When Moody’s Investors Services issued a “Request for Comment” last July about their plan to begin recalculating the effect of massive state and local unfunded pension liabilities on credit quality, I warned that this would eventually result in the across-the-board slashing of municipal bond credit ratings and numerous municipal bankruptcies in California.

It now appears that I may have understated the risk for California.  The California Public Policy Center released a report analyzing of the impact of the new Moody’s policy on six Northern California counties: Alameda, Contra Costa, Marin, Mendocino, San Mateo and Sonoma.  Their conclusion is that, when the new rules are applied, the annual cost of pensions will increase from the equivalent of about 50 percent to 100 percent of these counties’ net property tax income.