Moody’s: Pension Strains Put Pressure on Ratings

Financial Planning ^ | November 6, 2009 | Yvette Shields

[UAConservative]

The fiscal strain of deteriorating pension funding levels on local and state governments could contribute to downgrades in the next several years, especially among those governments that entered the recession with poor funding ratios or have little flexibility in their funding requirements, a new report from Moody’s Investors Service warns.

In the near term, the impact of dwindling investment returns as a result of the market downturn is broad and adds yet another layer of fiscal stress on governments already faced with faltering tax revenues, heightened demand for social services, and pressure to scale back pension contributions to balance their budgets.

Though returns in the equity markets where pension funds are heavily invested have improved, the losses continue to weigh on asset valuations and near-term contribution requirements at a time when demographic pressures pose long-term strains.

“There’s the near-term impact of investment losses and the long-term pressures of the demographics of an aging population, so the pressures will continue to build. That’s what we are worried about,” said Douglas Benton, a Moody’s vice president and senior credit officer who was the lead author on the special report released yesterday that deals with the pressure put local and statement governments ratings by pension funding issues.

[rawhide]

Sorry, I do not think the government employees pensioners will eer suffer. The governments will just just raise taxes and enact more fees to cover the shortfalls. Their cushy pensions are written in stone forever.

[Achilles Heel]

The pension funds suffer some because the power crazy union leaders contribute enormous dollars to the DEMS to keep them in office. This has to be made up somehow......

[rawhide]

The promised pensions will always be there. Any shortfall because of contributions to the democrats will be paid by the taxpayers. IOW, you are contibuting to the democrats, indirectly.

[MSF BU]

Federa retirees yeah. State/Municipal, forget it. The next decade is going to be an interesting time, and probably not in a good way. There is NO WAY the public will accept the local taxes needed to fund these pensions and I doubt the feds will bail them out.