Build America Bonds are the fastest-growing segment of the nearly $3 trillion muni bond market. Have they been priced too cheaply, benefiting investors at the expense of taxpayers? Are bank fees charged for selling the bonds too high? The New York Times’ article “Stimulus Bond Program has Unforeseen Costs” examines what’s going on with the bonds, why banks are now expressing doubts about them, and why the IRS is looking into the situation.

CNBC noted the next day that the U.S. Treasury was displeased by the NYT article. See the CNBC article for the full Treasury letter to the Times.

Meanwhile, Bloomberg Business Week reports that Massachusetts has used a similar stimulus program, the Qualified School Construction Bonds, to borrow more than $150 million at interest rates nearly a half-percent lower than Build America Bonds. “The federal government,” Bloomberg Business Week helpfully explains, “subsidizes as much as 100 percent of the interest costs on the school debt and a fixed 35 percent on Build Americas.”

States will be forced to make even further programmatic cuts or increase taxes if the federal government does not extend enhanced Medicaid matching funds, according to a new report from the Center on Budget and Policy Priorities. An extension had seemed to be in the works, leading many states to include that money in their FY2011 budgeting. But the U.S. House of Representatives dropped the extension from its May jobs bill. The Senate is considering a bill which includes the extension. The CBPP paper also provides an interesting look through the specific cuts that states might enact if the money doesn’t materialize—and the consequent effects that could ripple through the economy.

Note also the June 9th blog post on the topic of extended Medicaid enhancement as a bridge to health care reform by our colleagues at the Implementing Health Care Reform blog.  

States got somewhat more buy-in from local teachers’ unions in Round Two of the Department of Education’s Race to the Top, according to an Education Week analysis. One particularly interesting point:  “Even with greater union backing, states didn’t appear to garner the additional support by substantially weakening [the reforms in] their applications.” writes Michele McNeil, the article’s author. The article also describes specific changes states have made in order to foster more union buy-in and new laws that tie teacher compensation to student performance.

A New York Times article, “Studying Engineering Before They Can Spell It,” provides some interesting insights into kindergarten-class attempts at basic engineering and the upsides and downsides of some of the science-, technology-, engineering-, and math-oriented educational curricula favored by the Race to the Top competition.  Are there educational gains from having kindergarteners design wolf-impervious model homes for the Three Little Pigs? Or is it just a waste of limited school time and resources, albeit an undoubtedly cute one?

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