How Have Municipal Bond Markets Reacted to Pension Reform?

Source: Jean-Pierre Aubry, Caroline V. Crawford, Alicia H. Munnell, Center for State and Local Government Excellence, October 2017

From the summary:
This issue brief examines whether state and local borrowing costs have become more sensitive to pensions since the financial crisis.

The brief’s key findings include:
Rating agencies have begun to explicitly account for pensions in their methodologies;
Several governments have experienced downgrades attributable, in part, to their pension challenges;
Pension funded status can have a meaningful impact on the borrowing costs for a municipality; and
Adequate funding, monitoring, and management of public pensions should be an important component of state and local governments’ fiscal management.