Joseph Krist

Publisher

NYC BUDGET

The Independent Budget Office (IBO) presented its analysis of the Adams administration’s Fiscal Year 2026 Executive Budget and 2025-2029 Financial Plan, as required by the New York City Charter. It notes that usually during economic downturns, the federal government works to smooth the economic cycle and help state and local governments navigate financially. Now, the federal government is the underlying cause of much of the turmoil.

Federal dollars play a direct role in both the State and City’s ability to pay for planned expenses. New York State’s fiscal year 2025 budget of $240 billion included $89.2 billion (37% of total State budget) in federal funding. The Adams administration’s fiscal year 2025 budget of $119.8 billion includes $10.5 billion in federal funds in 2025 (9% of the total City budget) and $7.4 billion in 2026 (6%).

In the Executive Budget, the Adams administration assumes a surplus of $2.9 billion that it allocates towards prepaying next year’s debt. IBO estimates that there will be an additional $1.7 billion available, mostly due to agency underspending, for a resulting 2025 surplus of $4.6 billion. A growing concern is the Adams administration’s prepayment of $2.9 billion follows a pattern of shrinking pre-payments year-over-year since 2022.

Over that time, the pre-payment has shrunk from 9% of year-end tax revenues in 2021 to 4% this year. This means that the Adams administration’s practice of spending more than the revenue it brings in is unsustainable. IBO’s estimated gaps increase to $7.2, $7.9, and $7.1 billion in 2027, 2028, and 2029, respectively. These gaps are on average 7% of City tax revenues. This is minimally larger than the gaps the City has closed in recent years, which were around 4% to 6% of City tax revenues.

D.C. BUDGET

On March 8, the U.S. House of Representatives introduced a resolution to temporarily fund the federal government while mandating a federal spending freeze. Historically, continuing resolutions have exempted the city from spending freezes, since the money it spends on services comes from locally raised taxes, not federal funds. That provision was not in the House’s resolution. This created a $1.1 billion shortfall with the fiscal year already half over. The U.S. Senate unanimously passed a bill allowing D.C. to keep operating according to its current budget but the chaotic House failed to adjust its CR to include funding for D.C.

In mid-April, the mayor announced that the city was going to address most of the shortfall by invoking a 2009 federal law that gives the city the authority to increase its appropriated funding by up to 6 percent. That only eliminated some of the shortfall. Now, with the House still unwilling to act, the City outlined how it would close the remaining gap. Some payments would be pushed into the next fiscal year, which begins in October; some debt would be refinanced; open positions would temporarily go unfilled; and certain individual programs would face cuts.

It is apparently not enough for ideologues that the DOGE-related mass layoffs of federal workers have reduced the city’s revenue estimates by more than $1 billion over the next three years and has led Moody’s to downgrade the city’s credit rating.

CHICAGO ON NEGATIVE

Fitch affirmed Chicago’s A- rating on its GO debt. It did change its outlook to negative. “The revised Outlook on Chicago’s IDR and GO bond rating to Negative is driven by a lack of substantial progress procuring permanent and high impact solutions to its structure budget gap. This is estimated at more than $1.1 billion for 2026 (roughly 20% of the corporate fund budget). Fitch estimates reserves could weaken to less than 15% of spending by the end of 2025 compared to 29% in 2023. The city has budgeted reserve draws in 2024 ($414 million) and 2025 ($368 million), to help close its fiscal gap and fund advance contributions to its pension funds.” 

The City also faces uncertainty regarding potential reductions in state aid. The State’s budget process is unfolding in the face of potential cuts in federal funding both to the State and City. What could drive a downgrade? Management ineffectiveness, including late budget adoption, failure to adhere to fund balance policies or irresolute or excessively contentious fiscal decision-making; material reliance on non-structural fiscal measures (including fund balance use), aggressive budget assumptions or failure to fund the full statutory pension contribution, at a minimum; an actual or expected weakening of available reserves to less than 10% of general fund spending.

HURRICANE SEASON

The National Oceanic and Atmospheric Administration issued its forecast for this year’s Atlantic hurricane season. It expects to see between 13 to 19 named storms this year. That would make for anabove-average season, and most likely not as active as 2024 ended up being. An average Atlantic hurricane season has 14 named storms, including seven hurricanes and three major hurricanes.

The agency’s forecasters believe that six to 10 of the named storms could become hurricanes, meaning they would include winds of at least 74 miles per hour. Those could include three to five major hurricanes — Category 3 or higher — with winds of at least 111 m.p.h. According to NOAA, there is a 30 percent chance of a near-normal season and a 60percent chance of an above-normal season, with a 10 percent chance of a below-normal season.

CONGESTION PRICING

U.S. Judge Lewis J. Liman granted the Metropolitan Transportation Authority’s request for a temporary restraining order against the Trump administration efforts to end congestion pricing in Manhattan. Judge Liman noted that the M.T.A. “showed a likelihood of success” in its case to maintain congestion pricing. New York State “would suffer irreparable harm” without a restraining order. The decision leaves congestion pricing in place through at least June 9.

Secretary of Transportation Sean Duffy said in February that the department would begin withholding federal approvals and funding for a range of transportation projects beginning on May 28, starting with a payment freeze on a number of highway and transit accessibility projects. That was tied to a May 21 deadline which came and went as did the previous deadlines.

NUCLEAR

President Trump signed four executive orders to support accelerating the construction of nuclear power plants in the United States.  The orders include support for small modular reactors that offer the promise of faster deployment.

One order directs the Nuclear Regulatory Commission to streamline its rules and to take no more than 18 months to approve applications for new reactors.

Another directs the Energy and Defense departments to explore siting reactors on federal lands and military bases, possibly alongside new data centers. That could allow the departments to bypass the N.R.C. and develop their own, faster processes for approving reactors. Advanced nuclear facilities would only have to start construction by the end of 2028 to access 45Y and 48E tax credits.

The Tennessee Valley Authority applied for a license to construct the first small nuclear reactor at its Clinch River Nuclear Site in Oak Ridge, Tennessee. TVA is the first utility to submit a construction permit application to the U.S. Nuclear Regulatory Commission for a small modular reactor. The first small modular reactor at the Clinch River Nuclear Site could cost around $5.4 billion, according to a draft of TVA’s long-term energy plan.

