Ruppersberger, Stivers Urge Fix for State and Local Government Financing Amid Coronavirus

WASHINGTON – Co-chairs of the Municipal Finance Caucus, Representative Steve Stivers (R-OH) and Representative Dutch Ruppersberger (D-MD) today urged Secretary of the Treasury Steven Mnuchin and Chairman of the Federal Reserve Jerome Powell to take an active role in stabilizing and lowering the cost of borrowing for state and local governments facing unprecedented revenue losses as a result of the COVID-19 pandemic.  They were joined by 41 of their colleagues, both Republican and Democrat.

Specifically, the legislators urged the Federal Reserve to stand up facilities to purchase medium and long-term municipal securities publicly issued in the secondary market and directly from issuers.  Representing over 95 percent of municipal bonds, this segment of the market has a tremendous impact for local governments as they attempt to mitigate the impact of the coronavirus pandemic.  This would supplement previous actions taken to intermediate in the short-term municipal market, which accounts for approximately 5 percent of the current market.

“Secretary Mnuchin and Chairman Powell have shown tremendous leadership in responding to the pandemic’s unprecedented impact on our economy,” Stivers said.  “I’m encouraged by the previous actions to stabilize the municipal bond market, but want the Fed to feel emboldened to do more to help state and local governments of all sizes access needed financing to support their communities.”

“Many state and local governments are going to be in dire straits as they face unprecedented revenue shortfalls, extended timelines for income tax filing and unforeseen expenses related to COVID-19,” Ruppersberger said.  “At the same time, they have to keep police, firefighters and teachers on the payroll, maintain roads and provide other critical services.  I am proud to lead this bipartisan effort to encourage the Fed to also help our state and local governments weather this storm."  

Municipalities across the country are facing severe cash flow shortages resulting from the economic impacts of the COVID-19 pandemic, impacting their ability to fund vital services, such as the maintenance of roads and the construction of community health centers. 

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Federal Reserve and Treasury are instructed to utilize a portion of the $454 billion Economic Stabilization Fund (ESF) to assist state and local governments. 

The full text of the letter can be viewed here.