the pbgc will died in bankruptcy just like nyc otb
king and schumer should come speak and take questions from local 707 members st plattedeutsche in franklin square on september 13 at 8 pm
Why Chicago's Pension Obligation Bond Plan Is Even Worse Than It Seems
The Wall Street Journal brought the Chicago pension obligation bond proposal, which I first addressed in an article last week, into the national spotlight yesterday, in a (nonpaywalled) article, "Chicago’s New Idea to Fix Its Pension Deficit: Take On More Debt," which reports that:
Finance Chief Carole Brown said she would decide in the next week whether to endorse a $10 billion taxable bond offering that would be used to help close Chicago’s $28 billion pension funding gap. If the proposal is accepted by Mayor Rahm Emanuel and approved by the City Council, it would become the biggest pension obligation bond ever issued by a U.S. city.
The article further reports that the city is expecting a 5.25% interest rate for the bond; its bet is that it will earn more by investing those assets than it has to pay out in interest.
Easy money, right? Eh, not so fast.
The municipal pension valuation interest rate is currently set at 7%; it is the nature of government pension accounting that, in general, valuation interest rates are set at the plan sponsor's assessment (working with investment advisors) of the expected long-term return on fund assets. This means that, based on the pension board's own assessment, there isn't much room for error. And, indeed, Thurston Powers, writing at ALEC (American Legislative Exchange Council), is skeptical:
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