The project will use its own variant of GE turbine technology already employed at TVA. The other two SMR projects proposed for Wyoming and Texas use reactors are cooled by salt and gas rather than water. The Nuclear Regulatory Commission will likely take 2 1/2 years to review and grant the construction permit. TVA can begin on non-nuclear construction as early as 2026 if it secures a Department of Energy $800 million grant for the project.

California startup Valar Atomics and the state of Utah announced a partnership to have a new nuclear test reactor operating in the state in one year. The reactor will be developed at the San Rafael Energy Research Center in Emery County, which was purchased by the state last year. It is all part of a plan to develop a fleet of SMRs throughout the State of Utah.

COAL

The Trump administration declared that ​“an emergency exists in portions of the Midwest region of the United States due to a shortage of electric energy.” It cites that “shortage” to invoke the DOE’s emergency authority under the 1935 Federal Power Act to unilaterally order any power plant in the country to keep running. Now, the U.S. Department of Energy issued an order demanding that the J.H. Campbell plant, a 1,560-megawatt coal-burning power plant owned by Michigan utility Consumers Energy, must abandon its plans to shut down on May 31 and instead continue operating through at least late August.

The closure has been long anticipated and planned for since 2021. The planned shutdown is part of a broader agreement between Consumers Energy and state regulators to end coal use by 2025 and put the utility on a path to meeting the state’s mandate of 100% carbon-free power by 2040. Consumers Energy has estimated that the switch from costlier coal to cheap gas, solar, and energy storage will save customers $600 million through 2040.

The DOE justified its emergency order by citing a December 2024 report from North American Electric Reliability Corporation which said that the Midwest was at the most risk of “grid reliability challenges”. The power from the coal plant is offset by new gas generation and renewable energy purchases. The Trump administration has offered regulatory relief to some 70 coal fired generation plants nationwide.

MUNI SOLAR

In the midst of the array of trade barriers being erected by the Trump administration, the City of San Antonio’s electric utility (CPS Energy) has entered into an international agreement to develop solar and battery resources for its system. OCI Holdings of Korea announced that its U.S. subsidiary, OCI Energy, has signed a three-party memorandum of understanding with CPS Energy, and Vertech, the U.S. subsidiary of LG Energy Solution, to collaborate on energy storage system (ESS) projects in North America.

OCI Energy will obtain ESS batteries from Vertech, store solar energy generated during the daytime and sell the stored electricity to CPS Energy. The first project is the Alamo City ESS project a solar power facility under development on a 35-acre site in southeastern Bexar County in Texas. It will combine a 120-megawatt solar photovoltaic system with a 480-megawatt-hour energy storage system. OCI signed a 20-year storage capacity agreement with CPS Energy to supply power to the San Antonio area.

OCI will be a potential electric customer. It recently revealed plans to spend $265 million to build a solar cell manufacturing plant in San Antonio. It is expected to reach a production capacity of 2 gigawatts — 1 gigawatt in the first half of next year and another in the second half. 

HOSPITAL FIRST AID

In 2023, S&P lowered its rating to ‘A-‘ from ‘A’ on PeaceHealth, Wash.’s existing taxable bonds and tax-exempt revenue bonds. They kept a negative outlook. PeaceHealth, based in Vancouver, Wash., is a nonprofit Catholic health system providing care to communities in Washington, Oregon and Alaska. PeaceHealth has approximately 16,000 employees, a multi-specialty medical group practice with more than 1,100 providers, and 10 medical centers serving both urban and rural communities.

It is clear that the hospitals’ operating trends have not improved. It’s not a surprise given its smaller community orientation and the unfavorable demographics in those areas. PeaceHealth gets between 55 and 58% of its revenue from Medicare and Medicaid. Medicare alone is 40%. Operating losses have continued albeit with some improvement in FY 2024. Only strongly increased investment earnings got the system to breakeven.

Now the system is making cuts to better balance operations. It announced a 1% staffing reduction this week with immediate effect.  A hiring freeze is also being implemented through 2025, with the exception of clinical and essential operational roles. One important metric did follow recent trends unfortunately. Days in cash on hand declined again.

TARIFFS AND PORT CAPITAL COSTS

Much of the focus on proposed tariffs is rightfully on the most obvious impact – reduced shipping and port activity. That does have an impact on port revenues. The industry however is directing its attention to one serious impact to ports from a specific proposal regarding tariffs and Chinese ship building and the manufacture of port equipment led by The American Association of Port Authorities (AAPA).

Ship-to-shore (STS) cranes are a basic component of modern ports. They are the structures which actually load and unload containers onto ships. Currently, no U.S. companies manufacture STS cranes, and Chinese firms dominate the market. A joint survey by AAPA and the Maritime Administration revealed that 55 cranes are currently on order for U.S. ports, 44 of which are being sourced from China. Over the next decade, U.S. ports are expected to acquire 151 cranes, with about 80% projected to come from Chinese suppliers.

The Trump administration has proposed and then suspended the imposition of a 100% tariff on STS cranes imported from China. Before tariffs, a crane cost roughly $15 million. With the proposed tariff layered atop existing duties, AAPA estimates that U.S. ports could face $6.7 billion in additional costs over the next 10 years. One example is the Port of Houston, which has eight Chinese cranes scheduled for delivery in 2026. That result in $302.4 million in extra fees if the tariff is applied.

The AAPA has urged the US Trade representative to consider exemptions for cranes ordered before April 17, 2025, delay implementation by one to two years, and clarify whether the proposed Section 301 tariffs will be cumulative with existing duties.

CARBON CAPTURE AND WATER

The Mahomet Aquifer supplies water to hundreds of thousands of people in central Illinois.  Estimates for the number of Illinois residents served daily by the aquifer range from 500,000 to 1 million people. In 2015, portions of the aquifer in 14 Illinois counties were designated as a sole source aquifer by the EPA, since contamination of the aquifer could cause significant public health risk. That EPA designation also indicates that there are no “reasonably available alternative drinking water sources” that could be used if the water in the aquifer were contaminated.

Archer Daniels Midland (ADM) has been operating a carbon injection site in Illinois since 2011. The project received the first federal permit for “geologic sequestration of carbon dioxide” in 2017. Since then, the project has stored more than 4.5 million tons of carbon dioxide more than a mile underground. Last year, it was found that a leak occurred during carbon injections carried out by ADM.  8,000 metric tons of liquid carbon dioxide and other ground fluid escaped the area it was permitted to be in.

