The Securities and Exchange Commission voted 3-2 on July 23 to finalize a set of new rules governing Money Market Mutual Funds (MMMFs) that is set to go into effect in 2016. The rules require that MMMFs adopt a floating net asset value, giving up their previously fixed $1-per-share value. The SEC also imposed liquidity fees and redemption gates on the funds. The SEC vote comes in spite of opposition from ICMA, GFOA and state and local governments, as well as many within the business sector. The coalition believes that the reforms of MMMFs will place considerable financial and administrative burdens on state and local governments.

MMMFs are the largest investor in short-term municipal bonds, holding 80 percent of all outstanding short-term bonds totaling over $350 billion. State and local governments depend on the sale of these bonds to build and maintain schools to support an educated workforce; to build roads, public transportation systems, and airports; all of which are essential for supporting commerce. They also help to address the country’s water infrastructure, public utilities, health care and affordable housing needs, as well as provide public safety infrastructure that ensures local and national security.

Changing the net asset value from fixed to floating makes MMMFs far less attractive to investors. Losing this vital investing power will lead to higher debt issuance costs for many local governments across the country. These increased costs will either be borne by taxpayers, or will result in the delay or cancellation of much-needed infrastructure projects that would have otherwise helped drive and support national economic output.