Moody�s Triples Pension Debt Estimates
Original post made by Arnold on Jul 18, 2012
This is a big deal because Moody's is changing the way they view public employee union pension obligations. What Moody's is saying is that they will no longer use CalPERS numbers (CalPERS outlier smoothing policies that hide the true cost of the massive debt they believe taxpayers are obligated to pay) to compute state & local governments debt load. The formula CalPERS uses hides the TRUE cost by spreading debt over 20 -30 years, thereby only recognizing a fraction of their TRUE unfunded liabilities.
The Government accounting Standards Board (GASBy) has spent the past five years trying to provide a fair framework that would accurately account for pension debt. They made great progress in what is known as an 'Exposure Draft' (rough draft) that would have provided increase transparency for public pension funds and especially public pension like CalPERS who like to make their own rules. They did make significant progress in that we are less than two years from municipalities disclosing pension debt on their balance sheet, as opposed to footnotes. Unfortunately, when you have the political muscle of the unions, as well as the 230 billion dollars worth of muscle (lawyers & lobbyists & control of politicians) CalPERS was able to water down the recommendations of what is supposed to be an independent agency.
But, NOW, both Fitch and Moody's are picking up where GASBy fell down. They are saying that the California Bond ratings will be impacted by California's unfunded pension liabilities - at both the state and local level. The headlines are that pension debt under the new rating model, as opposed to the CalPERS model, will at least double.
If the rating agencies double our debt load then increased bond rates are sure to follow. If increased bond rates are sure to follow then the cost of projects like the High Speed Rail are sure to increase. Just one more reason to pay attention to unfunded pension obligations.
Moody's Triples Pension Debt Estimates Web Link
on Jul 19, 2012 at 7:27 am
No matter what Moody's does, the cost of anything like High Speed Rail or the new Bay Bridge Span, goes up, You just cannot trust government especially when it comes to money!
on Jul 19, 2012 at 10:17 am
The impossibility of sustainability has always been evident to anybody bothering to do the exponential growth in both dollars and years. It is wrong and misleading to ever use the 'UNfunded' word however. Anything in the world can be built or funded by doubling, tripling, quadrupling money endlessly. That is a NON-solution, since it is not a stable, fixed situation. Greedy want more on top of more, and faster, and earlier feeding of a beast that never reaches satisfaction. Only fools would attempt any 'fix' that always proves to only 'temporary'. The cup has a hole in it !! Time to get a new cup.
Now Compton has announced in September, they will be the 4th CA city to file bankkruptcy.
on Jul 19, 2012 at 10:28 am
Wait until the City of Pleasanton gets their CalPERS bill (Millions$$$ each year to make up the shortfall in pension funding)... Ouch! ... what services will they cut now ... it only gets worse people ... wake up!
By the way Compton is the fifth city to file bankruptcy - Vallejo, Stockton, San Bernardino, Mammoth Lakes ... and the beat goes on ...