The Impact of Pensions on State Borrowing Costs
The brief’s key findings are:
- Both public pensions and municipal bonds are in the headlines.
- An important question is how pensions affect municipal bond rates.
- Our analysis of 37,500 bond issues found that pensions raise rates by a modest 3-7 basis points.
- However, if pension costs rise as a share of state budgets, this impact could increase in the future.
- Interestingly, pensions do not appear to have an impact on bond ratings.