Posted on Friday, September 8, 2023

By Marc Joffe, Senior Policy Analyst, The Cato Institute

The Financial Data Transparency Act (FDTA) promises to provide municipal bond investors with standardized financial data for counties, cities, and special districts that issue debt securities. Rather than work through voluminous PDF financial statements, investors would be able to quickly access standardized data facilitating peer comparison and credit analysis—if FDTA is implemented effectively.

Some municipal market leaders have expressed concerns about the ability of local governments to comply with FDTA requirements. They may gain reassurance by looking at state-level reporting systems: local governments in eighteen states are already providing fielded financial statement data to a state auditor, controller, or treasurer. Among the states that have local government financial data reporting requirements are Illinois, Pennsylvania, California, and Ohio:  four of the five states with the largest number of local governments according to Census data. The full list of states requiring structured data submissions is in the accompanying table. It is likely that over half of the governments affected by FDTA already file structured data at the state level.

State Link to Local Government User Guide Link to View Data State Link to Local Government User Guide Link to View Data
California Guide Data Missouri* Guide Data
Florida Guide Data Nebraska Guide Data
Georgia Guide Data New York Guide Data
Illinois Guide Data North Carolina Guide Data
Indiana Guide Data Ohio Guide Data
Iowa Guide Data Pennsylvania Guide Data
Louisiana Guide Data Rhode Island Guide Data
Massachusetts Guide Data South Carolina Guide Data
Michigan Guide Data Washington Guide Data
 * to access Missouri Guide, save and open with Adobe Reader; the file may not open in a browser window

State agencies typically accept submissions from various types of local governments—not just cities and counties. In some cases, they provide specialized input sheets and instructions for different categories of government. For example, North Carolina has specialized data entry templates for utility authorities, airports, health districts, housing authorities, and libraries among others. State agencies that have considered the varying data points relevant to special purpose government should be well positioned to contribute to the XBRL taxonomy or taxonomies required for FDTA implementation.

In most cases, local governments meet their state reporting requirements by filling out online forms at a state agency portal. Some states accept the data as a file upload, usually in Excel format. Florida gives local governments three options: (1) enter the data online, (2) upload an Excel file, or (3) upload a file in Inline eXtensible Business Reporting Language (iXBRL) format.

Most of the state oversight agencies also require local governments to upload their audited financial statements in PDF format. As a result, local governments are often providing the same data points to the state agency twice: once in the financial statement PDF and again via website input or Excel upload. The result is both extra work and potential reconciliation issues.

Inline XBRL can eliminate this redundancy because it is a format that supports both human- and machine-readability. An iXBRL file looks like a web page and can include images and advanced text formatting like any HTML page. And, because key data points withing the HTML page are XBRL-tagged, they can be easily extracted by the state agency to provide standardized reporting and oversight.

Ideally, federal and state bodies would agree on a single XBRL reporting taxonomy that would meet the need of both municipal bond investors and state overseers thereby allowing all entities within a given state to meet all of their financial filing requirements by producing a single Inline XBRL instance document.

State experience suggests that gathering structured financial data from a wide array of local governments is a surmountable challenge. Federal regulators may benefit by consulting with state oversight agencies as they think about how to implement FDTA.