Why is it important to pay state and local government debt? by James Spiotto Past economic downturns have taught us the importance of state and local governments to timely pay their public debts: Panics, recessions and depressions: Since...
Month: March 2015
Legislative Action: States and Municipalities’ Attempts to Mitigate Pension and OPEB Underfunding
States and Municipalities Have Attempted to Enact Legislation to Reduce or Eliminate Pension and OPEB Underfunding to Address the Problem by James Spiotto Background Facts State and local governmental workers are 12% of the nation’s workforce, and since 1970...
Can Pension Benefits Be Reduced, Rolled Back, or Changed?
How Have Obligations Related to Pension Benefits Changed Over Time, and What Options Exist When They are Unaffordable? Pensions have undergone transition over time from a gratuity (to be paid if you want) to a contractual obligation (that is...
The Pension and OPEBs Crisis – The Hard Facts and Possible Solutions
The Current State of the Underfunding of Pensions and OPEBs by James Spiotto State and local government workers are approximately 12% of the nation’s workforce – 16 million employees. While available cash to pay for employee benefits was...
Trustee and Bondholder Rights and Remedies
By James Spiotto A. In understanding the rights and remedies of bondholders and trustee, it is important to understand the critical differences between revenue bonds and general obligation bonds, lease appropriation bonds and conduit financings and their respective...
The Myth That States Required a Bankruptcy Option – Debt Resolution Mechanism’s for States
By James Spiotto Myth: States need the ability to go bankrupt and have no standing debt resolution mechanisms. Reality: Since the late 1800’s, no state has defaulted on its general obligation bonds with the exception of Arkansas in 1933 which was refinanced. State...
The Myth That Bankruptcy Is the Only Option for Distressed States and Cities – Alternatives to Chapter 9
By James Spiotto Myth: State and local governments only recourse to financial distress is to file bankruptcy or to stop making debt payments to bondholders. Reality: States do not presently have a bankruptcy alternative and do not seem to desire one. State and local...
What Factors Have Helped to Prevent Municipal Defaults and Bankruptcies?
by James Spiotto A. Past market discipline and state and local governments need to borrow: As noted, in the 1800’s and 1900’s, states and local governments in order to fulfill their mandated mission borrowed for needed infrastructure and essential governmental...
What Are the Causes of Municipal Defaults and Bankruptcy?
by James Spiotto A. Traditionally causes of municipal bond defaults in the U.S.A. have been more linked to inability to pay rather than unwillingness to pay or political risks: Economic depression. Non-essential services. Feasibility of projects and municipal...
Understanding Municipal Bankruptcy and Who Can Use Chapter 9?
By James Spiotto What is Chapter 9? Exclusive chapter of the Bankruptcy Code that provides a method for municipalities to adjust debt. Not a tool for elimination of municipal debt but adjustment of debt to what is sustainable and affordable. It is voluntary, a...