ADM temporarily paused carbon injections in October after another issue with a well was identified. Now, legislation awaits the Governor’s signature which would restrict injections in the area of the aquifer. SB1723 passed out of the Senate in April 55-0 and passed out of the House on Tuesday with a vote of 91-19.

This week, the Environmental Protection Agency announced it was turning over regulatory oversight of carbon injection facilities in Arizona to the state.

There are no carbon injection facilities in Arizona and no permits have yet been requested to build any in the state. The Arizona Department of Environmental Quality is the state agency that will be responsible for implementing state oversight. Debate over carbon wells revolves around groundwater issues.

The state is losing significant groundwater supplies as industrial agriculture has engaged in significant pumping of groundwater to irrigate its crops. An Arizona State University study found that the Colorado River basin has lost 27.8m acre-feet of groundwater in the past 20 years, an amount of water nearly equivalent to the full capacity of Lake Mead. Most of the groundwater losses since 2003 occurred in the lower Colorado River basin which includes Arizona. Depletion of water storage in the Colorado River basin has sped up in the past decade. Since 2015, the basin has been losing freshwater at a rate three times faster than in the decade before, driven mostly by groundwater depletion in Arizona.

INTERNATIONAL STUDENTS

We have already commented on the role of international students as a source of funding for U.S. universities. While Harvard has been in the spotlight through its ongoing fights with the White House, a number of well-known institutions – public and private – have substantial cohorts of international students. These are the universities with the largest number of students and the share of international students as a % of total full time enrollment. Data is from the National Center for Education Statistics.

NYU – 49,847 (37%); Michigan – 48,167 (17%); Illinois – 47,118 (23%); Washington – 43,118 (18%); USC – 41,648 (28%); UC Berkeley – 41,572 (17%); UC San Diego (40,716 (18%); UC Davis – 38,184 (15%); UC Irvine – 35,511 (16%); Northeastern – 29,738 (40%). For the schools currently in the crosshairs Harvard has 20,807 (28%) and Columbia has 28,756 (40%).

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

TEXAS POWER

There has been a flurry of Texas legislation seeking to erect or maintain barriers to renewable projects. S.B. 388 requires every new megawatt of renewables to be matched by a megawatt of new gas power. It would require at least 50 percent of power generation installed after January 1, 2026, to come from “dispatchable” energy sources, which include natural gas and coal.

S.B. 819 would use “the police power of the state” to restrict landowners from leasing their properties to wind and solar companies. The bill would make it harder to permit renewable energy projects. The bill invokes the “police power of [the] state” to “increase electric generation” and “mitigate unreasonable impacts of renewable energy generation facilities on wildlife, water, and land” in Texas. The legislation would require new renewable energy projects that generate over 10 megawatts—enough to power about 10,000 homes—to obtain permits from state regulators before connecting to the power grid. 

The Texas Senate passed S.B. 715 which would require all renewable projects — even existing ones — to buy backup power, largely from coal or gas plants. It would require solar plants in particular to buy backup power to “match their output at night. The usual reliability arguments are being made by coal/gas advocates. This isn’t about daytime reliability (that’s not an issue). The bill would also force renewable projects to pay an annual “environmental impact fee” to fund site cleanups of these projects. Greenhouse gas-emitting energy projects in the state, including oil and natural gas, are not subject to similar dues. 

A study by the Texas Association of Business (TAB) concluded the laws would cost the state $5.2 billion more per year — and cost individual consumers $225 more each year. The irony is that Texas is a leader in installed wind and solar capacity. It has been established that shortages under a variety of weather situations have not been the result of renewable generation. Nevertheless,

the state’s oil and gas lobby continues to push against renewables.

NEW YORK STATE BUDGET

The State of New York finally has a budget some five weeks after the beginning of fiscal year 2026. The budget faced some thorny issues such as funding for the MTA in the face of threats to federal funding. Fiscal issues weren’t the source of the delay, however. Rather it was non-fiscal policy issues that held up enactment. Primary among them were changes made to recently enacted legislation which was seen in the criminal justice system seen as more favorable to defendants. Others were changes to the state’s involuntary commitment standards and a bell-to-bell cellphone ban in schools.

The fiscal side did include items such as an inflation rebate check program ($2 billion to provide direct cash assistance to more than 8 million New Yorkers with checks of up to $400 per family), a child tax credit (a $1,000 credit for kids younger than 4 years old and a $500 credit for kids ages 4-16) and middle class tax cut ($1 billion). 

Gov. Kathy Hochul signed new legislation as part of the FY26 Enacted Budget to fully fund the MTA $68.4 billion 2025-29 Capital Plan. The funding plan that also includes cuts to the regional Payroll Mobility Tax (PMT) for roughly 10,000 small businesses and an elimination of the PMT for self-employed individuals earning $150,000 or less. The plan will also eliminate the PMT for all local governments outside New York City. 

In addition to providing $8 billion in total operating aid for the MTA, the FY 2026 Budget will give a $3 billion State capital appropriation to support the MTA capital plan. The FY 2026 Budget also requires the City of New York to provide $3 billion toward the MTA capital plan and requires the MTA to find $3 billion in efficiencies. 

In the end, this budget might not matter that much. All of the major players in the process agree that proposed changes to federal budgets could substantially reduce funding and create gaps which would need to be addressed.

CALIFORNIA MAY BUDGET REVISION

Governor Newsom proposed a $322 billion state budget for fiscal 2026. According to the Governor, Washington’s imposition of tariffs has driven a downgrade in both the economic and revenue forecasts. Combined with increased expenditure growth above the Governor’s Budget—most notably in Medi-Cal—the state must now close an estimated shortfall of $12 billion to balance the budget.

Market volatility since tariffs were imposed has resulted in a substantial downgrade to the S&P 500 forecast in the second quarter of 2025. The impact of tariffs on financial markets was seen in significantly reduced stock prices of the largest California-based technology companies. The May Revision forecast assumes stock-based compensation to their employees is projected to decrease in 2025.

