The new Republican House leadership, whose party benefited in November from public antipathy toward the bailout of banks, is moving to avoid a federal bailout of state and local pension funds.
Congress has little authority over, or responsibility for, state and local public-employee pensions. But with pension liabilities increasingly stressing state and municipal finances, the prospect that the problem will end up in Washington's lap has some academics and politicians urging that the federal government move preemptively.
The latest wrinkle: A bill introduced last week by three prominent House Republicans to deny states and localities the ability to sell tax-exempt bonds—the lifeblood for many governments—unless they report their pension-fund liabilities to the Treasury Department. The federal tax-free status of interest on municipal bonds helps generate demand for the bonds and lowers government borrowing costs.
The goal, the congressmen say, is to get a better handle on funding woes of public pensions, which they say are not always forthcoming about the true extent of their financial exposure.
For decades, the federal government has regulated corporate pension funds and a federal agency, the Pension Benefit Guaranty Corp., can bail them out.
But there is no such federal backstop for state and local employee pensions. Some argue that Washington would be hard pressed to ignore a pension plan if it threatened a major government insolvency.
"The point of this is to smoke the rats out of their holes," said Rep. Devin Nunes of California, who introduced the bill. "What is the total amount of pension debt? No one really knows."
More here at WSJ
Congress has little authority over, or responsibility for, state and local public-employee pensions. But with pension liabilities increasingly stressing state and municipal finances, the prospect that the problem will end up in Washington's lap has some academics and politicians urging that the federal government move preemptively.
The latest wrinkle: A bill introduced last week by three prominent House Republicans to deny states and localities the ability to sell tax-exempt bonds—the lifeblood for many governments—unless they report their pension-fund liabilities to the Treasury Department. The federal tax-free status of interest on municipal bonds helps generate demand for the bonds and lowers government borrowing costs.
The goal, the congressmen say, is to get a better handle on funding woes of public pensions, which they say are not always forthcoming about the true extent of their financial exposure.
For decades, the federal government has regulated corporate pension funds and a federal agency, the Pension Benefit Guaranty Corp., can bail them out.
But there is no such federal backstop for state and local employee pensions. Some argue that Washington would be hard pressed to ignore a pension plan if it threatened a major government insolvency.
"The point of this is to smoke the rats out of their holes," said Rep. Devin Nunes of California, who introduced the bill. "What is the total amount of pension debt? No one really knows."
More here at WSJ
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