The Trump administration’s attacks on federal government workers will disproportionately harm veterans and their families. Nearly 900,000 civilian federal employees are either veterans, spouses of veterans, or spouses of active military, representing 30% of the entire federal government workforce.

Federal government employees are disproportionately likely to be veterans due to federal government hiring preferences. Table 1 shows that currently 758,300 civilian federal government workers are veterans, about 25% of federal employees based on January 2025 employment counts. Since there are about 7.3 million employed veterans, it follows that one out of every 10 employed veterans works for the federal government.

The federal government also employs nearly 250,000 spouses of veterans and spouses of active military. Together, the civilian federal government workforce consists of 895,900 veterans and spouses of veterans or active military. (Some federal government employed veterans are also spouses of veterans.)

Table 1

Cuts to federal employment will affect veterans in every state. Table 2 shows that in five states—California, Florida, Maryland, Texas, and Virginia—Trump administration cuts to federal employment could affect more than 50,000 employed veterans and spouses of veterans. Even in the least populous states, more than 1,000 veterans and veteran spouses are at risk of losing their jobs. Table 3 shows federal worker employment counts by congressional district.

Table 2

Table 3

Methodology

This analysis reweights the American Community Survey (ACS) public-use microdata to match external sources for the total counts of federal government employment and shares of veterans among federal workers. Without reweighting, the tabulations from the ACS would overreport the number of federal government workers and underreport the share of veterans in federal government employment. 

First, I construct congressional district identifiers in the five-year 2019–2023 American Community Survey microdata provided by IPUMS-USA by allocating the public-use microdata area identifiers to congressional districts using the population allocation provided by Geocorr 2022. Then, I reweight the non-United States Postal Service (USPS) federal government sample to match the distribution of broad age, education, gender, veteran, and race categories in federal employment tabulations provided by FedScope. With these data, I calculate veteran and veteran spouse shares of federal employment within each congressional district and then multiply the shares by previously published estimates of total federal government employment by congressional district available here. The latter source of data are Census published tabulations from the 2023 ACS of federal government employment, uniformly scaled to match January 2025 Bureau of Labor Statistics Current Employment Statistics (CES) estimates for total federal government employment. The tables suppress veteran counts when the ACS sample size for federal employment is less than 400, or when the weighted count itself is less than 100. All values are rounded to the nearest hundred.

Below, EPI economists offer their insights on the jobs report released this morning, which showed 151,000 jobs added in February. 

From EPI senior economist, Elise Gould:

Read the full thread here.

You might expect a negative #NumbersDay in this jobs report because of reported layoffs in and out of the government, but, it hasn’t shown up in the data yet. Unfortunately, this is the calm before the storm as trouble is clearly brewing and the pain will be felt across the economy in coming months.

— Elise Gould (@elisegould.bsky.social) March 7, 2025 at 7:33 AM

Jobs #NumbersDay highlights:
– Employment rose by 151,000 in February, just shy of the 168,000 average over the prior twelve months
– Nominal wage growth increased 4.0% over the year
– The unemployment rate ticked up to 4.1%
– The labor force participation rate fell 0.2 percentage points

— Elise Gould (@elisegould.bsky.social) March 7, 2025 at 7:47 AM

All eyes are on the latest #NumbersDay data to see the fingerprints of the recent federal layoffs. It’s too soon to see much, but here are recent trends in federal jobs for perspective. Ignore the large swings in Census taker employment. In February, we see an initial loss of 10,000 federal jobs.

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— Elise Gould (@elisegould.bsky.social) March 7, 2025 at 8:14 AM

As with much of the last few years, job growth in February was strongest in health care and social assistance. Proposed cuts to Medicaid and other social programs could seriously hamper not only employment in these areas but also the valuable services they provide.

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— Elise Gould (@elisegould.bsky.social) March 7, 2025 at 8:21 AM

Nominal wage growth continues to hold steady, rising 4.0% over the year. After falling steadily since its peak in June 2022, inflation has hovered around 3% for 20 months. As a result, average real wages have been rising. These gains could all be lost with the proposed tariffs and deportations.

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— Elise Gould (@elisegould.bsky.social) March 7, 2025 at 8:41 AM

From EPI president, Heidi Shierholz: 

Read the full thread here. 

We will start seeing the real impact of federal worker layoffs next month—not only reducing overall employment but undermining essential public services, making communities less safe, less healthy, and less economically stable. 5/

— Heidi Shierholz (@hshierholz.bsky.social) March 7, 2025 at 7:58 AM

And, we will likely start seeing job losses not just among federal workers, but from private sector workers who work at private sector firms who receive federal contracts (note: this is a much bigger group than federal workers). 6/

— Heidi Shierholz (@hshierholz.bsky.social) March 7, 2025 at 7:58 AM

Further, many other data sources are now starting to flash yellow/red. Stock markets are down, treasuries are down, consumer sentiment is down, inflation expectations are up, and measures of economic policy uncertainty are through the roof. 7/

— Heidi Shierholz (@hshierholz.bsky.social) March 7, 2025 at 7:58 AM

We will likely start to see private sector losses due to the chaos and instability the administration is sowing, as firms may hold off on investments and hiring, given the uncertainty. 8/

— Heidi Shierholz (@hshierholz.bsky.social) March 7, 2025 at 7:58 AM

A pull back in business investment triggered by policy uncertainty, combined with draconian budget cuts, could create a drag on demand that is too big to for the fed to handle, tipping us into recession later this year. 9/

— Heidi Shierholz (@hshierholz.bsky.social) March 7, 2025 at 7:58 AM

Unlike with the pandemic recession, if we have an economic crisis right now, it will have been entirely this administration’s doing. They will have taken an historically strong economy and tanked it with chaotic mismanagement and cruelty. 10/

— Heidi Shierholz (@hshierholz.bsky.social) March 7, 2025 at 7:58 AM

From EPI economist, Hilary Wething:

A key thing to think about when interpreting jobs numbers is the timing of Trump policies. Next month, we are sure to see the impact of federal layoffs in the economy, but there are other, slower moving but certainly harmful policy trajectories to watch out for. 1/

— Hilary Wething (@hilwething.bsky.social) March 7, 2025 at 8:25 AM

Immigration, tariffs, and Medicaid cuts all will have ripple effects throughout the entire economy. For more about Medicaid’s impact specifically, check out a new report I wrote with @joshbivens-econ.bsky.social & @moniquemorrissey.bsky.social www.epi.org/publication/…

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— Hilary Wething (@hilwething.bsky.social) March 7, 2025 at 8:25 AM

In recent decades, local governments have stepped up to tackle some of the most pressing economic challenges of our time, including raising minimum wages, developing popular paid leave programs, and ensuring that public contracts lead to good jobs and stimulate local economic development. Local action to raise wages or strengthen labor standards has often been motivated by state and federal inaction in the face of stagnating wages and growing income inequality. Many such local policy innovations have in turn served as important models for popular new state legislation and for the inclusion of important labor standards in major federal laws, such as the Bipartisan Infrastructure Law and Inflation Reduction Act.

