What happened to the money after the New Jersey governor killed a new commuter rail tunnel five years ago?
Bankers and new accounting rules are emboldening governments to borrow-and-bet their way out of pension problems, a strategy that’s backfired in the past.
Governments that borrow money to fund their pensions often pay less into their pension funds in future years than they're supposed to. Here’s how the 20 biggest pension bonds deals since 1996 have worked out.
The New Jersey governor pledges to “tell it like it is,” but his fiscal record and rhetoric don’t line up.
After a court ruling, the state’s legacy of borrowing to cover public employee pensions landed a $2.2 billion problem in the city’s lap.
Facing a giant budget deficit, Louisiana Gov. Bobby Jindal plans to borrow $750 million against future income from a landmark legal settlement with cigarette makers.
The New Jersey governor counts past pension borrowing as “school aid” in his budget – but not when it undercuts his claim of spending more on pensions than prior governors.
In pledging to fix New Jersey’s ailing finances, Gov. Chris Christie promised to avoid one-time budget fixes he called “sins of the past.” A review by ProPublica and The Washington Post shows he’s committed some of the same sins – and some new ones.
N.J. governor closed budget gaps by borrowing, shifting money from trust funds and paring back tax credits
The latest Securities and Exchange Commission examination of credit rating firms found problems similar to those documented in ProPublica's investigation of tobacco bonds.
When New Jersey decided to bail out some of its tobacco bonds, the state gave up $400 million in future revenues to pocket $92 million immediately, an arrangement that also helped one savvy investor cash in on a big bet.
Wall Street pressed S&P, Moody’s and Fitch to assign more favorable credit ratings to their deals and bragged that the raters complied. Now many of the bonds are headed for default.
Chautauqua County, N.Y. helped a bondholder get nearly $6 million for bottom-of-the-barrel debt – the bondholder let the county keep $600,000.
In Niagara County, N.Y., leaders took on 40-year debt to pay for short-term stuff, a case study in the perverse incentives tobacco bonds create.
In 1999, New York counties had a choice to make. They had just been promised annual payments from tobacco companies as part of a national settlement to reimburse them for smoking-related health care costs. Like winning the lottery, they could either get small payments indefinitely -- or take a lump sum immediately by entering into "securitization" deals. Counties knew that these deals would mean less money in the long run, but bankers said they offered protection in case the payments shrank or went away. Now the cost is clear: millions pledged to investors that counties could have kept for themselves.
A refinance of Niagara County’s tobacco bonds was good news — but for investors, not taxpayers.
Users can see how interest rates and declining cigarette sales affect the bottom line for counties that borrowed against income from the landmark tobacco settlement.
An updated tally by ProPublica shows that tobacco bondholders are due $2.6 billion of the $6 billion in this year’s payouts to state and local governments from Big Tobacco.
States and localities got cash up front but may end up paying back a lot more than they expected.