This is contributing to a downgrade in projected personal income tax revenues in 2025-26 that will reverse the positive trends in personal income tax withholding cash results through April 2025. In addition, personal income tax revenues from capital gains were significantly downgraded in 2025-26 due to the stock market decline.

Expenditures in the Medi-Cal program—the state’s health care program for low-income individuals—have increased significantly and continue to outpace revenues. In Spring of 2025, a cash flow loan of $3.4 billion was executed and an additional $2.8 billion General Fund was appropriated to support Medi-Cal expenditures of $37.6 billion General Fund in 2024-25. The major drivers of these increases are higher overall enrollment, pharmacy costs, and higher managed care costs.

It is the source of proposed cuts to deal with the budget gap which is getting much attention. Most prominent is an enrollment freeze for Full-Scope Medi-Cal Expansion for Undocumented Adults, Adults 19 and Older. Others include imposing Medi-Cal Premiums on Adults 19 and Older and Asset Test Limits.

The May Revision maintains the planned withdrawal of approximately $7.1 billion from the Budget Stabilization Account (BSA). That would leave total reserve balances of approximately $15.7 billion at the end of 2025-26. This consists of $11.2 billion in the BSA and $4.5 billion in the Special Fund for Economic Uncertainties.

IOWA EMINENT DOMAIN

Iowa senators voted 27-22 to pass a bill to limit the ability of carbon sequestration pipelines to use eminent domain. House File 639 comprised a number of bills passed by the House aimed at eminent domain. As written, the bill changed definitions of a common carrier, increased insurance requirements to cover any damages to property and reimburse landowners for increases in premiums due to the pipeline. It set requirements for the Iowa Utilities Commission (IUC) and expanded who can intervene in IUC proceedings.

This is the first time that the Senate took a vote on a bill associated with eminent domain after three other attempts. As is often the case with potentially difficult policy decisions, the budget process offered the best vehicle for progress on the issue. By refusing to vote on a budget for the State, supporters of the legislation were able to force consideration of the bill. This year, debate was contentious and efforts to amend the bill in favor of the Summit Carbon Solutions failed.

The effort to amend the bills focused on provisions designed to protect the Summit project. It was led by a former managing director (now a sitting State Senator) of a related entity Summit Agricultural Systems. Opposition to the Summit pipeline regularly hovers around 75%. It actually was in issue in the 2024 Iowa caucuses.

One interesting issue arises from the legislation. Does enactment language in the bill open the door to lawsuits from Iowans who have already signed an easement contract with the state when Summit is no longer able to uphold that contract without eminent domain to complete the project? It’s not clear how many land owners took the money out of fear of eminent domain but clearly many did. Will they be able to get out of their agreements and, if so, at what price?

Summit faces other challenges. The North Dakota Supreme Court heard arguments in a case where landowners are suing the state of North Dakota and the state Industrial Commission over a state law that can force landowners to take part in an underground CO2 storage project. Under that law, landowners can be forced to allow carbon dioxide storage beneath their property if 60% of the landowners agree to a storage project. The argument is that the law is unconstitutional because it doesn’t allow landowners to use the court system to argue for just compensation. 

The Northwest Landowners Association is the lead plaintiff in this case. It successfully challenged a 2019 North Dakota pore space law at the state Supreme Court, with justices finding it unconstitutional.

IS THIS LIFE AFTER FEMA?

Recently, North Carolina received a $1.4 billion grant from the U.S. Department of Housing and Urban Development for disaster recovery—including the repair or reconstruction of single-family homes, rental housing and infrastructure—as well as economic revitalization and mitigation. The grant administration is a state responsibility. The N.C. Department of Commerce on May 9 awarded a project management contract to Horne LLP, worth $81.5 million over the next three years to run North Carolina’s disaster recovery program in western counties flattened by Hurricane Helene.

The contract was awarded despite the fact that Horne was the prime contractor for the N.C. Office of Recovery and Resiliency, also known as ReBuild NC, providing case management and other services from 2019 to 2022, when the firm’s contract was not renewed after many disaster victims complained about poor case management. Here is how privatization gets a bad name. The western North Carolina disaster recovery advisor to Gov. Josh Stein, worked for Horne until April 2024. He was one of six people who authored the RFP.

The state noted in the RFP that this ranking method “may result in an award other than the lowest price or highest technically qualified offer.” In Louisiana, the state auditor investigated Horne in November 2022 after several company employees allegedly received COVID-related relief funds they were administering. Earlier that year the state of Alabama had to return more than $42 million in pandemic aid to the U.S. Department of Treasury after Horne failed to distribute emergency rental funds on time. In April, in West Virginia, Horne agreed to pay $1.2 million as part of a settlement agreement with the federal government over alleged improper billing for services related to disaster recovery in the state.

CALIFORNIA FIRE INSURANCE

The California FAIR Plan Assn., the state’s insurer of last resort, assessed its member carriers $1 billion on Feb. 11. The plan, operated and backstopped by the state’s licensed home insurers, said it has made $2.75 billion in claims payments as of last week and expects its costs for the fires will total $4 billion, which it could not cover with its limited surplus and reinsurance funds.

Under a plan approved by the state’s insurance regulator, insurers are filing applications with the state Department of Insurance seeking to surcharge their policyholders statewide for half the costs of that assessment. Ten home insurers and their affiliates have filed applications for surcharges, with the fees ranging from about $6 or less for some rental policyholders, $20 or $30 for condo owners and typically $40 to $60 for a standard homeowners policy. A bill working its way through the Legislature would authorize the California Infrastructure and Economic Development Bank to issue bonds on behalf of the FAIR Plan to help pay its claims and increase its liquidity.

State Farm is estimated to cover some 1,000,000 homes which means that one in five homes in the state are State Farm customers. Given that dominant position, it’s not a real surprise that the company has been the target of criticism from customers trying to navigate the insurance process. In spite of a 20% rate increase granted in 2024, the January fires have driven even higher insured losses. The State Insurance Commissioner has now approved State Farm for a “temporary” 17% increase in premium rates. The interim rates go into effect on June 1. 

S&P Global Ratings downgraded State Farm’s California subsidiary from an “AA” to an “A+” rating. The action reflected “a significant deterioration” in the company’s capital position over the last five years. The Commissioner’s order does require State Farm’s parent company to provide an infusion of $400 million in cash to the California subsidiary.

