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News from the Treasurer
Treasurer Hollenbach Meets with Boys and Girls State Treasurers
Frankfort, KY (June, 2013) Kentucky State Treasurer Todd Hollenbach welcomed Robert Bell of Ft. Knox High School, Ft. Knox, Kentucky and Kaitlyn Heuser of Central Hardin High School, Elizabethtown, Kentucky for a personal tour of Kentucky State Treasury. Both students were elected as State Treasurer within the annual American Legion Kentucky Boys State and American Legion Auxiliary Kentucky Girls State Programs. Kentucky Boys State, in its 73rd year, and Kentucky Girls State, in its 67th year, provide high school students education about city and state government by allowing participants to be involved in simulated political parties, campaigns, elections and appointments.
“It’s a real hands-on experience for these young people. They have the opportunity to practice and gain insight into how government and the political process work. They hold elections, write and pass bills, and debate real issues facing Kentucky and the United States.” Treasurer Hollenbach said. “This participation is invaluable to these young people. The program takes exemplary students, like Kaitlyn and Robert, and it cultivates their interest in how our commonwealth and country work. Many graduates of these two programs go on to become real life representatives in government and leaders within our community. Neil Armstrong, Tom Brokaw, Jane Pauley and President Bill Clinton all participated in this program. I have no question of the great value and importance of it.”
Treasurer Hollenbach talked with the students, discussing what their goals are for their education and careers. After visiting his office, the two were taken for a behind-the-scenes look at what Kentucky State Treasury does and how it operates. The students had the opportunity to ask questions of each division. They learned how checks are printed and the volume of checks for which Kentucky Treasury is responsible. They visited the Deposit Room and discovered the technological updates that have taken place in just the past few years in making deposits more efficient and cost effective. And they spent time in the Kentucky vault learning about how Kentucky State Treasury comes into possession of unclaimed property and the great efforts that are made to return that property to the rightful owners.
“These were two bright, young people, with excellent questions and excellent futures.” Treasurer Hollenbach added. “I have a deep respect for the American Legion and American Legion Auxiliary for their hard work in bringing about the leaders of tomorrow. They truly hold our future in their hands.”
Kentucky’s Treasurer Todd Hollenbach Among First to Support Maintaining Tax-Exempt Status of Municipal Bonds
Joined by Other State Treasurers in Letter Urging Lawmakers to Consider the Impact to State Budgets
Frankfort, Ky. (June, 2013) – Kentucky Treasurer Todd Hollenbach is calling on all Kentuckians to contact their congressional representatives and urge them to maintain the current tax-exempt status of municipal bonds.
As a national leader on the issue, Treasurer Hollenbach was one of the first of state treasurers to sign onto a letter from the National Association of State Treasurers (NAST) to members of the U.S. House Ways and Means Committee urging them to maintain the current tax-exempt status. “It’s an issue that will have long-term ramifications for Kentucky’s budget and our public infrastructure projects.” Hollenbach said.
“State and local governments use municipal bonds as the primary means of financing highways, bridges, transit systems, airports, water and wastewater systems, schools, higher education facilities and many other public projects.” Hollenbach said, “The need in our state to upgrade and maintain our bridges and roads has never been greater. Eliminating or reducing the tax exempt status of these bonds will result in fewer projects, fewer jobs and a continually deteriorating infrastructure.”
According to the NAST, states and localities save an average of 25 to 30 percent on interest costs when using municipal bonds as opposed to taxable bonds.
“With already tightened budgets,” Hollenbach added, “The ability to save billions of dollars on infrastructure financing is essential.” Eliminating the tax exemption will force us to pay higher borrowing costs at best or at worst cause us to curtail or abandon infrastructure projects.”
See Below for Treasurer Hollenbach's Municipal Op Ed
Don’t fix it… If it isn’t broken
Recently, I was one of the first state treasurers in the nation to sign onto a letter from the National Association of State Treasurers (NAST) urging members of the U.S. House Ways and Means Committee to maintain the current tax exempt status for municipal bonds.
The White House and congressional tax writers have proposed a cap on the current tax exempt status of municipal bonds. While this proposal may be well-intended, I believe it is misguided and should be reconsidered.
It is an issue that could have long-term ramifications for Kentucky’s budget and our public infrastructure projects. State and local governments use municipal bonds as the primary means of financing highways, bridges, transit systems, airports, water and wastewater systems, schools, higher education facilities and many other public projects.
According to a recent report from “Transportation for America”: Of Kentucky’s 13,842 bridges, over 1,300 are structurally deficient. Millions of Kentuckians use these deteriorating bridges. Bridges in rural counties serve as a life-line for communities to jobs, medical services and the inflow of needed staples like food. Urban bridges carry high volumes of traffic and are important arteries for regional economic centers.
According to the Kentucky Department of Education 226 of Kentucky’s 486 primary and secondary school buildings are over 50 years old. They estimate that it will cost $3.7 billion to bring all of Kentucky’s aging schools up to standard.
These projects create jobs and stimulate economic growth. Capping the tax exemption at 28 percent for top income earners, as proposed, could drastically reduce investor demand for municipal bonds, thereby increasing financing costs to states and localities. Higher financing costs could lead to higher state and local taxes and limited public investment in infrastructure. Additionally, a 28 percent cap is likely to have a disruptive effect on the bond market. Applying the cap retroactively would immediately reduce the value of bonds held by investors.
The negative public policy implications could be dramatic. As we saw in December 2012, the bond market experienced dramatic rate increases in reaction to proposals to cap tax exemption as part of the fiscal cliff debate and investors’ concerns that Congress and the administration might consider a change to the tax exempt status of municipal bonds.
As the president pointed out in his State of the Union Address, “What our businesses need most: [are] modern ports to move our goods, modern pipelines to withstand a storm, and modern schools worthy of our children.” I could not agree more! The need in our state to upgrade and maintain our bridges and roads and the need for jobs that this maintenance creates has never been greater.
The fact is that tax exempt municipal bonds save states and localities billions of dollars each year in financing costs. Access to a healthy tax exempt municipal bond market has served as a responsible and effective way to bring private capital to public projects and promote local decision-making based upon local priorities and needs assessments.
Eliminating or reducing the tax exempt status of these bonds will result in fewer projects, fewer jobs, and a continually deteriorating infrastructure. It will threaten economic growth by making it more costly for governments, and ultimately taxpayers, to finance these projects.
As Treasurer of the Commonwealth of Kentucky, I welcome discussion of new ways to meet our shared financial challenges. However, any new tool should be in addition to –not instead of—the primary financing mechanism that states have used for over a century to fund critical infrastructure projects. I will continue to stand with my fellow state treasurers from across the United States on this issue to insure the tax exempt status of municipal bonds remains in place. I encourage all Kentuckians to contact their U.S. Representatives and let them know that our safety, security, and financial prosperity should be their first priority.
Let’s not dismantle something that works!
Kentucky State Treasurer
Member National Association of Treasurers