Before the reader panics, thinking that H1N1 is back on the front burner, I’m referring to the “disease” that has surfaced amongst the PIIGS of the EU.
Today’s electronic version of the NYT outlines the latest plan of New York state to deal with its budgetary woes. Faced with a lack of wherewithal to make almost $6B of mandatory annual payments to the state pension fund, TPTB in New York, (Gov. David Paterson, and the state legislature) are evidently signing off on a plan that would allow for the borrowing of the funds due the pension fund from……wait for it….the very same pension fund!
Here’s the link:
This is very much akin to an individual putting the payment due on one credit card on another card. While such a practice may forestall all of the negative impacts of a late, or missed payment, it does absolutely nothing to address the fundamental issue of excessive indebtedness.
Of course, it is entirely possible that the good pols of New York drew their inspiration from Gov. Pat Quinn’s (Il.) idea of floating $6B worth of bonds in order to make THAT state’s contribution to the pension plan. Upon reflection, New York’s plan has the added refinement of not subjecting the debt to the vagaries of the credit markets, as would happen to Illinois. It should be noted that Moody’s recently cut Illinois’ rating from A1 to Aa3, meaning such debt will carry a higher price tag.
Souces: NYT, The Bond Buyer
Disclosure: No positions