CLIMATE LITIGATION

In 2021, the most destructive fire in Colorado history, the Marshall Fire, burned more than 1,000 homes in Boulder County and caused more than $2 billion in damages. That was some three years after Boulder County and the City of Boulder began litigation against fossil fuel producers. Like so many other cities and states, the Boulder lawsuit claims taxpayers shouldn’t bear the full cost of disasters like floods and wildfires. It argues the two defendant companies should share the financial burden after knowingly contributing to climate change and misleading consumers about the risks of burning fossil fuels.

As is the case everywhere else, the companies argue that the cases belong in federal court where they believe they will have a more sympathetic audience. Like everywhere else, the Colorado Supreme Court ruled the lawsuit could proceed within Colorado. The decision returned the case to a lower district court, which had already ruled the lawsuit wasn’t preempted by federal law and belonged in the state legal system. 

BRIGHTLINE RATINGS DIM

Fitch downgraded $2.219 billion of Brightline Florida LLC’s senior secured private activity bonds to BB-plus from BBB-minus and cut Brightline East LLC’s (BLE) $1.1 billion senior secured taxable notes to CCC-plus from B. Both securities have been placed on rating watch negative. It follows news that S&P lowered its outlook on its BBB-minus underlying rating on Brightline Trains Florida LLC’s (OpCo) bonds to negative from stable. Of the $2.2 billion in tax-exempt bonds, $1.13 billion is insured by Assured Guaranty (AGO) and rated AA.

Fitch said “The downgrades to OpCo and BLE debt reflect the weaker than expected ridership ramp up, lower fares, elevated operating costs, and significant spend down of the project’s liquidity accounts. The rating further reflects a number of unanticipated expenses that were not previously reported to Fitch that resulted in material draws on cash balances. Ramp-up is expected to be comparatively longer for Brightline than for other new transportation development projects.

Ridership data to Orlando is limited, complicating the validation of consultants’ long-term forecasts, and initial fares are high relative to competing alternatives particularly to Orlando. Due to slower ridership ramp up, lower fares, and higher operating expense, Brightline ended the year with an operating loss of $63 million.”

S&P notes that “ticket revenue is ramping slower than we anticipated, causing year-to-date revenues as of third-quarter 2024 to lag our base-case forecast by 20%. Notably, for the same period average long-distance fares were 19% lower than our forecast, long distance ridership revenue accounts for about 70% of total ticket revenues in 2024 under our base case. OpCo expenses reported through the third quarter of 2024 are higher than our base case by 7%. We understand additional costs have been incurred in fourth quarter 2024, impairing the balance of the reserves. 

Both agencies see the potential for a serious liquidity crunch in the next 18-24 months.

NEW YORK CITY – RIKERS ISLAND

Federal Justice Laura Taylor Swain (yes, the same judge handling Puerto Rico’s bankruptcy) ordered the City of New York to appoint an outside official to make major decisions regarding the operation of the City’s prison complex on Rikers Island. The official, called a remediation manager, would work with the New York City correction commissioner, but be “empowered to take all actions necessary”. The official would report directly to the judge and would not be a city employee.

The decision comes some ten years after the City settled litigation over conditions at the jails. That settlement resulted in the appointment of a federal monitor who reported on operations. That position was not empowered to make decision, whereas the “manager” is. It is an extraordinary step. Since 1974, federal courts have put only nine jail systems in receivership, not counting Rikers order. In November, the judge found the City found the city to be in contempt for failing to stem violence and excessive force at the facility.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

FEDERAL EXTORTION

The Trump administration and Maine reached an agreement that restored funding for schoolchildren. The U.S. Agriculture Department held up around $3 million, which would pay for food preparation in schools and child care centers, and also assist in feeding disabled adults in congregate settings. The Agriculture Secretary called the funding “wasteful, redundant, or otherwise against the priorities of the Trump Administration.” The state’s attorney general said his office had withdrawn a lawsuit it filed in objection to the funding freeze.

A bill to restore more than $1 billion in funding for Washington, D.C., that Congress blocked earlier this year has stalled in the House. Congress, when it passed a continuing resolution in March, omitted standard language routinely included in appropriations bills to approve the city’s budget. Now it is being held up on ideological grounds as votes are being held back by a bloc of conservatives who want to include new restrictions on voting, abortion and other issues.

The Senate approved a separate bill that would allow D.C. to continue operating under its current budget without interruption. Until the House acts and passes a budget for D.C., Washington was forced to revert to last year’s funding levels, amounting to a roughly $1.1 billion cut halfway through the fiscal year. The holdup has already led to one downgrade of the City’s G.O. rating.

NEW YORK TAKES THE HIT FOR BORDER POLICIES

New York City’s tourism agency, New York City Tourism and Conventions, had had projected a full recovery this year with a record number of visitors after the coronavirus pandemic disrupted travel five years ago. Then the realities of Trump administration border policies began to take hold. The agency has now twice revised downward its initial forecast of 67.6 million visitors — international and domestic — since President Trump began threatening Canada, detaining tourists, and advancing a trade war.

The latest forecast now estimates that 64.1 million tourists will visit the city. That includes 400,000 more domestic travelers than last year, but 800,000 fewer foreign travelers. The new forecast sees 12.1 million international travelers, a 17 percent drop from earlier 2025 projections. That is a direct reflection of the reaction in Canada to threats from the President.

Last year, tourists spent $51 billion in New York City. Spending this year is now forecast to decline by $4 billion. Through April, about 117,000 fewer foreign passengers have arrived at Kennedy International Airport and Newark Liberty International Airport compared with the same period in 2024. The Empire State Building Observatory’s operator said it saw a 4.6 percent decline in people in the first three months of the year compared with last year, adjusting for the shift in the Easter holiday this year. About 50 percent of its visitors are from overseas. 

WHY NOT PUERTO RICO?

One element of the Trump administration’s trade and economic plans is returning manufacturing jobs to the U.S. It is clear that on an overall basis, the administration will always take the low or no tax option. You would think that these plans could be used to help industries which already are here to modernize or expand. That you might concentrate your efforts on places where there is both a need and a framework in place to encourage growth and employment.

