PA Considers More Debt as Alternative to Funding Pensions

Kick the can down the road

HARRISBURG — Sometimes the cure can be worse than the disease.

So-called "pension obligation bonds" offer an enticing way for Pennsylvania policymakers to avoid a steep increase in pension payments over the next few years, but experts warn to tread carefully.

The idea of swapping one type of debt for another can easily backfire and leave the state in even worse shape.

At a state budget hearing last month, lawmakers and the heads of Pennsylvania's two major pension funds — the State Employees Retirement System, or SERS, and the Public School Employees Retirement System, or PSERS — discussed the possibility of selling bonds to pay off a portion of the combined $42 billion debt for the two systems.