Governments borrowing heavily to cover growing pension shortfalls

[Judi Lynn]

Posted on Sun, Oct. 17, 2004

Governments borrowing heavily to cover growing pension shortfalls

BOB PORTERFIELD
Associated Press

Local governments in California are borrowing money this year at a rate unmatched in the past decade to pay for growing deficits in their pension funds, according to an Associated Press analysis.

So far in 2004, local governments with pensions outside the giant California Public Employees Retirement System have issued nearly $1.7 billion in bonds just to pay for existing pension shortfalls. With three months left in 2004, that's 50 percent higher than any year in the last decade, according to data from the California Debt and Investment Advisory Commission.

The stock market's poor performance, shrinking tax revenues and the creeping expansion of employee benefits all contribute to the swelling deficits in public pensions. But whatever the cause, these debt numbers suggest California governments aren't putting enough away for their employees' retirement.

Increasingly, local governments are relying on pension obligation bonds to pay the difference between pension assets and payouts. Wall Street is happy to help, especially since courts have held that pension bonds can be issued without voter approval.
(snip/...)

http://www.miami.com/mld/miamiherald/news/breaking_news/9942005.htm