Above The Fold 05.26.09

States look to use the Fed’s blow-dryer to unfreeze municipal bonds…DMV workers want you to be as unhappy as they are…Companies, banks fear the tax man’s wrath, regardless of which state he hails…High-tech id cards on the minds of medical-marijuana patients in California, among other things…The fall of auto dealers adds to toxic stew that is state economies…Airport travelers tired of walking to hotels  downtown…Do you want health insurance, your job, or none of the above?

The $400 billion municipal bonds market provides short-term financing to towns and cities across the coutry, but they’ve been frozen since the fall of Lehman Brothers. And now state and local officials are looking to Congress for help. Barney Frank, chairman of the House Financial Services Committee, is drafting legislation that would involve the Federal Reserve, and potentially the Treasury’s bailout money, the New York Times reports. “The municipal sector has been asking for federal assistance since TARP was just a glimmer in Hank Paulson’s eye,” said Matt Fabian, managing director at Municipal Market Advisors, an independent research firm. “But no one was pursuing it for months. Now, there has been a re-engagement in Washington about using the TARP money.” Perhaps most adamant about getting the muni-bond market unfrozen is California who is looking at a multi-billion dollar budget gap over the next two years.

“Neutral facial expressions” policies are on the rise, USA Today reports, and they are required at departments of motor vehicles (DMVs) in Arkansas, Indiana, Nevada and Virginia. The problem is that face-recognition software, which is used by DMVs to compare a new license photo with others that have already been shot to avoid identity fraud, has trouble matching two photos of the same person if facial expressions differ in each photo. Thirty-one states do computerized matching of driver’s license photos and three others are considering it, says the American Association of Motor Vehicle Administrators. And in Illinois, photo matching has stopped 6,000 people from getting fraudulent licenses – that’s no laughing matter. A related story also comes from today’s USA Today – a more serious look and a quote from Frank Abignale, of Catch Me If You Can fame. Don’t miss it, click here.

BusinessWeek reports that traditional tax-haven states may adopt legislation that will start tapping companies for more money – even if they are outside their boundaries. “The states are turning over every rock for money,” says Richard D. Pomp, a professor at the University of Connecticut School of Law. “If they haven’t been looking at the issue, they will.” The test case involves Massachusetts and Capital One Financial. The Massachusetts Supreme Judicial Court ruled in March that since the bank made so much money from cardholders who lived in Mass., the state was entitled to $2 million in taxes, despite the fact Capital One didn’t have a branch or office in the state. Cap One is appealing to the U.S. Supreme Court but they’re only one of dozens of potential companies who could be hit with a tax notice. But, Washington (D.C.) attorney Donald Griswold, who represented MBNA in a similar matter says, “there’s a snowball’s chance in hell” the Supreme Court will hear Cap One’s case.

High-tech identification cards are on the minds of medical-marijuana patients in California, among other things, the San Diego Union-Tribune reports. Marijuana remains illegal under federal law. Even though marijuana is permitted for medicinal use in California, the state law is vague about how patients may access or transport the drug. “It’s not a complete remedy, but it will help quite a bit,” said Rudy Reyes, who became an advocate of medical marijuana after being severely burned in the 2003 Cedar fire. “Right now the local cop is literally allowed to come after me and say, ‘You’re no better than a recreational user’ because I don’t have a card.”

The closing of nearly 2,000 automobile dealerships will add a new layer to the crisis facing state budgets, Stateline.org reports. State and local governments rely heavily on car sales taxes and licensing fees. For example, in California, one-fifth of the state’s sales tax revenue is from new and used cars. And in Michigan the loss of 20,000 hourly jobs in the automobile sector could cost the state $600 million in revenue. “This jobs crisis goes deeper than auto companies and assembly workers in Detroit,” Leo Gerard, president of the United Steelworkers, said. “Reducing U.S. auto manufacturing drives down overall employment, from the people who make auto catalogs and shipping boxes to workers making glass for windshields, rubber for tires and other materials.”

A real brainy idea is being implemented at more airports across the country: adding rail service to downtown. USA Today reports that with increased traffic and a growing number of shuttles, airports are connecting passengers from the terminals to regional metro-rail systems. “There is a consensus building that this is a desirable piece of overall strategy to deal with ground transportation challenges,” says Matthew Coogan, director of New England Transportation Institute who has written extensively about the subject. However, funding in most regions is scarce. So many projects at airports like Denver, San Francisco and Dallas may be years away from completion.

Health care is getting the pinch from small firms as increased health-care premiums and sharp revenue shortfalls continue to bare down on U.S. small business. According to the Wall Street Journal many small businesses are having to choose between cutting health insurance, laying people off or both. Using a recent survey by the National Small Business Association, about 10% of small businesses are considering eliminating coverage over the next year. “You want to attract good talent and benefits are important for that,” says one small business-owner, Kelly Reeves.

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