Ill. Idea: More POBs

Having the state with the lowest credit rating for a U.S. state, ever, sell $107 billion in Pension Obligation Bonds (POBs) is an idea that will take an extraordinary amount of salesmanship. Here is the pitch by Professor Runhuan Feng (University of Illinois) in conjunction with State Universities Annuitants Association presented yesterday to the Illinois legislature.

Pension Obligation Bonds: Fallacies & Realities

It is on the table in Illinois:

Lawmakers in Illinois are so desperate to shore up the state’s massively underfunded retirement system that they’re willing to entertain an eye-popping wager: Borrowing $107 billion and letting it ride in the financial markets. The legislature’s personnel and pensions committee plans to meet on Jan. 30 to hear more about a proposal advanced by the State Universities Annuitants Association, according to Representative Robert Martwick. The group wants Illinois to issue the bonds this year to get its retirement system nearly fully funded, assuming that the state can make more on its investments than it will pay in interest.

Here is what will be conveniently overlooked by those pushing these Pension Obligation Bonds (POBs)….

Financial State of the Cities (not in New Jersey)

Truth in Accounting released its second Financial State of the Cities report, a comprehensive analysis of the fiscal health of 75 of the nation’s 77 most populous cities based on fiscal year 2016 comprehensive annual financial reports.

This year, the study found that 64 cities do not have enough money to pay all of their bills, and in total, the cities have racked up $335.4 billion in unfunded municipal debt. The study ranks the cities according to their Taxpayer Burden or Surplus™, which is each taxpayer’s share of city bills after available assets have been tapped. Check out the data for your city at the State Data Lab.

As it turned out no city in New Jersey made the list. The reason….

New Jersey Tops Another List

S&P Global Ratings did a comparison of the per person costs of pensions, OPEB, and other debt among the states and New Jersey topped the list – by a lot.

Now the worse news.

Breaking News: Christie Makes It To Eleven – And It’s All About Pensions

Minutes after hearing the news this is all we got on Ask the Governor on pensions:
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According to Reuters:

NJ Debt Bomb Exploded Under Christie

Taking official numbers from the annual Treasury Department debt report as of June 30, 2016 has the state’s total Bonded and Non-Bonded Obligations at $171,560,258.  What was that number on June 30, 2009 before the governor who balanced every budget came aboard?

NJ Pension Debt – Pick Your Number

nj101.5 reported on New Jersey’s long-term debt based on the annual Treasury Department debt report as of June 30, 2016 made public Friday with some telling observations:

The pension liability isn’t the number the state uses to decide how much to contribute – or rather, should contribute – to its pension funds.

The “unfunded actuarial accrued liability” for the state-administered pension funds is $49 billion. To help repay that, plus make the current payment, the state should put in a little over $5 billion in the upcoming fiscal year. Instead it plans to put in $2.5 billion.

The numbers look even more daunting if alternate accounting and actuarial methods are used.

The debt report discloses those in supplemental information at the back of the publication, because they’re not required in official financial disclosures and don’t impact state budget decisions.

Those analyses peg the liabilities as high as $136 billion for pensions and $68 billion for health benefits.

Just one problem here.