At the same time, the ability of local policymakers to innovate and address local economic conditions has increasingly faced obstruction from state legislatures through the abusive use of preemption—state laws that block, override, or limit local ordinances on workers’ rights.

For nearly a decade, the Economic Policy Institute has tracked the spread of state laws that preempt workers’ rights and limit local democracy. New updates to EPI’s workers’ rights preemption tracker document the most recent legislative changes and point to both troubling and promising developments:

• Following a significant wave of copycat laws enacted in the early to mid-2010s, harmful state preemption laws have continued to spread to new geographies and issues. Though the pace of legislatures adopting new laws preempting local worker rights policies has slowed, the spread of preemption to other areas of local policymaking has only accelerated.
• A longstanding trend of lawmakers in majority-white state legislatures obstructing local policymaking in majority-Black-and-brown communities has intensified in a few states, with sweeping “Death Star” bills that attempt to strip local control across a stunningly broad array of policy areas.
• In a few recent instances, advocates have succeeded in reversing or resisting harmful state preemption laws, and recent workers’ rights ballot initiative victories continue to demonstrate that preemption laws blocking popular labor rights policies are counter to the democratic will of voters.

Abusive state preemption continues to deepen inequality for all workers, and especially widens racial and gender wage and wealth gaps

As EPI’s tracking map shows, abusive preemption of workers’ rights is most prevalent in the South followed by the Midwest, in states where conservative lawmakers have long used preemption to stifle local government action, often under pressure from corporate interests and right-wing groups like the American Legislative Exchange Council.

In two previous reports, EPI has documented that preemption laws have a disproportionate effect on workers of color, women, and immigrants and deepen economic and racial inequality. In some states, preemption laws passed by majority-white legislatures have targeted the democratic authority of cities with majority-Black populations. For example, in 2016, the Alabama state legislature blocked a minimum wage increase in the city of Birmingham, where 69.2% of residents were Black. By contrast, Alabama’s state legislature at the time was 75% white.

In many cases, cities with higher poverty levels attempt to pass legislation with poverty-reducing effects, but their efforts are thwarted by the state legislature. For example, in 2015, Kansas City and St. Louis—cities with significantly higher poverty rates than the state as a whole— attempted to address poverty among low-wage workers by increasing their local minimum wage, but the state preempted the increase.

New updates to EPI’s worker rights’ preemption tracker show these trends accelerating and expanding to new policy areas in some states.

State preemption of workers’ rights expanding to new issues and geographies

Our workers’ rights preemption tracker includes legislation enacted in additional states over the past two years, plus a new tab to capture state laws that have initiated a new trend of states blocking adoption of local heat standards—laws designed to protect workers from extreme heat.

Heat standards

When Texas—a state where workers across myriad industries face regular, dangerous exposure to extreme heat—failed to pass a state-level heat standard, local leaders worked to fill the gap. Lawmakers and advocates in both Austin and Dallas have long recognized the vital need to protect vulnerable workers from heat exposure; both cities passed their own heat standard ordinances mandating water and shade breaks for construction workers more than a decade ago. Dallas’s law has protected workers since 2015 and Austin’s since 2010. In Florida, another state with sweltering summers and limited worker protections, Miami city officials proposed a similar ordinance in 2023. Without heat standards, workers can be forced to labor in extreme temperatures without necessary periodic access to water, shade, or breaks to prevent increased risk of heat illness, heat stroke, or even death.

In addition to outdoor workers like farmers and construction workers who are exposed to extreme temperatures, many indoor laborers in animal processing, manufacturing, warehouses, and similar occupations work in facilities without climate control or where temperatures are elevated further by industrial ovens or blast furnaces.

Unfortunately, local efforts to enact worker heat protections were blocked in both Texas and Florida. Texas is the state where the highest number of workers die from high temperatures: Between 2011 and 2021, at least 42 workers died in Texas from environmental heat exposure.  Despite this, lawmakers have not only refused to pass a state-level heat standard, but in Texas they went so far as to pass a sweeping preemption law in 2023 that nullified Austin and Dallas’s long-standing measures and prevented similar future efforts. Similarly, the Florida state legislature passed HB433 in 2024 prohibiting all municipalities from enacting worker heat protections and overruling Miami’s proposal.

While the Occupational Safety and Health Administration has proposed a federal heat standard, the rule is unlikely to be finalized under the new Trump administration. Though two states preempt heat standards at a local level, the vast majority do not. Between a federal government committed to rolling back protections for workers and a global climate crisis that continues to exacerbate extreme temperatures, state and local governments must be the ones to address this critical occupational safety problem.

“Death Star” bills

The new Texas law blocking heat standards was sweeping in scope—representing the most recent instance of so-called Death Star preemption bills. These vague, wide-reaching bills are aimed at preempting local control across a broad range of policy areas, often including any and all laws related to workers’ rights and job quality. In 2023, for example, Florida passed broad preemption legislation that allows businesses to sue local governments and immediately halt any ordinance they believe to be “arbitrary or unreasonable.” Texas’s 2023 preemption law goes one step further and outright blocks local decision-making on every single category that EPI’s preemption map tracks, including heat standards. Though the legislation is currently embroiled in legal challenges, its existence has already had a chilling effect on localities in Texas. Even when contested or repealed, Death Star bills create an environment of uncertainty and fear that stalls local progress. States including Iowa and Michigan (where the “Death Star” label was first applied to a preemption bill) had previously passed wide-ranging legislation blocking local policymaking affecting nearly any employment practice, putting a halt to significant local initiatives to raise wages and improve other working conditions in these Midwestern states.