That is why it makes less and less sense that the point is not being made as a part of the budget process that Puerto Rico is a great candidate for such help. Much has been made of the country’s reliance on foreign often Chinese sources for up to 97% of some drugs used in the U.S. With all of its problems, Puerto Rico does have a significant drug manufacturing industry. It just does not operate to its full potential because of foreign competition supported by low or no tax policies. When Section 936 ended, there’s a reason the industry moved to Ireland.

Fortunately, not all of it left. P.R. still has 11 of the world’s largest drug manufacturers. Before that tax break ended, it has been estimated that it allowed drug companies to keep the 2022 equivalent of about $235 million per year — or 70 cents for every American annually. Given the totality of the circumstances which impacted the drug industry since 2017, it’s not unreasonable to think that tax and industrial policies could be of some help.

Another issue is the reliability issue of the power system. The existing manufacturing base often has its own provisions for power. The trials of PREPA truly impact the residential customers who would be expected to work at these plants. It reinforces the idea that the PREPA bankruptcy needs to be resolved.

WESTERN WATER

Snowpack is variable across the region, but most of the higher elevations currently have about 80%-100% median snow water equivalent (SWE). Pockets of snow drought are present throughout the region, but are mostly confined to lower elevations. Snow has completely melted 1–3 weeks early at some lower elevations. Persistent snow drought in southern portions of Utah and Colorado and a rapid transition to late-season snow drought in much of northern Utah and Colorado have led to low streamflow forecasts. As a result, Governor Cox of Utah issued a drought emergency order, declaring a state of emergency in 17 counties.

Snow conditions remain dire in southern portions of the upper and lower Colorado River Basin. SWE is currently below median in southern portions of the basin, including in the Upper San Juan (31% of median), Gunnison (36%), Upper Colorado-Dirty Devil (22%), and Lower Colorado-Lake Mead (28%) Basins.

The Upper Colorado Basin as a whole (130 SNOTEL stations) is now at 62% of median SWE. As of April 28, the April-July for runoff into Lake Powell is 3.5 million acre-feet (MAF), or 56% of the 30-year average.

Most recent median water supply forecasts have declined in the Colorado River Basin compared to the April 1 forecasts. This is likely due to dry conditions, rapid snowmelt, and early melt out. Most forecast points in the Upper Colorado Basin indicate 50%-75% of median seasonal runoff, with some locations less than 50%. This will put additional pressure on the Upper Basin states to conserve water above that which they are being asked to make in current negotiations.

OAKLAND

Just days before an interim mayor was expected to release a budget proposal for the biennium beginning July 1, the City of Oakland’s Finance Director announced their resignation. This as the City faces an $89 million shortfall in the current fiscal year, and a $265 million projected structural deficit over the next two-year cycle. The City Administrator who is running the City until the new Mayor takes office this month was expected to release his budget proposal for the next two fiscal years on May 1. 

The Finance Director has been at the center of several highly politicized disputes. In late November we reported that the Finance Director was proclaiming that the City was on the edge of insolvency. This followed disputes over public safety funding and overtime issues. The City clearly faces significant financial issues. It has already taken some steps to address expenditures – 42 employee layoffs and 34 demotions while also temporarily closing two fire stations, cancelling all police-training academies and cutting some $2.6 million in funding for NGOs and a host of other grants and citywide programs.

Lagging revenues from taxes on real-estate transfers and business licenses, along with rising overtime costs for the city’s police and fire departments are cited as the most obvious problems. The outlook on the City’s general obligation rating from Moody’s remains on negative outlook. When the City was downgraded in December, Moody’s said “Governance is a key driver for the rating action given that management has not made sufficient and timely budget adjustments to fully absorb the one-time pandemic relief monies that were used to fund operations, and declining revenue, in particular real estate transfer taxes. As such, the city has reduced its flexibility to address ongoing spending pressures.”

INITIATIVES UNDER ATTACK

Gov. Ron DeSantis signed a law creating new hurdles for citizen-driven initiatives. Under Florida’s measure, voters could be charged with a felony if they collect more than 25 signed ballot petitions, other than their own or those of immediate family members, and don’t register with the state as a petition circulator. Under the law, more people will be banned from collecting petitions, including Floridians with felony convictions who haven’t had their voting rights restored.

Noncitizens and people who don’t reside in Florida will also be prohibited from gathering signatures, in a state with a significant population of part-time workers and foreign-born residents. Floridians will have to provide their driver’s license number, voter ID card number, or the last four digits of their Social Security number in order to fill out a petition. The form will ultimately become a public record.

The legislation as the State is still dealing with a scandal involving a charity run by the Governor’s wife that was found to be spending some $10 million on opposition to two ballot initiatives on the 2024 ballot.  Florida voters supported ballot initiatives to protect abortion rights and legalize recreational marijuana, though not by the required 60% super majority needed to pass.

The efforts to limit or eliminate initiatives takes on some almost comical aspects. New laws in Arkansas will bar initiative ballot titles written above an eighth-grade reading level. And canvassers will have to verify that petition signers have either read the ballot title or had it read aloud to them. In South Dakota, sponsors will need to make sure their petition titles appear in 14-point type on the front page and 16-point font on the back, where people typically sign.

According to a review by The Associated Press, roughly 40 bills restricting or revamping the citizen initiative process have passed at least one legislative chamber this year.

FLORIDA BUDGET FIGHT

A deal was announced between the leaders of the Florida House and Senate to cut taxes by $2.8 billion, including a sizable permanent reduction in the state’s sales tax rate as part of a top-line deal on the budget. Perez said the deal means the budget will be smaller than the one initially proposed by Gov. Ron DeSantis. The House and Senate had been unable to reach an agreement on top-level spending levels and tax cuts before the end of the legislative session. House leadership had proposed a $5 billion permanent cut in sales taxes, while the Senate was seen as urging a more cautious approach and advocated a smaller blend of permanent and one-time cuts.

Bills dealing with property insurance, education, increased minimum wages and loosening child labor laws all failed to be enacted. Mixed in with the fiscal issues were a couple of other controversial topics which the Legislature hoped would escape notice amidst the budget fight. The Legislature has agreed to ease the financial burdens of condominium owners and impose strict new restrictions on ballot initiatives.  

