Congressman Darrell Issa’s Committee on Oversight and Reform meet today on state and municipal debt.
The hearing was really a dressed up fight over municipal pensions and collective bargaining rights.
The concern is that bond investors, worried about unknown pension liabilities, will increasingly require more yield for the risk of owning municipals. And some think a solution is to remove the current form of guaranteed pensions.
Many public workers do not get Social Security; rather they get a municipal pension. This is a “defined benefit”.
Defined benefit plans are like Social Security or a fixed annuity. You and/or your employor pay into the plan for a number of years and at retirement you receive a monthly check for a fixed amount adjusted for the cost of living (COLA) increases.