Public Finance

3.1 Preamble

Governors support the preservation of public financing – notably tax-exempt financing. Most states utilize public financing to raise capital for a wide range of public projects, some states utilize public-private partnerships, and some states operate on a “pay-as-you-go” basis. By lending money through the purchase of state and locally issued bonds, investors help provide market validation for those projects.

States must also continue their historic role providing front-line consumer and investor protections and promoting innovative instruments and policies that are fiscally prudent, financially sound, and reasonable.

Governors affirm the observance of the following guiding principles in federal laws, regulations, and practices:

3.2 Guiding Principles

3.2.1 State Authority over Financial Services

  • No federal law or regulation should preempt, limit, or interfere with the ability of the states granted under the U.S. Constitution or current federal laws to develop and operate their own revenue and tax systems.
  • Federal laws, regulations and international agreements should not preempt or undermine state authority over financial services institutions, nor should they impede state-level modernization of state-regulated financial institutions.

3.2.2 Public Finance

  • Federal statutory and regulatory policies should not either increase issuance costs to states and local governments, directly or indirectly, or diminish retail and institutional market demand for bonds issued by states and local governments.
  • Like the Tower Amendment (15 U.S.C. §780-4(d)) that exempts public issuers of securities from federal requirements prior to the sale of state and local bonds, federal laws and regulations, including their interpretation and implementation, must not weaken the constitutional rights of states over their revenue systems.

3.2.3 Consumer and Investor Protection

  • A robust, state-federal collaboration helps reinforce a multi-level defense against predatory practices and systemic risks to the intertwined domestic and global financial services systems.

3.2.4 Functional Regulation

  • Functional regulation must remain the guiding principle for financial services regulation.

Time limited (effective Winter Meeting 2017 – Winter Meeting 2019).
Adopted Winter Meeting 2017.