Gig economy

For a decade, tech companies have aggressively backed state legislation to prohibit local governments from setting labor standards or regulating fares, licensing, insurance, safety, or other practices of “transportation network” or “delivery network” companies like Uber, Lyft, or DoorDash.  While the most important innovations in setting wages and standards to address the rise of gig work have continued to emerge from the local level in cities such as Seattle and New York City, tech companies have lobbied heavily to block such action wherever possible.  With the most recent additions of Hawaii and Washington in 2022, 44 states now have laws preempting cities from setting certain standards for “transportation network companies.” Many of these same states (including Georgia since 2022) also specify that drivers who connect to jobs via a digital app are to be considered independent contractors, barring them from all the rights and protections afforded by employee status. These company-backed laws now prevent cities in most states from adopting wage and labor standards to improve conditions for a workforce of disproportionately Black, brown, and immigrant drivers.

Project labor agreements and prevailing wages

With the addition of Texas (where new Death Star legislation is currently in effect though under court challenge), 24 states now bar localities from entering into project labor agreements (PLAs) and 12 states bar localities from adopting their own prevailing wage requirements for public projects.

Prevailing wages and PLAs help ensure workers are treated fairly and paid a living wage while performing jobs under government contracts. Prevailing wage laws require contractors on public projects to pay at least the average wage for a given occupation in the locality. This ensures contractors bidding for public work will compete on the basis of quality, efficiency, or productivity rather than by lowering wages. Project labor agreements are multi-party agreements used to set the terms and conditions of employment on major projects. PLAs set clear, legally binding wage, benefit, and safety standards across an entire project that allow a local government to ensure that public investments are generating high-quality jobs. PLAs also help keep projects on task—saving local governments time and money—by coordinating large numbers of individual contractors and their workforces.

In the past four years, localities in states with preemption laws missed out on new opportunities to use these key policy tools to shape the quality of construction jobs created by massive federal investments flowing to local governments via the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA). Preemption of PLAs likewise left many local governments at a distinct disadvantage when seeking competitive federal funds under programs that encouraged or required use of PLAs to ensure quality job outcomes on BIL- or IRA-funded public infrastructure or green energy projects.

Preemption of workers’ rights has expanded to restrict other local policies that decrease poverty, increase housing access, and protect the rights of immigrants

In addition to workers’ rights policies tracked by EPI, new forms of local policymaking designed to improve economic conditions for working people have become targets in recent years.

Guaranteed income programs

For example, some states have blocked local efforts to implement or even pilot guaranteed income programs. Many local policymakers have begun experimenting with such programs to decrease poverty and improve access to housing for all. Stockton, California, for example, implemented a basic income program from 2019 to 2022, during which 125 residents were provided with $500 a month for 24 months, measurably improving their ability to cover housing costs and find full-time employment. Another trial program in Denver, Colorado, provided adults experiencing homelessness with cash payments for a year, resulting in a dramatic increase in the percentage of participants who could obtain rented or owned housing, from 8% to 35%.

Although early evidence shows local guaranteed income programs have proven effective, several states have already moved to ban guaranteed income programs. Arkansas, Iowa, Idaho, and South Dakota have all passed preemption laws that block cities and counties from implementing guaranteed income programs, and Tennessee and Texas are now considering similar legislation. Republican legislatures have even preempted guaranteed income programs in states where no pilot programs existed, an aggressive act of “preemptive preemption” designed to limit policymaking powers of progressive cities rather than to respond to issues constituents are raising.

Immigrant worker rights

In the past five years, a growing number of states have enacted laws preempting local government policies that in any way limit use of local resources or involvement of local law enforcement in federal immigration enforcement (sometimes called sanctuary policies). These constraints on local governments are especially damaging at a moment when the federal government is actively seeking new ways to compel state and local governments to participate in immigration enforcement actions that threaten to violate civil liberties, encourage racial profiling, and cause massive economic hardship for families and local communities. Despite these growing pressures, it remains legal for local governments to adopt sanctuary polices where not preempted by state law. Many local governments have continued to refuse involvement with immigration enforcement because they recognize that fear instilled by anti-immigrant attacks leads to fewer people reporting crimes or worker rights violations, making worker exploitation more likely and leaving communities and workplaces less safe for everyone.

Persistent campaigns to reverse harmful preemption are achieving limited success

Two states have successfully repealed three state laws that previously preempted local minimum wage or paid leave ordinances.

In 1997, the Arizona state legislature passed a law preempting local minimum wages higher than the federal minimum wage. In 2006, however, Arizona voters passed Proposition 202, which established a higher state minimum wage, enacted paid leave requirements, and reversed the preemption law. Ten years later, the Arizona legislature again attempted to preempt workers’ rights when it passed HB 2579, a bill to prohibit cities and counties from requiring employers to provide employees paid sick days or paid family leave—directly overruling Proposition 202. Within a year, however, this law was struck down in court because it violated a 1999 proposition which prohibits the state legislature from amending or superseding voter-approved initiatives. Since the preemption repeal, both Tucson and Flagstaff have passed local minimum wages that exceed state law.

In 2019 in Colorado, lawmakers repealed a 1999 minimum wage preemption law. Four localities have since adopted higher minimum wages, addressing challenges facing low-wage workers in cities with higher costs of living.

For the past two years, workers and advocates in Michigan have worked to repeal state preemption of local workers’ rights measures, most recently supporting SB 1173, which would repeal the state’s preemption of local project labor agreements, following attempts in 2023 to pass two earlier bills which would have completely reversed Michigan’s preemption of a wide range of important labor standards. Though these bills have not yet passed, they serve as important recent models for other states fighting to repeal harmful preemption laws.

Other recent bright spots in the ongoing struggle to overturn harmful preemption laws include Tennessee. In 2024, Think Tennessee, an affiliate in EPI’s EARN network, was part of a successful campaign to repeal 2016 state legislation that had banned inclusionary zoning, reinstating the rights of local jurisdictions to enact measures which promote affordable housing.

