By Allison Ball, Kentucky State Treasurer
States across America face an infrastructure crisis. One out of every five miles of highway in our country is in poor condition and the number of traffic fatalities increased 7 percent from 2014 -2015, according to the American Society of Civil Engineers.
In Kentucky, more than 1,157 bridges are structurally deficient. That’s 8 percent of our total bridges. While these bridges aren’t in danger of imminent collapse, “structurally deficient” means they could pose a risk to public safety if they aren’t repaired and properly maintained. If an airline had a structurally deficient rating that high, few people would fly. Yet, we cross deficient bridges every day because many of us of don’t have a choice.
But one choice Congress can control is to make it easier for state financial officers to fund our critical infrastructure needs. Our economy and public safety depend on it. Congress can do this by making a simple regulatory fix that could inject more than $1 trillion in desperately needed liquidity into capital markets.
At issue is a 2016 rule from the Securities and Exchange Commission that has significantly hurt the ability of local treasurers, mayors, chambers of commerce, and colleges to fund infrastructure and development projects. The rule sharply curtailed the low-cost, private sector financing that our local governments rely on to help fund infrastructure and utility repairs.
Historically, money-market funds have been the largest purchasers of the type of debt used as working capital and infrastructure investment by municipalities and businesses. Unfortunately, that 2016 SEC rule has essentially dried up the market for exactly this type of debt that state and local governments are most likely to issue. That has sent a shockwave through financial markets, and created a capital flight of more than $1.2 trillion that could have been used in to invest in our local communities.
The bipartisan Consumer Financial Choice and Capital Markets Protection Act currently being considered by Congress would reverse this de facto tax that has been levied against state and local governments. By freeing up funding, local governments could pay for improvements to road and bridges and invest in the growth of their communities.
Reversing this rule would seem like a no-brainer. Unfortunately, some large Wall Street firms who benefit from the status quo are lobbying to block the legislation.
Thankfully, a growing, bipartisan consensus in Congress eager for infrastructure reform has recognized how important this must-pass legislation is to our nation’s economic future. The bill was already approved through a key House committee this year and is currently being considered by the committee on Banking, Housing, and Urban Affairs in the Senate. It enjoys the support of a growing list of cosponsors from both sides of the aisle.
To be clear, Congress and the administration have already made great strides toward rolling back unhelpful and unnecessary regulations. Earlier this year, Congress eased some of the Dodd-Frank regulations that were enacted in the wake of the financial crisis of 2007-08. In an overzealous effort to rein in bad actors on Wall Street, Dodd-Frank ended up punishing banks and consumers on Main Street who couldn’t absorb the cost of regulation. Thanks to the leadership of Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan, many of those onerous regulations have been relaxed.
While these steps are welcome, Congress needs to undo the misguided SEC regulation and let states finance key projects in the most cost-effective manner possible. The House and Senate can and should make this fix this year so financial officers can address our infrastructure and other local needs that have been neglected for far too long.