COVID-19 has been cited as the excuse for five municipal issuers ($407 million) not making scheduled debt service payments. Look for hospital, nursing home, toll road and sales tax dependent issues to be most at risk.
The Wall Street Journal is reporting that Puerto Rico has received approval for a bond restructuring plan that would wipe out 1/3 of its sales tax related debt.
The federal control board (FOMBPR) that oversees Puerto Rico’s finances has asked a court to invalidate $6 billion worth of debt issued by the U.S. territory. The debt includes all general obligation bonds issued in 2012 and 2014 in “clear violation of debt limits established by Puerto Rico’s constitution. These bonds were used to finance deficit spending.
One of the reasons public pension plans continue to be so poorly funded are Unrealistic Assumptions. There are numerous assumptions made by the investment and actuarial industries that serve public pension systems. Underlying these assumptions is pressure to use overly optimistic assumptions which translates to lower budget demands upon plan sponsors (i.e. states, counties, cities, school districts, etc.)
The Wall Street Journal has an article which highlights just one example of these overly optimistic or unrealistic assumptions. The median assumed investment return on pension assets is 7.25%. Over the past 10 years the actual median return was 6.79% and over the past 20 years the actual median return was 6.49%.
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.