One state lawmaker is raising the controversial idea of borrowing money to help put a dent in Pennsylvania’s $47 billion unfunded pension liability.
House Rep. Glen Grell has suggested one way to pay down some of the state’s pension debt would be to issue a pension obligation bond — not as a way to cover required state contributions to the two pension plans, but as a way to borrow money at a better rate and produce some savings.
Such a bond wouldn’t mean taking on additional borrowing, because the commonwealth already owes money to its pension systems, said Grell, R-Cumberland.
A pension obligation bond isn’t any part of the governor’s overhaul plan.
Budget Secretary Charles Zogby said it’s not out of the question, but he said he’s not sure such a move would produce enough savings — and he notes it’s a bit of a gamble.
“The costs are real, and those will definitely hit the books. Whether the payoff is actually there or not is really a guess,” Zogby said. “I would suggest at least the odds are probably not good that it is a net positive at the end of the day.”
Conservative economic analysts advise against such bonds, saying any savings depend on a strong market.They also caution that whatever savings are generated are often used irresponsibly — for example, instead of paying down debt, they’re used to boost benefits.
Lawmakers outlawed pension obligation bonds with a 2010 package of pension system changes.A portion of the law would have to be repealed to issue such a bond.