For the first time in 15 years, states are seeing a sustained period of increased revenues and lower borrowing costs, a combination that is helping to bolster state coffers.
Those favorable factors, along with cuts in payroll and a reduction in capital projects, are further enhancing efforts by state and local governments to balance their budgets.
According to figures released by the U.S. Census Bureau, revenue has grown and borrowing costs have declined for seven straight quarters, a period not seen since the 10 quarters from June 1996 to September 1998.
Muni win streak
Meantime, for the first time since 2002, the municipal bond market has experienced six consecutive months of positive total returns.
Muni sales are down this year from last year’s record-breaking $408 billion in issuance, when state and local governments took advantage of the Build America Bond program. With strong demand, prices have risen, prompting many state and local governments to refinance their debt and realize a windfall in savings.
Tax-free securities are expected to gain 4% in the quarter, and have outperformed Treasuries this year, according to Bloomberg.