In a recent federal bill passed at the end of 2022, the Financial Data Transparency Act is supposedly bringing us more accessible public financial information. Will it bring better public finance decisions? I am skeptical, to understate the situation — but I am looking forward to more accessible info! Jumping off from a recent episode of the Public Money Pod.
Episode Notes
Public Money Pod
Show webpage: https://munifinance.uchicago.edu/cmf-podcast/
Each year state and local governments spend $4 trillion dollars. Where does that money come from? Where does it go? Who manages it? And what do citizens and taxpayers have to show for it? In The Public Money Pod we explore the budgets, bonds, and bureaucrats at the heart of state and local public finance.
Hosted By:
Liz Farmer is an award-winning fiscal policy expert and journalist, writing about the many ways state and local governments spend our taxpayer money. You can find her @LizFarmerTweets and “Long Story Short.”
Justin Marlowe is a Research Professor at the University of Chicago’s Harris School of Public Policy, where he also serves as Associate Director of the Center for Municipal Finance.
Episode: Fix-It Financial Leadership, with Mark Scott
We discuss the challenges of engaging elected officials in their community's financial story. Legendary City Manager Mark Scott explains how the Los Angeles Riots transformed Beverly Hills, how municipal bankruptcy transformed San Bernardino, how to engage elected officials in financial decisions, and the public finance of Coachella, among many other topics. In Ripped from the Headlines we enumerate the challenges and opportunities of the Financial Data Transparency Act.
Liz Farmer on Mark Scott
April 2017, Governing: The City Managers on a Constant Quest for New Places to Fix
In the early 2000s, Mark Scott had been working for the city of Beverly Hills for 20 years -- 14 of them as city manager. Thanks to the opulence of the town, it was the kind of place where a budding manager could learn the business minus the typical “city” problems. But eventually the absence of serious issues started to get to Scott. During his tenure, he had watched neighboring Los Angeles endure dramatic civil and social unrest. Meanwhile, in Beverly Hills, luxury merchants and developers were bending over backward to do business. In 2003, the town’s Rodeo Drive Committee announced that the glassware company Baccarat was displaying $1 million worth of crystal chandeliers along the famous road’s median. It all triggered something in Scott, and he decided he needed a change. Or, really, a challenge.
He couldn’t have picked a more opposite place for his next chapter. Scott landed in Spartanburg, S.C., a former mill town divided almost evenly between white and black residents. About one-quarter of the town lived in poverty. Scott started working on ways to bring life to depressed places, overseeing a revitalized town square, new public housing, and new parks and grocery stores in historically segregated neighborhoods. He learned how to finance new projects “out of nothing,” he says, a skill he hadn’t needed in Beverly Hills.
But as it turns out, the move to Spartanburg was only the beginning of what became Scott’s quest for new problems to solve. He returned to California, and in a relatively short time has been manager of four cities: Culver City, Fresno, Burbank and now San Bernardino, which is in the process of exiting municipal bankruptcy.
Financial Data Transparency Act
Data Coalition fact sheet: https://www.datacoalition.org/resources/Documents/FDTA%20_ACT_final2_2022.pdf
Searchable, Machine-Readable, Open Data Standards: The FDTA defines requirements for common data standards that build upon industry and technology best practices, account for lessons learned from existing federal regulatory standard setting, and incorporate relevant federal policy and international standards definitions. The data standards require that data be rendered fully searchable – which is facilitated by the requirement to be “machine-readable.” “Machinereadable” data are “data in a format that can be easily processed by a computer without human intervention while ensuring no semantic meaning is lost” (per 44 U.S.C. § 3502(18)). The data will be made available under an “open license” format, which will reduce barriers for industry, academia, and others to incorporate or reuse the data standards and information definitions into systems and processes. This requirement will also facilitate competition between multiple vendors for data tools and services, ultimately reducing long-term costs
National League of Cities: What You Need to Know About the Financial Data Transparency Act
As written, the introduced legislation would require local governments to come into compliance with the new financial reporting standard by 2027. The new standards are to be created by the Securities and Exchange Commission (SEC).
The final legislation mandates that governments put their financial information in machine-readable format. The key difference between the initial draft and the final draft of the legislation is that they will be responsible for enacting the new data standards. It is preferable to have the SEC be the body that administers the standards because Congress has oversight of the agency, and if the rules are not working Congress can exercise oversight of the agency.
This legislation will pose an unfunded mandate of compliance on local governments. While the bill mandates compliance, it does not provide any additional federal dollars to help municipalities come into line with the new requirements. NLC will be working with the SEC and other allied organizations to reduce the burden of this unfunded mandate as much as possible on communities.
The mandates will be set in place approximately four years from the passage of the legislation.
Girard Miller, Governing: More and Better Uses Ahead for Governments’ Financial Data
The central idea behind the FDTA is that public-sector organizations’ financial data should be readily available for online search and standardized downloading, using common file formats. Think of it as “an http protocol for financial data” that enables an investor, analyst, taxpayer watchdog, constituent or journalist to quickly retrieve key financial information and compare it with other numbers using common data fields. Presently, online users of state and local government financial data must rely primarily on text documents, often in PDF format, that don’t lend themselves to convenient data analysis and comparisons. Financial statements are typically published long after the fiscal year’s end, and the widespread online availability of current and timely data is still a faraway concept.
….
The debate over information content requirements should focus first on “decision-useful information.” Having served briefly two decades ago as a voting member of the Governmental Accounting Standards Board (GASB), contributing my professional background as a chartered financial analyst, I can attest that almost every one of their meetings included a board member reminding others that required financial statement information should be decision-useful. A key question, of course, is “useful to whom?”
San Bernardino on STUMP
May 2015: Buyers of Distressed Munis: BEWARE! GET OUT!
San Bernardino bondholders were being told that pensions come before them:
May 11 (Reuters) – An attempt by holders of bonds issued by bankrupt San Bernardino to win the same treatment accorded the city’s biggest creditor, state pension giant Calpers, was thrown out by a federal judge on Monday.
The ruling comes three days before the southern California city of San Bernardino is to produce a bankruptcy exit plan and would appear to clear the way for the city to slash its bondholder debt. The city has already said that it intends to make full payment to Calpers, which has assets of $300 billion.
May 2014: Public Pension Watch: The Fragility of "Can't Fail" Thinking
Calpers, the large California public pension plan, has filed an amicus brief in the case of Detroit’s bankruptcy.
Calpers does not like the Detroit pension plans being treated like unsecured creditors in a bankruptcy proceeding, and cites the constitutional (state constitutional, that is) protections for pensions. Thing is, there’s law, and there’s reality.
October 2015: Calpers and the Benefits of Public Pensions: Things Seen and Unseen
Vallejo has been followed by Stockton and San Bernardino. All of these bankruptcies have been paired with service cuts, much of which would be considered essential services being cut.
This is not unique to California, of course, but it’s just becoming more and more visible.
The problem becomes that Calpers is trying to make something that is unseen (economic boost by retirees) to being seen, while ignoring the equal issue of taxpayers spending their own money. And that the taxpayers don’t give a damn about that anyway.
They care about their services.
BOTTOM LINE IS SEEN BY ALL
So you’d better be ready to explain just what people are getting for their tax dollars now. They can see that the pensions currently paid are for services not currently being provided.
March 2015: Pension Quick Takes: Nice Work if You Can Get It
Public Finance and Data