In other cases, advocates have succeeded in repeatedly fending off major preemption threats. For example, the West Virginia Center on Budget and Policy and other West Virginia advocates for local governance have for nine years successfully resisted the passage of a Death Star bill in the state.

It’s past time to lift state bans on workers’ rights

Despite significant opposition, workers, advocates, and lawmakers persist in their efforts to overturn preemption laws, restore local democracy, and protect workers’ rights. State legislators should heed these calls and lift bans on workers’ rights policymaking.

Reversing abusive state preemption of local workers’ rights policymaking is an important priority, especially in the present context of growing federal attacks on fundamental workers’ rights and labor standards—and threats to the separation of powers and democracy itself. Moreover, the workers’ rights policies preempted in many states continue to prove especially popular, showing that preemption laws are in direct conflict with the will of voters. Across the country, when given the opportunity voters continue to approve ballot measures increasing the minimum wage, expanding paid leave, and strengthening workers’ rights to unionize, including in states where legislatures have blocked localities from enacting some of these very same policies. Such outcomes reflect a clear ongoing trend of strong voter support for policies that prioritize worker, racial, and gender justice—preferences that are being denied by too many state legislatures. 

To reflect voters’ strong interest in addressing longstanding economic problems like stagnating wages, stark income inequality, and eroding job quality, state lawmakers must stop using preemption laws to block workers’ rights and restore the ability of local officials to do what’s best for their constituents and communities.

EPI’s updated fact sheets calculate the costs of child care in every state, showing that child care is unaffordable for working families across the country. This early care and education is crucial for children not only because it allows their parents to participate in the labor force, but also because it boosts their socialization, cognitive development, and school readiness. Child care is one of the largest expenses in a family’s budget partly due to early care and education requiring long operating hours for better access and a low student-to-teacher ratio for better quality.

Child care costs vary widely across the country, ranging from as low as $521 per month in Mississippi to as high as $1,893 per month in Washington, D.C., for a household with one 4-year-old child. This variation is even wider across counties and metro areas, as can be seen in our recently updated Family Budget Calculator.

In our fact sheets, we use state-level data from the Department of Labor and Child Care Aware of America on the cost of infant and 4-year-old care to determine child care costs for one- and two-child families. We incorporate the latest available data, in most cases for 2023, and adjust everything to 2024 dollars using the appropriate indexes.

Below, we use New Mexico as a case study to show the different data points offered in the fact sheets. As federal COVID-19 relief funding for child care stabilization grants came to an end in September 2023, New Mexico was the first of a number of states to step up and address the child care needs of working families. While these investments have already begun having positive effects, there is more work to be done.

In New Mexico, infant care remains more expensive than housing and college tuition (see Figure A). The average annual cost of infant care is more than $14,000, or nearly $1,200 a month. Child care for a four-year-old still totals nearly $10,000 per year, or more than $800 a month. We often consider housing or rental costs as the largest expense a family must face. But in New Mexico, infant care for one year exceeds rent by more than 10%.

One of the hallmarks of a middle-class lifestyle is the ability to invest in one’s children and send them to college. Families often save for years to afford public in-state tuition. Yet, infant care costs families 86% more than in-state tuition for a four-year public university.

Figure A

Infant care for one child takes up 21% of median family income in New Mexico.1 The Department of Health and Human Services considers child care affordable if it costs no more than 7% of a family’s income. This threshold would imply that only 10.8% of families in New Mexico can afford infant care. Care for two children—an infant and a 4-year-old—would take up a whopping 35.8% of median family income in New Mexico.

Minimum wage workers and early child care educators in New Mexico take on an even larger burden to cover child care costs. Figure B shows that minimum wage workers would need to spend 57% of their annual earnings just to pay for child care for one infant. Even in Santa Fe County—which has the highest local minimum wage in the state ($14.60)—it would take 46% of annual earnings to cover infant care. Further, a median child care worker would have to spend nearly half (47%) of their earnings to put their own child in infant care.

Figure B

Advocates and policymakers nationwide have been pushing for universal pre-K for decades as a way to provide dependable, free child care to families. After a decade-long campaign, New Mexico passed a constitutional amendment in 2022 guaranteeing a right to early childhood education. In doing so, they created a funding stream of about $150 million per year, most of which will help subsidize early childhood programs. Given that this amendment passed so recently, we do not expect to see the impacts of this legislation in our fact sheets yet.

This aid has helped parents and caregivers join or stay in the workforce, advance professionally, and reach financial stability. Despite significant gains for the children and families who rely upon child care, wages for the workers who administer this essential care remain insufficient at keeping them out of poverty. Policymakers should invest in this workforce by raising wages. A recent report commissioned by Organizers in the Land of Enchantment (OLÉ) estimates the first-year cost to the state of adopting and subsidizing wage and career ladders. Advocates and state policymakers can use EPIs child care fact sheets in tandem with this report to push for legislation that invests in New Mexico’s children.

Our fact sheets show that child care is unaffordable for working families everywhere in the country, and it’s even further out of reach for minimum wage workers and the very workers that administer child care. New Mexico’s investments mark an important step toward affordable child care, but investments like this are needed across the country. Further, to fully realize these investments, we must ensure that our child care workforce is well-paid, empowered to unionize and engage in collective bargaining, and able to afford the same quality of care for their own children.

Note

1. Median family income refers to families with at least one child under age 6.

Tonight, President Trump will deliver an address to a joint session of Congress where he will outline his political agenda for the next year. Among many other topics, the president is expected to highlight the numerous actions directed at reducing the federal workforce and federal spending, expelling a narrative of rooting out waste and fraud in the federal government. In reality, these actions are nothing more than attacks on federal workers and the services they provide, and an attempt to erode the public’s faith in the federal government.

President Trump has issued a record number of executive actions aimed at the federal workforce, including issuing an executive order to make it easier to fire federal workers in jobs that are normally apolitical; revoking an executive order that protected their collective bargaining rights; eliminating remote work options; and requiring all agencies to identify and review retention needs of all probationary federal employees, resulting in the firing of thousands of federal workers.  

