Worst Idea for Fixing State Pensions
Pennsylvania Treasurer Rob McCord told the Pocono Record that now is the time to address the state pension crisis, rather than later, a point the Commonwealth Foundation agrees with. However, McCord’s proposed fix is extremely misguided:
Taxpayers would be better served in the long run if the state legislators and the governor agreed to borrow money now, while interest rates are low, to help cover pension costs. The bond would provide new investment capital for bargain stocks.
“We probably should be looking at a pension obligation bond because we’re missing a lot of investment opportunities now,” McCord said. “This is a prudent time to bring that debt onto the books.”
Part of the refinancing could be used to invest in the state’s infrastructure, he added.
So not only does McCord suggest borrowing money to invest in the stock market – a risky proposition for anyone to do – but he then suggests that we use the money from the bonds for something other than pensions. You will note that in Rick Dreyfuss’s presentation on Pensions & Politics, pension obligation bonds is the number 1 “non-reform reform” identified on slide 34.