Strapped Governments Revive Pension Bonds

Publication: Washington Post

Author: Michael McDonald and Adam L. Cataldo

05/04/2008 - Pension bonds are making a comeback, as states and cities from Alaska to Philadelphia bet they can use the proceeds to help fill deficits in their retirement funds and still generate a higher return than what they pay in interest.

Officials may sell a record $35 billion of the securities this year after offerings have declined since 2003, according to data compiled by Bloomberg. Connecticut issued $2.2 billion of pension debt last month, paying an average rate of 5.88 percent on money that state officials projected would earn 8.5 percent when invested.

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While the systems earned on average 11.9 percent a year from 2003 to 2006, many of them failed to make the contributions required to keep pace with the benefits they promised, the Pew Center on the States, a nonprofit public policy research group, said in a December report. New Jersey's seven retirement funds have a combined deficit of $28.3 billion, up 14 percent from last year, according to state actuarial reports.

Read the full article Strapped Governments Revive Pension Bonds on the Washington Post's Web site.

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