Save the $100,000 that Meredith Whitney charges for research
Just the numbers please
You can save the $100,000 that Meredith Whitney charges for her research. Reuters has the data on municipal bond issuers with the weakest profiles by bond-market standards. Puerto Rico leads the pack as the least credit-worthy issuer.
Issuer Weekly Yearly Outstanding Unfunded S&P Moody's Spread* Average Tax-supported Debt Pension Rating Rating Puerto Rico 225 203.7 $40 bln $24 bln BBB A3 Illinois 174 175.5 $24 bln $62 bln A+ A1 California 95 106.3 $87 bln $50 bln A- A1 Michigan 80 81.2 $7 bln $12 bln AA- Aa2 Nevada 70 68.0 $2 bln $2 bln AA Aa2 New Jersey 65 54.7 $32 bln $37 bln AA- Aa3 D.C. 60 57.3 $6.4 bln $0 A+ Aa2 N.Y. City 47 55.7 $61 bln $76-122 bln AA Aa2 Rhode Isl. 47 45.9 $2 bln $4 bln AA Aa2 Ohio 38 31.9 $11 bln $2.9 bln AA+ Aa1
*In basis points for the week ended June 17, 2011, Sources: Municipal MarketData, Moody's Investors Service, Standard & Poor's Ratings Services, local government budget reports, official statements
The roots of delusion
Small snippet from an excellent piece in the New York Times on the roots of the unfunded pension mess (emphasis mine):
It was 1999, and the California Public Employees’ Retirement System, or Calpers, the large government agency that manages retirement benefits for more than 1.6 million public workers, retirees and their families, was lobbying the legislature to increase employees’ benefits. Calpers’s plan would lower the retirement age for some workers to 50 years, even as it raised pensions to as much as 90 percent of their salaries.
Lobbyists were arguing that the plan — which would ultimately create the largest pension increase in the state’s history — wouldn’t cost “a dime of additional taxpayer money.”
But Mr. Seeling, the agency’s chief actuary, knew that wasn’t necessarily right. Sitting at his desk, poring over spreadsheets, he saw the truth. Calpers, at the time, was awash in cash and many cities believed that pensions were essentially self-funding if the stock market remained high. But if the market stumbled, he realized, Calpers’s plan could cost taxpayers billions of dollars.
Round three for California
California passed a budget last week, but then State Comptroller Chiang said it was not balanced and Governor Brown vetoed it. Now the Governor will bring a new budget proposal forward. Is Hollywood writing this script?
California Governor Jerry Brown has drafted a plan to pass a [new] budget through the Legislature that sidesteps Republicans who blocked a previous effort, according to two people with knowledge of the matter.
Brown’s proposal comes as legislators have been forced to forfeit pay for every day they fail to send a balanced budget to the governor past a June 15 deadline. He vetoed a spending plan sent to him by Democrats last week, saying it used legally doubtful maneuvers and one-time fixes.
Smoking bonds rally
Bloomberg reports that parties are close to a tentative agreement to settle a dispute related to tobacco bonds:
Ending a $7.1 billion dispute between states and cigarette makers may prevent future litigation and provide tobacco-backed bonds with more predictable income streams.
The [municipal] bonds rallied yesterday after reports that tobacco companies tentatively agreed to settle a disagreement dating to 2003. The fight stemmed partly from company claims that market- share erosion reduced the amounts they’re required to pay 46 states under a 1998 agreement tied to medical-related expenses.
“If there’s a settlement, that alone will be positive, because it will put an end to that open-ended question — are states going to lose $2 billion, $3 billion or $7 billion?” said Richard Larkin, director of credit analysis at Herbert J. Sims & Co. in Iselin, New Jersey. “Most people have had to assume that all this money is at risk.”
Wall Street Journal: Debt-Ceiling Standoff Restricts Muni-Market ‘Slugs’
Associated Press: Maryland studying tax revenue lost to Internet sales