Feature

Alumna Q&A: On Public Finance and the Economy

Sara Press, MPP'06, visited the Harris School last month with State Farm colleagues (including fellow alum Matt Harvey, MPP'08) for a Career Services information session on the company and its summer internship program. Press, an investment analyst at State Farm's home office in Bloomington, Illinois, sat down with eViews to talk about her work, the current economic crisis, and advice for students.

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Q. Can you explain what you do at State Farm?

A. My job involves analyzing municipal bonds, which fund local government infrastructure and improvement projects, to help State Farm decide where to invest. Through our own independent analysis, we look at the long-term financial needs of governments and the inherent credit risks involved. Given that State Farm may invest in bonds maturing in 15 to 20 years, our focus is on the enduring stability of a municipality. This is an ongoing process so most of the projects I work on revolve around research pertaining to overall credit trends and portfolio management.

Q. How do you think the current economic crisis will affect your industry?

A. The economy has put a lot of stress on municipal credits. During this rough environment, we will likely see great variance on how municipalities will handle the problem, and I expect to see a widening divide between winners and losers in terms of credit quality. This is already beginning to happen with the large deficits many states and local governments are projecting, complicated by revenues coming in under their forecasts. With the growing cost of benefits for employees and continued need for infrastructure renovation, many government entities will be faced with hard financial decisions in the next few years. This is especially true as housing prices fall and sales taxes decline, creating a lag for revenue that will most likely grow larger into 2010.

Q. What is the state of public infrastructure projects in Chicago and/or Illinois? Are either a risky investment?

A. As highlighted in the recent priorities outlined by the Obama administration, public infrastructure throughout the country [needs investment] due to its historical neglect. This is an added expense in a time of decreasing revenues that will put pressure on municipalities. All major cities will face massive infrastructure maintenance realities.

On a relative basis, Chicago may actually be in a better situation due to [previous] funding of its projects, but it still faces a serious challenge. States, like Illinois, are facing infrastructure needs, along with major pension and retiree benefit [demands], that remain unfunded. This is a focus for many analysts because accurate information and disclosure on these can be difficult to obtain.

Q. Why are policy students good candidates for public finance jobs?

A. Due to their knowledge of government projects and financing, policy students are great candidates for public finance. In particular, the Harris School does an impressive job of teaching students economics and statistics in the core coursework. Accounting and other skills can be learned on the job.

Q. What's your advice for students looking for a job in the financial industry in this economic climate?

A. Students . may be fighting an uphill battle, but it is still an obtainable goal. I think that relevant coursework in finance and accounting shows real interest in the field, as well as an internship, even if unpaid. In an environment like this it also helps to be flexible in your expectations of a job. Many different opportunities still exist where you can gain experience and contacts that aren't in the [typical circles] of finance and investment.