Marty Margolis, founder of the predecessor company to PFM Asset Management, has launched the Public Funds Investment Institute, a "nonprofit organization dedicated to empowering public funds participants in the $​4 trillion public funds investment market with insights, tools and resources to help them make well-​informed investment decisions." One of the former local government investment pool (​LGIP) manager'​s first posts is the piece, "Public Sector Financial Assets Continue to Grow, Even as the Economy Slows." Margolis writes, "Covid-​19 revenue and spending patterns fueled strong growth in public funds investment balances over the past several years, and recent Federal Reserve data show that investment balances continued to expand this year to $​3.​7 trillion as of March 31, 2023. The data is buried in a 200+ page quarterly report on Financial Accounts of the United States from the Federal Reserve, and although it has some significant limitations ... it is the best there is when it comes to accounting for public sector investment trends." He comments, "Here'​s what we'​ve seen in the past several years: Aggregate cash and investment balances grew by $​855 billion, or 32%, from 2019-​2021 as the Covid-​19 lockdowns delayed state and local government spending, and Federal Covid relief funds swelled state and local government balances. Interestingly, the Pew Foundation Federal Pandemic Project estimated total Federal aid to state and local governments for Covid relief to be about $​800 billion so this might account entirely for the growth. Balances stabilized in 2022 but continued to grow in the first quarter of this year. Investment assets grew about 3% in the first quarter of 2023. This is surprising. Though Federal Covid relief payments have largely ended, American Rescue Plan Act funds are being spent by states and localities, and overall economic growth is slow. Other factors -- including high interest rates that generate much higher investment returns -- swelled portfolios by $​124 billion over year-​end to $​3.​7 trillion. (​The figure is not seasonally adjusted but 3% in a quarter is a hefty annual rate.) The growth could be reversed in coming months as state and local governments continue to spend Federal Coronavirus relief funds before the 2026 deadline. And an economic downturn would depress tax and other revenue receipts and push up the costs of social and economic aid programs, drawing down investment balances."

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