Tags: GOP | Lawmakers | avoid | Pension | Bailout

GOP Lawmakers Move to Avoid Pension Bailout

Tuesday, 07 Dec 2010 11:36 AM

Republican lawmakers are gearing up to fight off any chances that the federal government may end up bailing out pension funds at state and local levels.

Three house Republicans recently introduced a bill that would deny states and local governments the ability to sell tax-exempt bonds — a key source of revenue — unless they disclose their pension-funded liabilities to the Treasury Department, the Wall Street Journal reports.

"The point of this is to smoke the rats out of their holes," Rep. Devin Nunes of California, who introduced the bill, tells the Wall Street Journal.

"What is the total amount of pension debt? No one really knows."

The federal tax-free status of interest on municipal bonds helps generate demand for the debt instruments and lowers borrowing costs.

While the federal government can regulate — and bail out — corporate pension funds via the Pension Benefit Guaranty Corp., no such mechanism exits for state and local employee pensions.

Critics says the move undermines states' rights, while supporters say underfunded pension liabilities are dangerously sky high.

Keith Brainard, research director of the National Association of State Retirement Administrators, estimates such liabilities at the state level to be more like $750 billion.

In New York state alone, the $132.8 billion pension plan there is underfunded by $71 billion, according to Empire Center for New York State Policy, a think tank.

"The traditional pension system exposes taxpayers to intolerable levels of financial risk and volatility," the organization says in a report, according to Bloomberg.

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Republican lawmakers are gearing up to fight off any chances that the federal government may end up bailing out pension funds at state and local levels. Three house Republicans recently introduced a bill that would deny states and local governments the ability to sell...
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2010-36-07
Tuesday, 07 Dec 2010 11:36 AM
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