At the same time as the Trump administration has made massive cuts across the federal workforce, they have taken actions to expand immigration enforcement capacity by repurposing staff at other agencies to help carry out mass deportations, such as the Internal Revenue Service, the State Department, and multiple subagencies at the Department of Justice.

President Trump also created the so-called Department of Government Efficiency (DOGE), headed by tech billionaire Elon Musk, which has furthered the attacks on the federal workforce by offering federal workers a “deferred resignation” and calling on federal workers to justify their work in weekly emails. Moreover, President Trump has issued several executive orders that insert DOGE in the reduction of the federal workforce, creation of rulemakings, and the approval and disbursement of federal payments.

Let’s be clear, these attacks on the federal workforce will not make the government more efficient, but they will degrade the public goods and services we use every day. These actions are intended to foster distrust in the federal government and allow for the dismantling of vital social safety net programs millions of Americans rely on. This is further evident in the recently passed House budget resolution, which contains draconian cuts to social safety net programs like Medicaid to provide tax breaks for the extremely wealthy. Further, these attacks on the federal workforce and social programs are likely an economic crisis in waiting.  

In the coming months, we will no doubt continue to see more attacks on the federal workforce. You can find a comprehensive catalogue of all policies relevant to working people and the economy at Federal Policy Watch, an EPI online tool documenting actions by the Trump administration, Congress, federal agencies, and the courts.

Lisa Johnson of the Canadian Press reports on a how Alberta is setting up a new Crown corporation to oversee Alberta’s Heritage Savings rainy day fund: 

Alberta Premier Danielle Smith announced a new Crown corporation Wednesday to oversee the province’s rainy day fund.

The Heritage Fund Opportunities Corporation is to direct policy for the Heritage Savings Trust Fund, which will still be managed by the Alberta Investment Management Corp., or AIMCo.

The new Crown corporation is also mandated to independently manage the investment of new deposits.

Smith said she aims to grow the fund to at least $250 billion by 2050 in order to wean the province off the resource revenue roller-coaster.

“No matter how far into the future, there will come a time that we may be unable to rely on those revenues, and we cannot hide from that reality now,” the premier said in Calgary.

The fund’s assets were valued at $23.4 billion as of September, and the government pledged another $2 billion that is now earmarked for the new corporation’s investments.

Finance Minister Nate Horner said its board can invest that seed funding in a different way than AIMCo, the province’s public pension fund manager.

“That’s beyond AIMCo’s mandate, more in a sovereign wealth (fund) style,” said Horner.

The new Crown corporation will operate at an arm’s length and publicly report results, Smith said.

Horner told The Canadian Press in an earlier interview the goal is not to “de-risk” pet projects that have difficulty getting financing, as Smith has previously mused.

“This will be return-focused,” he said.

The finance minister said the new corporation will create global investment opportunities that wouldn’t have been offered to a manager like AIMCo.

When asked Wednesday whether the new corporation’s goal to support “areas that matter to Albertans” means investing in more Alberta-based assets, Horner said “not necessarily.”

“It’s about leveraging opportunities where those partnerships could provide great opportunity for the province down the road, but that isn’t necessarily the goal,” he said, pointing to the province’s advantages, like its knowledge base in artificial intelligence and water infrastructure.

He said the plan represents a return to the original vision of the heritage fund.

It was created in 1976 by former premier Peter Lougheed to set aside a portion of resource revenues, but subsequent governments have dipped into the piggy bank as needed, particularly when the price of oil crashed.

The Heritage Fund Opportunities Corp. will be chaired by Lougheed’s son Joe, board chair of Calgary Economic Development and a partner at Dentons law firm in Calgary.

Smith’s United Conservative Party government has committed to not skimming interest earnings from the fund to prop up the province’s general revenue.

It estimates that if all the Heritage Fund’s income had been reinvested from the start, it would be worth upwards of $250 billion today, generating more than $20 billion annually.

Opposition NDP finance critic Court Ellingson told reporters in Calgary he supports the government’s efforts to grow the long-neglected savings fund, but the province already has a body in place to do that work.

“We didn’t need a new corporation,” he said.

Wednesday’s announcement comes after Horner sacked the chief executive officer and entire board of directors of AIMCo in November.

Less than two weeks later, the province hired former prime minister Stephen Harper as the new chairman of AIMCo.

In addition to the Heritage Fund, AIMCo also handles about $118 billion in investments for public sector pension plans representing thousands of Albertans, including teachers, police officers and municipal workers.

Barbara Shecter of the National Post also reports Alberta unveils new investment entity with aim to boost Heritage Fund to $250 billion:

The Alberta government is seeding a new investment vehicle with $2 billion as part of a plan to boost the province’s resource investment fund tenfold to at least $250 billion by 2050.

The money to be invested and managed by the new Heritage Fund Opportunities Corporation was previously earmarked for the Alberta Heritage Savings Trust Fund, which was started in 1976 to invest a share of the province’s resource revenue for the future and diversify the economy.

For now, the rest of the nearly $24 billion in the Heritage Fund will continue to be managed by Alberta Investment Management Corp. (AIMCo), a Crown corporation that also manages the pensions of public servants across the province, under the direction of the new corporation. 

“As the investment model is proven, more funds could potentially be moved from AIMCo,” a government spokesperson said.

At a news conference Wednesday, Premier Danielle Smith said the new investment vehicle is necessary, in part, to ensure returns generated by the Heritage Fund are reinvested over a long horizon, allowing the fund to grow larger and faster than it has in the past when this wasn’t always the case. 

Her plan, laid out alongside Finance Minister Nate Horner, is that the fund will have a strong focus on maximizing growth “while supporting areas that matter to Albertans, such as technology, energy, and infrastructure.”

Horner added that some of the investments will be “beyond AIMCo’s mandate,” adding that they will be “more in a sovereign-wealth style,” which could lead to joint investments with other long-term sovereign wealth funds.

However, Smith stressed that the fund will operate at arm’s-length from government.

“It is critical that the Heritage Fund Opportunities Corporation be free to make the right decisions for long-term growth without interference from government, which is why we’ve set it up as an arm’s-length agency,” she said. “A broad group of directors will bring deep financial experience so that it can focus on improving long-term Heritage Fund investment growth outcomes.”

