Unfunded Pension Obligations to Factor into State Credit Ratings [More Bad News]

Moody’s Investor Service announced that they will begin factoring unfunded public pension obligations into calculations used to determine state credit ratings. This move was recently pointed out by the New York Times in an article that highlights the nation’s growing recognition of the threat posed by massive unfunded obligations.

The numbers are staggering. American Enterprise Institute and Northwestern University have estimated that states unfunded public-pension liabilities is $3 and $5 trillion, respectively.

Unfortunately, the board that writes the rules for state financial reporting does not require the inclusion of public pension obligations, funded or unfunded, in state financial documents. This grossly flawed accounting system allows state governments to hide the true costs of the staggering benefits provided government workers. It permits lawmakers and bureaucrats alike to shy away from the danger posed to state budgets by out of control public pension obligations...

Read more: http://www.atr.org/unfunded-pension-obligations-factor-state-credit-a5805#ixzz1CdmxATXd

"....they will begin factoring unfunded public pension obligations..."

Oh they haven't to date...? Oh man, that's gonna leave a mark or 50. Or 57. Whatever! Some states will show OCTUPLING of the debt side of their balance sheets if this comes into effect. That'll put a cap in their asses, count on it. You are gonna see hordes of screaming piglets if Moody's et al actually does this.

Cripes, who would even pay attention to Moody’s ratings anyway?

The people who buy the bonds. The worse the rating, the higher the interest that bond buyers require to compensate them for increased risk.

Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)

I’m wondering if there might be a “National Pension Adjustment Act”, passed surreptitiously, that would give both the federal and State governments the ability to alter existing pension agreements so that the *form* of the pension could be, within limits, altered from just cash to cash and benefits.

This could be a crafty way for governments to avoid bankruptcy and chaos, while not screwing pensioners. It even gives some added flexibility to both.

To start with, cash is not the end-all-be-all of benefits, especially when there is strong inflation. So if a pensioner, for example, has major medical expenses outside of any medical plan, the government could offer prorated medical care as a better equivalent to cash.

The idea is that government could get medical care provision at lower cost than could the pensioner with cash, so offers the pensioner a deal that they do a co-pay direct from their pension at less cost to them than paying in cash.

But the idea could go much further. Based on the idea of store club cards, a pension could work somewhat like a debit card, except they would get an additional discount, on top of coupons and sales, so that they could buy, for example, $150 of groceries for $100 direct from their pension.

While it sounds somewhat convoluted, if States and even the federal government were allowed to do things this way, it could save them enormous sums of money, keep the pension systems more solvent, and the pensioners would get more out of the deal as well.

And, to a great extent it could be voluntary. If pensioners didn’t want to fuss with it, they could still get 100% of their pension in cash, and a lot would vie for this. But those who took advantage of it could get perhaps 105% of their pension, with less strain on the system.

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