Budget sessions are often highly political – look at New York State. It became clear that the impending gubernatorial election in 2026 was the major obstacle. Overhanging the budget negotiations were questions about a charity – Hope Florida which is run by the wife of Governor DeSantis. He would like her to succeed him. That led to investigations of the charity and its activities fighting ballot initiatives in Florida – not its stated purpose.

HOSPITAL MERGER

In June 2024, Oregon Health & Science University (OHSU; Aa3 stable) and Legacy Health (A1 negative) announced an affiliation agreement. This week, the parties terminated their agreement. It comes before state regulators were able to make a decision on approval of the plan. The Oregon Health Authority (OHA) had heard from a variety of interests including a community advisory board which unanimously asked the OHA to reject the proposal.

Concerns over a rise in insurance costs to patients and a reduction in competition, jeopardizing care quality were big issues. Those factors are raising concerns all over as concentration continues to increase. Unfortunately, most patients feel no positive impact from hospital consolidations. Unsurprisingly, hospital labor opposed the merger as consolidations all over generate staff reductions. One of the issues driving the plan was the cost of paying hospital staff in a post-COVID inflationary environment.

OHSU was the financially stronger and higher rated entity. Legacy is under more financial pressure and is dealing with overcapacity. Those factors made a merger more attractive. Of immediate concern is the potential impact on Legacy’s ratings of the decision not to merge. In December 2024 Moody’s said Legacy’s “A1 rating reflects good business fundamentals, the persistence of favorable liquidity, and the strong possibility that a merger with Oregon Health & Science University (OHSU, Aa3 stable) will be completed by the middle of next year. Now the key factors are “ongoing operational headwinds which may result in operating cashflow margins remaining below 3%-4% through at least fiscal 2026, and debt to cashflow remaining unfavorably high at over 4x.”

HAWAII CLIMATE TAX

Starting Jan. 1, 2026, Hawaii will increase the state’s Transient Accommodation Tax from 10.25% to 11%, Each county may also impose an extra 3% tax. Gov. Josh Green said they all will do so, bringing Hawaii’s total TAT to 14%. The increase was passed in the wake of the Maui wildfires of 2023. It is expected that the incremental tax – “the climate impact fee”, or “green fee,” will generate $100 million annually.

Beginning 7/1/2025, the legislation requires the Governor to request in the executive budget or supplemental budget that an amount of general funds that approximates the additional Transient Accommodations Tax revenue generated by this Act be expended to advance certain climate change mitigation and tourism projects.

HOSPITAL DOWNGRADE

University Hospitals Health System, Inc.’s (OH) (UH) is the second largest health system in northeast Ohio the second largest health system in northeast Ohio. This week, Moody’s downgraded UH to A3 from A2. The system includes an academic medical center, 12 community medical center locations, ambulatory healthcare centers, a large network of physicians, and other healthcare services. Like many others, its recovery from the impacts of COVID and inflation have hampered operating results.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

NEW YORK STATE BUDGET

It took a month after the start of the fiscal year but a roughly $254 billion state budget agreement was announced this week. The budget was delayed while the Legislature debated several non-financial issues. Primary among them was changes to New York State’s very strict limits on involuntary psychiatric commitment. Another was an all-day ban on students having cellphones in schools. The agreement also eases so-called discovery requirements on how prosecutors hand over evidence to criminal defendants in the pretrial phase.

The budget proposal called for New York to spend $17 billion more than last year, made possible in part after state officials disclosed that tax revenues and the state’s general fund closed the fiscal year with billions more dollars than expected. The framework agreement with the Legislature included the governor’s proposed child tax credit of up to $1,000 for families with a child under 4, but the refund was scaled back. Now about $2 billion will be devoted to the program, with New Yorkers receiving between $200 and $400, depending on their income. The budget agreement maintains the tax cut but includes an increased payroll levy on companies with more than $10 million in revenue.

The Metropolitan Transportation Authority will get $68.4 billion over the next five years as part of a state budget agreement. Full details on how the state intends to pay for the plan — largely with an increased rate on an unpopular business tax — are not yet clear. Some $30 billion of the capital plan will be paid for with an increase to the payroll mobility tax, an unpopular levy on businesses in New York City and surrounding counties that use mass transit. Companies with a payroll of over $10 million will shoulder a higher rate while the tax on smaller businesses will stay the same or decrease.

The M.T.A. expects to spend $10.9 billion to buy roughly 2,000 new rail cars, an order that will include 1,500 subway cars and more than 500 for the Metro-North and Long Island Rail Road.  $3.3 billion will buy and support 2,261 new buses.

It will spend $1.1 billion to install modern fare gates at 150 stations to prevent fare evasion. The M.T.A. said it lost close to $800 million in fare and toll evasion last year.

About $1.2 billion that would have been used for the reconstruction of Pennsylvania Station will instead be applied to other transit projects, now that the Trump administration has declared it will take the responsibility to manage and finance the Pennsylvania Station project.

STATE OF THE STATES

The effort to enact a budget for Federal Fiscal Year 2026 is likely to hinge on one or two items which Congress will attempt to offload onto the states. Primary among them is Medicaid. There will be efforts to lower the federal share of Medicaid expansion under the ACA. If the cut is large enough, some 10 states would see participation in the expansion cut back as automatic triggers related to the size of the federal share would kick in.

The moves to cut Medicaid will not just seek to reduce fiscal pressures on states. In several cases, states where Medicaid expansion occurred did it pursuant to voter initiatives. It is a clear effort to override the popular will. If it succeeds, states will benefit in the narrow sense that fewer people will be covered requiring less expenditure. What it also brings is a return to a model that everyone acknowledges was broken in terms of healthcare for the uninsured. This will increase demand for more assistance to institutions for care of the indigent from the state to the healthcare system.

The federal drama will unfold just as most of the states begin a new fiscal year. The potential for difficulty is clear. NY Gov. Hochul acknowledged the uncertainty associated with ever changing federal policy in announcing the budget agreement. That is a factor that many states will have to anticipate. The key to state budgets in fiscal 2026 will be flexibility. If the federal cutbacks go through and the economy continues to underperform, midyear adjustments will be required.

