More Bad News for State and Municipal Pension Plans

In further signs of the eroding viability of state and municipal pension plans, the SEC filed a complaint against the state of Kansas claiming inadequate disclosure of pension liabilities in its 2009 and 2010 bond offerings.

The SEC claimed that Kansas failed to adequately disclosure their pension liabilities when issuing $273 million in bonds. Calling his state’s pension system the second-worst funded system in the country, Gov. Sam Brownback (R) has been cooperating with the SEC by taking steps to be more transparent and by creating a new retirement plan for workers hired in 2015. There is a reported pension shortfall of $8.3 billion, while taxpayer debt is just $3.1 billion.

In Detroit, meanwhile, a bond insurer with potentially $1 billion in liability is seeking to dismiss a suit by the city filed in Bankruptcy Court which sought to dismiss the insurer’s claims on money borrowed by the city in 2005 and 2006. The city claims that the certificates of participation, which raised $1.45 billion, were invalid because they exceeded state borrowing limits. The insurer claims that they are victims of fraud by the then-mayor of Detroit, who is now in jail.

As Dorothy in The Wizard of Oz might say, “Lions, and tigers and bears. Oh my!”