Smith said the new Heritage Fund Opportunities Corporation will be chaired by Joe Loughheed, a Calgary lawyer and son of the former premier who created the Heritage Fund. The goal, she said, is to ultimately create a wealth fund that can forge global partnerships, and will supplement and potentially ultimately replace unpredictable resource revenue.

A document laying out the plans further suggests that a retail investment product could be developed “to allow Albertans to invest directly in the Heritage Fund, subject to public interest and feasibility.”

Sources say Smith’s idea to boost the returns of the Heritage Fund, which she has been speaking about publicly for months, were discussed with AIMCo before her government took the unusual step in November of ousting the entire board and the investment manager’s chief executive, Evan Siddall.

Reasons cited by the government included that rising costs of AIMCo were not commensurate with returns, though this was disputed in a letter sent to Horner by ousted chair Kenneth Kroner.

According to sources familiar with the proposals, AIMCo’s game plan included taking in more money and increasing returns through additional investments in private assets such as infrastructure. 

Following the November purge, Horner installed former prime minister Stephen Harper as AIMCo’s chair and senior civil servant Ray Gilmour was named interim CEO.

A new unpaid position was established on the board for the deputy minister of treasury board and finance as a way “to ensure more consistent communications between AIMCo and Alberta’s government.”

In addition to discussing a Heritage Fund overhaul with AIMCo before the shakeup, Smith’s government was also working with outside consultants, according to news reports.

In May, the Calgary Herald reported that the government had retained a firm called BERG Capital Management, an investment consultant for pensions and sovereign wealth funds that changed its name to PNYX Group, to do a “deep dive” on the Heritage Fund.

Then, in November, after the UCP government passed an order-in-council approving the incorporation of a provincial corporation for the purpose of managing and investing all or a portion of Crown assets, Smith told the Herald that “a hybrid investment strategy” was possible, with pension funds invested in a very conservative way while Heritage funds would be invested in a manner that would allow them to grow tenfold by 2050.

Chris Varcoe of the Calgary Herald also reports Alberta drafts blueprint to grow Heritage Fund to at least $250B by 2050, establish Crown corporation:

It’s never too late to start saving for the future and the Alberta government aims to follow that advice, setting out a blueprint to grow the Heritage Savings Trust Fund to at least $250 billion by 2050.

As part of its strategy, the UCP announced Wednesday the creation of a new Crown corporation that will govern and guide the rainy-day account.

The province wants to grow the fund’s value 10-fold in the coming decades from more than $24 billion today, largely by leaving income inside the account, instead of tapping it once the rain begins to fall and oil prices drop.

However, once the province hits the $250-billion target, a portion of the fund’s annual interest could be used to offset future resource revenue volatility or to invest in infrastructure.

“The best time to plant a tree was 20 years ago, and the second-best time is today,” said Finance Minister Nate Horner, comparing it to the province’s investment goals.

“If we are diligent, and we grow this to $250 (billion) or more, by 2050 we’ll be able to take off $10 billion annually, while continuing to grow the fund and replace at least half of the royalties we receive now.”

The new Heritage Fund Opportunities Corp. (HFOC) will be chaired by Calgary lawyer Joe Lougheed. It will operate at arm’s-length from government to ensure independent decision-making, according to a provincial document.

The Crown corporation will be seeded with $2 billion — money the government previously earmarked during the budget to the Heritage Fund — and will have its own investment objectives and a small management team, Horner said.

Existing Heritage Fund assets currently managed by the Alberta Investment Management Corp. (AIMCo) will remain under its oversight. AIMCo was recently overhauled by the province.

The province says the new corporation will make strategic investments “that maximize growth, while supporting areas that matter to Albertans, such as technology, energy and infrastructure.”

It will also work with other institutional investors and sovereign wealth funds “to access premier investments.”

The corporation’s benchmark return will be the same as AIMCo’s objective — at 9.3 per cent annually — “but my expectations are higher,” Horner said in an interview.

“The $2 billion will be invested by HFOC in a sovereign wealth-style investment — with its own board, with its own governance . . . It’s a different type of investing,” he said, noting it will have longer-term horizons than a pension fund.

 “We’re not going to be involved in any way in making actual investment decisions.”

However, the idea of establishing HFOC and supporting specific sectors has raised Opposition questions.

“We didn’t need this new corporation,” said NDP MLA Court Ellingson.

“We have real concerns about the Heritage Fund being used to invest in projects that otherwise can’t secure financing.”

The Heritage Fund was worth $24.3 billion at the end of September. It was created in the mid-1970s by the Progressive Conservative government of Peter Lougheed — Joe Lougheed’s father — to save growing resource revenue.

However, initial goals that the fund would receive up to 30 per cent of non-renewable resource revenues were dropped by ensuing Alberta governments, often during economic downturns.

Since its creation, more than $45 billion of investment income from the fund has been transferred into the government’s general revenue account for day-to-day spending.

“Fundamentally, the government is going back to the main principle that my father’s government set up in 1976 when they established the Heritage Fund,” Joe Lougheed said in an interview.

“The vision was to grow those assets for future generations of Albertans, such that it would grow to a large pool of assets, which, over time, could reduce the roller-coaster of resource revenue dependency that Alberta, quite frankly, still has.”

The job of the HFOC board will be focused around governance, establishing a new statement of investment policies and goals, such as asset allocation and oversight of risk.

“The next 10, 15, 20 years in Alberta are going to be very, very strong,” added Lougheed.

“When you’re doing well, that’s the time to save money.”

A graphic in the road map document shows that if the current fund expands over time, with a projected annual net return of nine per cent, compounded yearly, it could be worth more than $50 billion by 2032, and top $100 billion by 2040.

Horner says it’s vital for the fund to retain its income, which will let it continue to grow over time.

“I think it’s conservative,” Horner said of the $250-billion target.

“All that it requires — other than diligence — is our government and the governments that follow (to) have the diligence to leave the retained earnings in the fund and be patient.”

University of Calgary economist Trevor Tombe said he’s encouraged to see the province think about its long-term fiscal future and indicate it won’t withdraw earnings from the fund for government spending.

However, he wonders about the language surrounding the HFOC goals of strategic investments being made in areas such as technology, energy or infrastructure, and what that will practically mean.

