Alaska officials have been exploring the idea of a pension obligation bond sale since November; back then, the plan was to sell $1.6 billion worth of the bonds.
Now, the sale is likely to be even larger.
Governor Bill Walker doesn’t need the state legislature’s approval for the issuance, because their approval of a since-scrapped bond sale in 2008 still stands.
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The pension obligation bond is part of a multi-step process to repair the state’s budget, including a potential personal income tax, something the state hasn’t seen in 35 years, Mitchell said. Even the state’s famous oil dividend checks to residents are being questioned, Mitchell said.
The state’s pension system was in bad shape long before oil prices fell. As of 2013, Alaska had the fourth-worst funded pension among U.S. states, reporting it had 52.3 percent of the money needed to pay retirees, better than only Illinois, Connecticut and Kentucky, data compiled by Bloomberg shows.
If Alaska goes ahead with the bond, the debt service would be an appropriation of the state, Mitchell said. Because that opens up the bond to non-payment risk, Governor Walker plans to ask for approval when the state legislature reconvenes in the third week of January even though the approval granted in 2008 is still valid, Mitchell said.
Standard & Poor’s downgraded the state’s credit rating on Tuesday.
Photo credit: “Flag map of Alaska” by 2002_Winter_Olympics_torch_relay_route.svg: User:Mangoman88, using Blank_US_Map.svg by User:Theshibboleth – 2002_Winter_Olympics_torch_relay_route.svgFlag_of_Alaska.svg. Licensed under Public Domain via Wikimedia Commons
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