Moody's Ratings

By Daniel Borenstein, staff columnist © 2013, Bay Area News Group
Posted: 02/22/2013 05:51:55 PM PST
Updated: 02/24/2013 10:12:36 AM PST

Moody’s Investor Services will soon unveil new pension standards that could peel away gimmicks used to hide the shocking size of government retirement debt.

Final details have not been released. But if the rating company adopts the standards it suggested in a proposal circulated last year, unfunded pension liabilities for most state and local governments would be about $2.2 trillion, nearly triple what they currently report.

The new numbers will be used by Moody’s when it examines government agency finances to rate their bonds. The standards will not require governments to better fund their pension systems or affect official balance sheets. Moody’s doesn’t have that authority.

But the standards could drive up borrowing costs for local governments that suffer ratings downgrades because of the more transparent accounting. That might encourage public agencies to pay off pension debt faster.

Marcia Van Wagner, Moody’s vice president spearheading the changes, told me they stem from frustration about disparate ways governments calculate pension debts. Comparing one public agency’s pension debt to another’s is often apples to oranges.

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