MoneyPalooza Monstrosity: State and Local Governments Should Pay Down Pension Debt




If a state or local government’s public pension funds have large unfunded liabilities, those liabilities accrue at the assumed rate of return on the assets that should have been there to cover that liability.


The point is this: if it makes sense to pay down the pension unfunded liability with muni bonds, thus creating new liabilities and thus new leverage, it makes even more sense to take a “windfall” of cash and pay down the pension debt, which creates no new state/local government liabilities

Author(s): Mary Pat Campbell

Publication Date: 26 March 2021

Publication Site: STUMP on Substack