MuniLand

I forget that the last recession was in the mid 2000′s.

We had a short, intense credit boomlet in between that and the crash of 2008.

The hangover from the housing and financial bubble has been tremendous.

Deficits, caused by the financial crisis,  are still a serious problem in muniland.

Remember that states must balance their budgets annually.

Here is a spreadsheet with the shortfall numbers for fiscal year 2012 from the Center on Budget and Policy Priorities.

The total shortfall for all states in 2012 is ~ $112 billion or approximately 17.6% of projected budgets.

Poor Nevada leads with the highest percentage at 45%.

But it’s sunny California that has the biggest dollar shortfall at $25 billion. More serious times ahead.

Reform muniland pensions

There has been substantial abuse of pension systems. Politicians for decades have granted increasing benefits to employees. And workers have used various tricks to vastly increase their benefits. All this has contributed to the unsustainability of muniland pensions.

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.