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Pension bonds add risk to public retiree crisis

Oakland's leaders took a risk by borrowing $213 million to cover pension payments, betting that the fund's investments will earn more than the bonds cost.

By Judy Lin | Updated on January 03, 2013
AP Photo/Marcio Jose Sanchez

SACRAMENTO, Calif. (AP) — Oakland’s city leaders took a risk when, rather than lay off more staff or cut services, they decided to borrow nearly $213 million to cover pension payments owed to retired city workers. They’re betting that the pension fund’s investments will earn more than the cost of issuing pension obligation bonds.

If they’re right, a financial burden is eased. If not, the city is saddled with paying interest on top of the payments it has promised retirees.

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