“The $250-billion goal is reasonable and achievable, but it’s all contingent on returns being sufficiently high,” Tombe said.

“And that makes the decisions that the government takes around the mandate to this new entity, around what its objective is, more important than anything.”

You can read more on Alberta's Heritage Savings Trust Fund here.

Alberta's government put out a publication, "Renewing the Alberta Heritage Savings Trust Fund : a roadmap to securing Alberta’s future" which is available here.

Alright, on Tuesday I discussed AIMCo's latest DEI shakeup and today I am trying to figure out this latest move by the Alberta government and how it will impact AIMCo.

First, before I begin, I posted an update to that comment which I will post below:

Janet French of the CBC reports AIMCo job cuts raise questions about commitment to inclusion, critics say:

Helen Ofosu, a human resources consultant and adjunct psychology professor at Ottawa's Carleton University, says removing leaders in charge of inclusion and diversity sends the message those principles don't matter to the organization.

"That's basically telling people who may be dealing with a disability, being a visibly racialized person, a religious minority — any of those people all of a sudden start to feel like, 'Hmm, what is my place here? Do I matter?' "

 It definitely doesn't send the right signal. Read more here.

Also, someone made a good point on LinkedIn, namely, AIMCo is a large fiduciary that needs to keep track of many companies and use its proxy votes to raise concerns. DEI is a serious concern with any investment, public or private, so why get rid of the Head of DEI?

In other news, AIMCo was named one of Canada’s top employers for young people as well as one of Alberta’s top 85 employers:

Edmonton – The Alberta Investment Management Corporation (AIMCo) is pleased to announce it has been named one of Canada’s Top Employers for Young People as well as one of Alberta’s Top 85 Employers, both distinctions awarded by the Canada’s Top 100 Employers project.

AIMCo was recognized for its fulsome programs to support the professional development of its employees. These include entry-level programs that allow new graduates to gain experience in multiple departments across the organization, and support for all employees to enroll in skills development courses related to their roles. Initiatives such as these reinforce a culture that prioritizes professional development, which in turn drives AIMCo’s overall success. The Canada’s Top 100 Employers project is the largest Canadian editorial endeavour to recognize top-performing workplaces across the country. The project has been running for 25 years and now includes 19 national, regional and special-interest competitions.

For more information about AIMCo’s recognition as a top employer, please click here. 

Well, I think we know who deserves the credit for this but he's gone now.

Now, on to the new Heritage Fund Opportunities Corporation which will be chaired by Joe Lougheed, the son of Alberta's former premier Peter Lougheed who created the Alberta Heritage Savings Fund back in 1976.

I don't know Joe Lougheed (featured above), thought very highly of his father Peter Lougheed and I'm sure he's a smart lawyer and will make an excellent chair of this newly established Crown corporation.

They are going about it the right way, naming a chair first and nominating a board of directors who will then hire a CEO to ramp operations up.

My comments are the same as the NDP finance critic Court Ellingson who said why do they need to create a new Crown corporation?

And God knows I'm no NDPer or Liberal for that matter!

It's common sense, AIMCo is doing a great job at managing the savings of the Alberta Heritage Fund so why create a new and separate Crown corporation to take over?

Apart from being costly, you need to pay new board members and staff which admittedly is negligible over the long run, but is it really necessary?

Don't forget, AIMCo has all the strategic relationships with peers and top funds, it has staff covering every asset class and risk managers and has the same return target as the Heritage Fund. 

So why create a new Crown corporation to take over the Alberta Heritage Savings Fund? 

One person I talked with said "if you look at how Alberta's government is acting, they're gutting AIMCo slowly, firing people, taking away assets, it's awful."

But that doesn't make sense either, why would they want to gut or get rid of AIMCo? 

The problem is they are weakening the organization and the long-term effects are going to to hurt active and retired members.

Of course, I could be wrong, maybe AIMCo will come out of this stronger and this new Crown corporation will be a long-term success but it certainly seems very strange to do all this unless it's part of a master plan to intervene in both these funds (they say they will continue to operate at arm's length but let's see).

I'm curious to see who AIMCo's next CEO will be as well as the new CEO of the new Heritage Fund Opportunities Corporation.

All I know is Alberta and the rest of Canada have much bigger fish to fry, we better brace for impact because February 1st is right around the corner.

Below, Alberta Premier Danielle Smith and Finance Minster Nate Horner announce a new plan forward for the Alberta Heritage Fund.

Next, Canada can work with US President Donald Trump’s administration to reshape global trade and weaken China’s dominance of supply chains, according to Chrystia Freeland, the Canadian politician who’s vying to replace Justin Trudeau as prime minister. 

She spoke with Bloomberg's David Gura about Canada's role in global trade, and reacted to Trump's administration -- including his Treasury Secretary pick Scott Bessent.

Needless to say, I agree with Premier Smith's approach on how to negotiate with the Trump administration to avoid tariffs and worry when I hear our federal government preparing for a protracted trade war and calling for a "pandemic-like relief program" for Canadians which will be impacted by tariffs.

Lastly, Denis Girouard and Stéfane Marion of the National Bank of Canada, take a closer look at Canada's trade balance in the context of the US deficit, to clarify Canada's marginal role in this dynamic, and explain that these uncertainties are not just negative. Current economic and trade tensions offer a unique opportunity for Canada to reassess its industrial policies, notably by strengthening its manufacturing sector and tackling provincial trade barriers, which represent the equivalent of a 21% tariff. 

Great discussion, take the time to watch it.

Sarah Rundell of Top1000Funds reports on why CPP Investments CIO Ed Cass says they are cutting back on emerging markets:

CPP Investments, the C$675.1 billion asset manager for the Canada Pension Plan, has already hit its reduced long-term strategic exposure to emerging markets of 16 per cent in a quick paring back of the allocation from 2023 levels when emerging markets accounted for 22 per cent of assets under management. 

Edwin Cass, chief investment officer at CPP Investments tells Top1000funds.com that although the investor still believes there is both an opportunity to diversify and generate alpha in emerging markets because of inefficiencies, that window of opportunity is narrowing.

“This is changing over time due to a number of factors, including geopolitical risk and improving market efficiency,” he says.

