Pima Treasurer Warns: Congress’s Move Against Tax-Exempt Bonds Could Cripple Local Schools

Brian Johnson has been elected as the treasurer of Pima County, a role he approaches amidst critical national discussions regarding municipal financing.

Currently under consideration by the House Ways and Means Committee is a proposal that could eliminate the tax exemption for interest on municipal bonds. This sweeping initiative, intended to save the federal government $250 billion over the next decade, has drawn substantial backlash from various stakeholders. They argue that tax-exempt municipal bonds are vital for funding essential public projects, including infrastructure and community services.

The Securities Industry and Financial Markets Association (SIFMA) has taken a strong stance against the proposed removal. SIFMA emphasizes that tax-exempt bonds are a crucial financing tool for state and local governments, along with nonprofits and educational institutions. By increasing the cost of borrowing, the proposal could inadvertently lead to elevated taxes or reductions in crucial funding for vital services.

Adding to the concern, the Public Finance Network has formally urged Congress to safeguard tax-exempt municipal bonds. They highlight the bonds’ key role in financing infrastructure projects like roads, bridges, and public transportation. The potential loss of their tax-exempt status raises fears about the capacity of local governments to invest in projects that enhance community living standards.

The National Association of Counties (NACo) has echoed these worries, pressing Congress to reject legislation that would limit or abolish this tax status. NACo notes that municipal bonds are critical for supporting public projects, such as educational institutions and health facilities. Removing the tax exemption could severely burden local budgets, making it more difficult to deliver vital community services.

In Southern Arizona, the concerns have been particularly acute among members of the Southern Arizona School Business Officers. The primary threat posed by the proposed tax changes revolves around educational financing. School boards frequently issue municipal bonds to fund the construction and maintenance of educational facilities.

Recent Census data reveals that Marana, for instance, has experienced a population surge of 30-40 percent since 2010. In response, the Marana Unified School District is looking to establish an additional high school to accommodate the growing community.

Should the tax exemption be revoked, the cost of financing for districts like MUSD could significantly rise as they may need to provide higher interest rates to entice investors. This hike in borrowing costs could potentially lead to increased property taxes and diminished educational funding—consequences that would ultimately impact local students’ learning conditions.

The ongoing discussion around the tax exemption’s potential removal showcases broader issues related to public finance and infrastructure support. Advocates of the move suggest it could yield necessary funds for other national priorities, while opponents warn that the long-term repercussions of raising borrowing costs and hindering public investment far outweigh any short-term financial benefits.

The implications of removing the tax exemption for municipal bonds stretch across various sectors, raising alarms in education, healthcare, and public services. As such, residents are encouraged to reach out to their congressional representatives—including Reps. Juan Ciscomani and Raul Grijalva, and Sens. Mark Kelly and Ruben Gallego—to express their perspectives on how these potential changes could affect local communities.