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Are We on the Brink of a Golden Age for U.S. Public Finance?


Combined Federal Spending Packages Could Provide Historic Boost to State and Local Governments


By Tom Kozlik, Head of Municipal Strategy and Credit

For the past year, uncertainty has weighed heavily on the U.S. municipal sector as the ongoing economic impact of the COVID-19 pandemic continues to unfold. But now the picture is beginning to clear, and it look as though public finance could be on the brink of a new golden age.

The recent passage of the $1.9 trillion American Rescue Plan Act of 2021 marks the sixth phase of U.S. fiscal policy in response to the pandemic, bringing total spending to more than $6.5 trillion since March 2020. The Plan includes at least $350 billion that will flow directly to state and local governments. Combined with various spending from earlier stimulus, about $650 billion will significantly support credit quality across many public finance sectors.

Now an infrastructure spending package is currently in the works. Reports indicate this potential seventh phase of spending could total as much as $3 trillion. If that holds true, it would bring the amount of U.S. fiscal policy response to the pandemic to almost $10 trillion in a year’s time. This is an historic level of policy support that could launch a new golden age for U.S. public finance that could last several years.

Much remains to be seen and some municipal entities that were experiencing structural imbalances or multi-year pension funding issues before the pandemic could still face difficulties. However, the picture today is much clearer—and brighter—than 12 months ago.

Visit HilltopSecurities’ COVID-19 Relief Resources page on our website to follow our latest commentary on the ongoing fiscal response to the pandemic, as well as past insights on its effect on the municipal sector. This page will continue to be updated as more information develops.

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