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Local governments sometimes look to investment earnings to compensate for declining revenues. Adhering to established investment policies can help ensure that they don't compromise the safety of public funds in the process.
The historically low interest rates caused by the Federal Reserve's aggressive efforts to minimize the effects of the most recent recession have created a serious dilemma for local governments. Already confronted by substantial budget gaps because of declining tax revenues, eroding interest earnings from investments have further exacerbated fiscal woes. Faced with the same problem in the early 1990s, some governments tried to compensate for ...