public subsidization of private developments; and(3) the ability of Indianapolis to shift a greater share ofthe burden for its expenditures to the state and federal governments.There is little evidence that Unigov has (1) reduced the numberof service provision, production, or taxing units in the county;(2) improved central-city residents' satisfaction with theirlocal public services; or (3) effected a substantial redistributionof the financial base for those local services. Instead, thereis some evidence to the contrary.     

Federal tax reform and the financing of state and local governments

Although the Reagan Administration tax reform proposals would reduce federal income tax liabilities for most taxpayers, federal tax reform would also create strong pressures on state and local governments to cut taxes and public services. These pressures would arise primarily because itemizers would no longer be able to deduct state and local taxes in determining their federal income tax liabilities. In New York City and Boston, it is likely that the Administration's tax reform would induce cuts in spending that range from 2.5 to 7.5 percent. While the elimination of state and local tax deductibility may promote allocative efficiency in the provision of local public goods, the cost would be a decline in the degree of redistribution through the state and local public sector, and a reduction in local public services for the poor.