On one hand, deglobalisation can be positive for emerging market investors because it adds to diversification by decoupling relationships between various trading blocs, he explains. However, geopolitical risk is the “flip side” to deglobalisation and brings real complexity.

“We need to understand the impact that deglobalisation and regional trading blocs will have on sectors and specific assets within the countries we invest in. Due diligence and appropriate investor protections become even more important.”

Successful emerging market securities selection during the past several years has been a source of alpha, and he says CPP Investments has found the strongest returns in emerging market infrastructure, notably through investments in toll roads. For example, the asset manager owns toll roads in Mexico, Chile, Indonesia and India that Cass says “are performing well.”

The energy transition also continues to present opportunities. Investments include renewable energy providers, such as Renew Power in India, and Auren Energia, one of Brazil’s largest platforms for renewable energy and energy trading.

However, more expensive active management in emerging markets is important because these markets are less efficient. And successfully navigating the risks is an intense process that relies on an in-country presence resting heavily on “boots on the ground” to stay close to political and regulatory developments and monitor any impact to existing assets.

CPP Investments has opened emerging market offices in Mumbai and São Paulo to allow it to “do its homework,” better understand the businesses it invests in; the environment in which they operate and sensitivity to local risks. Cass explains that offices in emerging markets also allows CPP Investments which manages assets both internally and with external partners to position itself to partner with the best regional and national firms.

“We also spend time building relationships with governments to understand the regulatory environment in the countries where we invest. These local and regional factors are incorporated into our organisation-wide integrated risk framework, which covers a wider variety of investment risks and includes various types of stress tests on our portfolios.”

“Our presence in the regions where we invest combined with our company-wide focus on building relationships with governments and monitoring regulatory changes also enables us to mitigate issues as they arise.”

CPP invests across 56 countries with more than 320 investment partners. Just over 50 per cent of investments are in North America.

If I read this right, CPP Investments is going to start trimming its massive exposure to emerging markets which stood at 16% for base CPP (bulk of assets) and 11% for enhanced CPP (all figures from F2024 Annual Report):

Most of the exposure in emerging markets is in passive global equity indexes which you can find here and below (click to enlarge):

CPP Investments also has made meaningful investments in infrastructure in India but the bulk of the assets are passive exposures to emerging market equity indexes.

Ed Cass cites two reasons for cutting back exposure: geopolitical risk and increased market efficiency (ie security selection is becoming tougher there).

He doesn't get into details on how much they plan to cut, we will have to monitor that in every subsequent annual report.

He does state that these markets provided meaningful alpha for the Fund over the last several years but provides very little detail on how much alpha was produced there:

Successful emerging market securities selection during the past several years has been a source of alpha, and he says CPP Investments has found the strongest returns in emerging market infrastructure, notably through investments in toll roads. For example, the asset manager owns toll roads in Mexico, Chile, Indonesia and India that Cass says “are performing well.”

He states they need to understand deglobalization and the risks and opportunities that brings and they have boots on the ground in key areas to build relationships and monitor government regulations.

My thinking? It all comes down to US interest rates, the lower they go, the more exposure you want to risk assets including emerging markets.

Conversely, the higher they go, the less exposure you want to emerging markets and other riskier assets.

Interestingly, as US rates normalize, the trend in emerging market equities is lower:

 

Of course, I'm oversimplifying but that's how these funds think in terms of Risk On/ Risk Off and it makes a lot of sense because higher US rates go, less risk you need to take (just buy more long-dated US Treasuries and hold to maturity).

There's another risk in emerging markets and we saw it last year as CDPQ got embroiled in a large bribing scandal in India where three former executives there were accused of taking part in bribing scheme to bribe Indian government officials by US regulators. 

I can assure you that this rattled the boards of the Maple Eight and many board members raised concerns about investments in India and other emerging markets.

At the end of the day, governance, rule of law and a stable regulatory framework are critical to making large investments in private markets and some countries are a lot more advanced than others in that regard.

In my opinion, this might require a rethink in emerging markets on whether you want to be a direct owner of a platform there or indirect owner of assets through funds even if you pay fees.

On a related topic, CPP Investments and  and MGRV, a leading Korean rental housing provider, recently announced a KRW 500 billion (C$500 million) joint venture to develop rental housing projects in Korea:

CPP Investments will hold 95% of the venture and MGRV will own the remaining 5%.

The joint venture, CPP Investments’ first direct investment in the residential sector in Korea, aims to develop properties in key corridors of Seoul, close to major business districts and leading universities. CPP Investments has committed up to KRW 133 billion (C$133 million) to the joint venture’s seed projects located within Seoul.

“This joint venture offers an excellent opportunity to enter the residential sector in Korea and meet the strong demand for high-quality rental housing in the greater Seoul area where half of Korea’s population resides,” said Sophie van Oosterom, Managing Director, Head of Real Estate at CPP Investments. “We are pleased to work alongside an experienced local partner like MGRV to enter this market segment, which we believe can generate attractive long-term returns for the CPP Fund.”

MGRV CEO Cho Kang-tae said, “this strategic partnership marks a significant step in demonstrating the high growth potential of the Korean rental housing market and MGRV’s competitive operational capabilities on a global scale,” adding, “we will continue to drive the ecosystem innovation in the market by expanding community-centered properties.”

Rental housing market is huge everywhere nowadays, including in Korea. This is a smart long-term investment.

Below, Bloomberg Daybreak Asia podcast explores where opportunities lie in emerging markets with Rahul Chadha, Founder and Chief Investment Officer at Shikhara Investment Management. Plus, a look at how the week's US eco data will play into the Fed's policy path with Rob Haworth, Senior Investment Strategist at US Bank Wealth Management.

Next, Commerce secretary nominee Howard Lutnick was asked about the potential impacts of tariffs at a hearing on Wednesday. Lutnick, who appeared to suggest tariffs could come in phases, pointed to border issues with Canada and Mexico as a ‘short term’ issue. Lutnick cited both fentanyl and undocumented migrants as areas of concern for the Trump administration but did not provide details about his assertions beyond calling for an end of movement of fentanyl into the US.

Lastly, watch FOMC Chair Jerome Powell's presser from earlier today after the Fed kept rates unchanged.