NEW YORK CITY BUDGET

It takes a while to get past the campaign literature portion of Mayor Eric Adams’ proposed FY 2026 budget. The “biggest, best budget ever” is $115.1 billion, with gaps of $4.6 billion in FY27, $5.8 billion in FY28, and $5.7 billion in FY29. Tax revenue is expected to have increased by nearly 8 percent in FY 2025, driven by growth in income and business taxes. As the economy slows, growth is forecast to decline to around 1 percent in FY 2026. This results in an upward revision over the FY 2026 Preliminary Budget of $1.7 billion in FY 2025 and $1 billion in FY 2026.

The FY 2026 Executive Budget maintains $8.5 billion in reserves, including $1.2 billion in the General Reserve, $5 billion in the Retiree Health Benefits Trust Fund, $250 million in the Capital Stabilization Reserve, and a record level of $2 billion in the Rainy-Day Fund. This represents no increase in reserves to offset the potential impacts of federal funding reductions.

Given the erratic nature of federal policymaking observed over the first 100 days, the assumption that that process has reached a conclusion is a bit dangerous. “In addition to rising recession risk, the city has not changed its assumptions for the receipt of federal funding to reflect the potential impact of recent federal actions, as many of these actions are litigated, leaving it vulnerable to choices made in Washington,” said Thomas P. DiNapoli, the state comptroller. 

PRIVATE EQUITY AND HOSPITALS

The role of private equity in the not for profit healthcare sector is receiving increasing negative attention as the impacts of its management of facilities, especially hospitals is resulting in financial turmoil. Last week, we discussed the end of operations of two hospitals in PA which were “turnaround situations”. They resulted in neither improvement nor asset sales.

Steward Health Care is another PE entity that thought it could build a better mousetrap and turnaround regional hospitals that did not offer all acute care services. They did it while also loading debt on to the balance sheets. Steward operates 31 hospitals across eight states — Arizona, Arkansas, Florida, Louisiana, Massachusetts, Ohio, Pennsylvania and Texas. One of its Pennsylvania hospitals – Sharon Regional Medical Center closed in January and was only recently reopened by its new owners Tenor Health Partners.

Tenor is owned by R2 Power Investments, a private equity firm headquartered in Pasadena, California. Tenor bills itself as a turnaround firm for financially struggling hospitals. Steward continued to work with Tenor to finalize a deal after the hospital shut its doors. The health system received court approval to purchase shuttered Sharon Regional Medical Center for $1.9 million on Jan. 10.

Steward had gained notoriety for the financial distress at Massachusetts hospitals purchased from the Catholic Church in Boston. Steward Health Care closed some facilities after what can only be described as a failed buyout strategy in acquiring hospitals. Other facilities are being sold. St. Elizabeth Medical Center in Brighton has been rebranded as Boston Medical Center — Brighton, while Good Samaritan Medical Center in Brockton is now Boston Medical Center — South. BMC Health System assumed operations of the two hospitals on October 1, 2024, after Steward Health Care sold the facilities.

CLIMATE LITIGATION

The Maryland Supreme Court will decide whether three climate change lawsuits are preempted by federal law. The Court will review Baltimore City, Annapolis and Anne Arundel County’s lawsuits against more than two dozen fossil fuel companies, agreeing to hear a host of issues in the consolidated appeal that previously had been rejected by federal courts. Primary among them is that some of the companies’ production occurred on federally regulated areas offshore which would preclude state regulation.

The Court is set to decide four issues from appellants’ petition. They are whether the U.S. Constitution and federal law preempt and preclude state law claims seeking redress for injuries allegedly caused by the effects of out-of-state and international greenhouse gas emissions on the global climate; whether Maryland law precludes nuisance claims based on injuries allegedly caused by the worldwide production, promotion and sale of a lawful consumer product.

It will also decide whether Maryland law precludes failure-to-warn claims premised on a duty to warn every person in the world whose use of a product may have contributed to a global phenomenon with effects that allegedly harmed the plaintiff; and whether Maryland law precludes trespass claims based on harms allegedly caused by global climate changes arising from the use of a product by billions of third parties around the world outside of a producer’s control.

In January, an Anne Arundel County Circuit judge dismissed a pair of lawsuits by Annapolis and Anne Arundel County, citing the reasoning presented in a July 2024 Baltimore City Circuit Court ruling that determined similar claims by Baltimore City are preempted by federal common law and therefore cannot survive. That decision is an outlier.

But federal courts have so far ruled there was no valid basis to remove the cases to federal court. In February 2024, a panel of 4th Circuit judges in the Annapolis and Anne Arundel County cases found federal removal was not proper; in April 2022, a 4th Circuit panel found the same in the Baltimore City case. In April 2023, the U.S. Supreme Court denied the city’s petition for certiorari.

The U.S. Department of Justice in a pair of lawsuits argued that recent laws New York and Vermont adopted requiring oil companies to contribute billions of dollars into funds to pay for damage caused by climate change were unconstitutional. The Justice Department filed those cases one day after it launched two preemptive cases seeking to stop Hawaii and Michigan from filing planned lawsuits against major oil companies over climate change, cases the administration said would imperil domestic energy production. DOJ cited an executive order that the President signed on his first day back in office on January 20, declaring a national energy emergency to speed permitting of energy projects

GRANT CUTS

The scale of the continuing effort by the Trump administration to dictate university conduct through the withholding of grant monies for research is becoming clearer. A recent analysis at the Kaiser Family Foundation (KFF) shows how significant and comprehensive the effort has been.

KFF Health News found that the NIH terminated about 780 grants or parts of grants between Feb. 28 and March 28 KFF Health News found that the NIH terminated about 780 grants or parts of grants between Feb. 28 and March 28 of this year. Some grants were canceled in full, while in other cases, only supplements — extra funding related to the main grant, usually for a shorter-term, related project — were terminated.

Among U.S. recipients, 96 of the institutions that lost grants in the first month are in politically conservative states including Florida, Ohio, and Indiana, where Republicans control the state government or voters reliably support the GOP in presidential campaigns, or in purple states such as North Carolina, Michigan, and Pennsylvania that were presidential battleground states. An additional 124 institutions are in blue states. Columbia University had more grants terminated than all organizations in politically red states combined.

Montana is one of 23 states, along with Puerto Rico, that are eligible for the NIH’s Institutional Development Award program, meant to bolster NIH funding in states that historically have received less investment. Congress established the program in 1993. The NIH’s grant terminations hit institutions in 15 of those states, more than half that qualify, plus Puerto Rico.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.