Bet Big, Then Go Short

by Cezary Podkul and Cecilia Reyes, ProPublica
July 10, 2015

Governments that borrow money to fund their pensions often pay less into their pension funds in future years than they're supposed to. That can leave the funds in a worse shape than they were when the debt was sold, even if the pensions earn more on the borrowed money than taxpayers owe in interest.

Check out the table below to see how the 20 biggest pension bond deals since 1996 have worked out. And explore our map to see the pension funding ratios by state.

Related: When Wall Street Offers Free Money, Watch Out

Pension Funding Ratios by State

Deal Rank Year Sold Sponsoring Government State Amount of Pension Bonds Sold (millions) Bond Amount Deposited in Pensions (millions) Who Got The Money Bonds Used To Pay Or Offset Pension Contributions? Government(s) Underfunded Pension After Sale? Years of Pension Underfunding Did Funding Get Worse? Unfunded Liabilities At Issue (millions) Unfunded Liabilities Latest (millions) Funded Ratio At Issue Funded Ratio Latest Link To Bond Sale Document
1 2003 Illinois Ill. $10,000 $9,477 All five Illinois-managed pension funds Yes Yes 12 Yes $43,104 $104,619 48.6% 42.9% 2003 Illinois pension bond offering
2 2011 Illinois Ill. $3,700 $3,680 All five Illinois-managed pension funds Yes Yes 4 Yes $83,077 $104,619 43.3% 42.9% 2011 Illinois pension bond offering
3 2010 Illinois Ill. $3,466 $3,452 All five Illinois-managed pension funds Yes Yes 5 No $85,569 $104,619 38.3% 42.9% 2010 Illinois pension bond offering
4 1997 New Jersey N.J. $2,803 $2,750 New Jersey-managed pension funds Yes Yes 19 Yes ($1,231) $82,774 104.0% 32.6% 1997 New Jersey pension bond offering
5 2008 Connecticut Conn. $2,277 $2,000 Connecticut Teachers' Retirement System No No 0 Yes $6,530 $10,802 70.0% 59.0% 2008 Connecticut pension bond offering
6 2003 Oregon Ore. $2,084 $2,000 Oregon Public Employees' Retirement System No Yes 4 No $1,818 ($2,267) 96.2% 103.6% 2003 Oregon pension bond offering
7 2008 Puerto Rico P.R. $1,589 $1,426 Puerto Rico Employees' Retirement System Yes Yes 6 Yes $13,878 $30,000 17.2% 0.7% 2008 Puerto Rico pension bond offering
8 2005 City of Detroit Mich. $1,440 $1,371 Detroit General Retirement System and Police and Fire Retirement System Yes Yes 8 Yes $148 $2,918 97.9% 64.5% 2005 Detroit pension bond offering
9 2008 Chicago Transit Authority Ill. $1,297 $1,111 CTA Employees' Retirement Plan Yes Yes 7 Yes $636 $1,213 75.8% 60.9% 2008 Chicago Transit Authority pension bond offering
10 1999 City of Philadelphia Pa. $1,292 $1,250 Philadelphia Municipal Retirement System No Yes 12 Yes $1,365 $5,707 75.8% 45.8% 1999 Philadelphia pension bond offering
11 2008 Puerto Rico P.R. $1,059 $1,017 Puerto Rico Employees' Retirement System Yes Yes 6 Yes $13,878 $30,000 17.2% 0.7% 2008 Puerto Rico pension bond offering
12 2003 Wisconsin Wis. $850 $705 Wisconsin Retirement System No No 0 No $526 $53 99.2% 99.9% 2003 Wisconsin pension bond offering
13 1996 New York State N.Y. $773 $769 New York Employees' Retirement System and Police and Fire Retirement System No No 0 Yes ($9,270) $19,846 114% 88.7% 1996 New York State pension bond offering
14 2002 San Diego County Calif. $737 $550 San Diego Employees' Retirement Association* No No 0 No $1,435 $2,138 75.5% 82.7% 2002 San Diego County pension bond offering
15 2004 Kansas Kan. $500 $440 Kansas Public Employees' Retirement System Yes Yes 11 Yes $4,743 $8,292 70.0% 66.6% 2004 Kansas pension bond offering
16 2010 Kentucky Ky. $468 $465 Kentucky Teachers' Retirement System Yes Yes 4 Yes $11,061 $21,592 57.4% 45.6% 2010 Kentucky pension bond offering
17 2004 San Diego County Calif. $454 $450 San Diego County Employees' Retirement Association No No 0 No $1,203 $2,138 81.1% 82.7% 2004 San Diego County pension bond offering
18 1997 City of Oakland Calif. $436 $433 Oakland Police and Fire Retirement System Yes Yes 15 Yes ($56) $478 106.9% 67.9% 1997 Oakland pension bond offering
19 2004 Sacramento County Calif. $426 $420 Sacramento County Employees' Retirement System Yes Yes 2 Yes $330 $1,268 93.2% 85.2% 2004 Sacramento County pension bond offering
20 2004 Fresno County Calif. $403 398 Fresno County Employees' Retirement Association Yes Yes 1 Yes $41 $878 98.0% 82.2% 2004 Fresno County pension bond offering

Methodology

Top 20 list excludes pooled bond issues, refinancings, and bond sales whose pension funding component was too small to make the cut.

Funding ratios and liabilities reflect phasing-in of new accounting rules, which require pensions to calculate their assets and liabilities using different methodologies that require the use of lower rates of return for deeply underfunded pension plans. That makes certain plans, like New Jersey, Puerto Rico and Kentucky look more underfunded than they would have been under old accounting standards, but the general trend of decreasing funding is the same.

Unfunded liabilities measured at end of fiscal year in which bonds were sold, or next nearest year if data was unavailable, and the latest year for which the information was published. Amounts in parentheses mean pension assets exceed liabilities.

Count of years of pension underfunding includes fiscal year in which bonds were sold.


Sources: Bond sale data from Thomson Reuters. Uses of funds from bond documents. Pension funding statistics from annual financial reports filed by the pension plans and governments.

* A portion of San Diego's 2002 deal also went to refinance previous bonds