State Pensions Continue to Fall Behind


S&P has released an analysis of the per capita share statewide debt, pension liabilities and other liabilities (primarily health care liabilities).  New Jersey has the highest per person liability at $27,293 and Nebraska the lowest at $242.

CNBC S&P article

Kentucky to Overhaul Severely Underfunded Pension Plans


Kentucky officials plan to release an outline of plans to restructure the State’s severely underfunded pension plans.  The Kentucky pension system is one of the most poorly funded plans in the country.  The pension plan covering the State’s non-hazardous employees was 14.80% funded and the teachers’ plan was 35.22% funded.

The outline of the overhaul includes new employees being placed in a defined contribution plan (401(k) style).  No information was made available about what changes the overhaul would include in an attempt to reduce the net pension liability covering existing employees and retirees.

The Bond Buyer article

Public Pensions Suffer From a Gaping Hole


The Economist has a powerful article about American public sector pension funds.  The article is a good overview of the issues facing these defined benefit pension plans and some of the key assumptions that resulted in the current shortfall.

The Economist article

Budget Chief: No U.S. Bailout for Puerto Rico


Trump administration budget chief Mulvaney stated in a BloombergPolitics article “I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem.”  Mr. Mulvaney went on to say, “We are not going to bail them out.  We are not going to pay off those debts.  We are not going to bail out those bond holders.”

Frequently overlooked in the discussion of the Puerto Rico debt crisis is the impact on bond insurers.  Assured Guarantee and MBIA have not recently updated investors on their exposure to the Puerto Rico debt crisis.  The most recent information available indicates that Assured Guarantee may have significant exposure to Puerto Rico debt.

BloombergPolitics article

Alum Rock USD Ratings Downgraded


Standard & Poors downgrade the Alum Rock USD CA general obligation debt rating to BBB+ from AA- and its certificate of participation debt rating to BBB from A+.  S&P also signaled that an additional cut in rating or potentially withdrawing the rating entirely.

S&P cited the District’s inability to reconcile its books in a timely manner and difficulties obtaining information from District management.

The District has only received conditional approval of its 201-2018 budget from the Santa Clara County Office of Education.  Full approval is required for the District to issue new bonds to fund ongoing construction.  In addition, a June 2017 State of California audit criticized the District for poor budget and projected management and warned that the District may be vulnerable to fraud, misspending and mismanagement.

The Mercury News article