March 2022

Thank you all who attended our DC Advocacy Update at the Institute earlier this month in Miami. The NABL Governmental Affairs Committee will continue to hold advocacy sessions at the end of each quarter to keep members informed on recent federal updates and NABL advocacy actions, and to allow our members the chance to share their thoughts and questions. These interactive updates will be accompanied by written updates starting with this one in NABL News each quarter.

Here are some updates from our Governmental Affairs desk:

General Climate in Washington, D.C.

It's worth noting that D.C. is entering campaign mode leading into the midterm elections. While ambitions and the to-do-list in Congress remain large, reelection bids will take centerstage. Beyond election year realities, Congress is also juggling numerous presidential appointments; including Judge Ketanji Brown Jackson's nomination to the Supreme Court; rising inflation, supply chain bottlenecks, winding down of COVID-19 pandemic stimulus programs, and geopolitical instability stemming from the Russian invasion of Ukraine.

The Government is Funded...Now on to FY2023 In March, Congress passed a comprehensive spending omnibus to appropriate the government through FY2022, which ends September 30. The package provided much needed funding for certain infrastructure programs authorized under the Infrastructure Investment and Jobs Act that had been stalled by the appropriations delays. President Biden released his FY2023 budget on March 28. The $5.8 trillion proposal does not include any municipal bond provisions, but it does include significant additional funding for state and local governments as well as a proposed minimum tax of 20 percent on ultra-wealthy households. With the release of the Administration's numbers for next year, Congress now begins the process of drafting (and ideally passing) appropriations bills for the next fiscal year. Congress may choose instead to pass a continuing resolution by September 30, which would punt the issue until after the November elections.

LIBOR Legislation Hitches a Ride

The FY2022 appropriations omnibus also included the Adjustable Interest Rate (LIBOR) Act, which provides an automatic fallback process for legacy contracts that reference LIBOR when the rate ceases to exist. The provision, which is similar to and supersedes state laws passed last year in Alabama and New York, was broadly welcomed by municipal market participants.

Focus on ESG Continues

Since the beginning of the Biden Administration, both Congress and regulators have closely examined the world of ESG investment and labeled bonds. Most recently, the SEC published a proposed rule which would require publicly traded companies to include certain additional climate-related disclosures in their statements. While the rule only applies to the corporate market, it provides an indication of where the SEC may head for other markets. The MSRB has also broadened its focus on ESG with its December 2021 request for information on ESG Practices in the Municipal Securities Market. NABL submitted comments to the request and joined a separate coalition response with other industry stakeholder groups.

What Else is In Store for the 117th Congress

The 117th Congress has already passed two signature pieces of legislation: the American Recovery and Reinvestment Act passed in March 2021, which provided $350 billion to state and local governments; and the Infrastructure Investment and Jobs Act (IIJA) passed in November 2021, which will provide $1.2 trillion in federal infrastructure investment over the next eight years and creates two new categories of private activity bonds for carbon capture technology and broadband projects. Congressional Democrats and the Biden Administration spent significant effort to advance a larger social spending package, known as the Build Back Better Act, and voting rights reform. While both efforts remain key priorities for the Democrats at both ends of Pennsylvania Avenue, the odds of either effort advancing prior to the election remain low.

Nonetheless, potential for additional legislation with tax titles may present opportunities for NABL municipal bond priorities to advance later in the spring and summer, or post-election during the lame-duck Congress.

As always, please feel free to reach out me any time with questions, comments, or concerns.

Sincerely,

Brian Egan
Director of Governmental Affairs