Following on the heels of a grim Fitch report from earlier this month, which warned that little progress is being made toward making up state pension shortfalls, an SEC official offered some strong words:
“Trillions of dollars in liabilities — reflecting amounts promised to state and local government workers — are not appropriately reflected on government books, thereby seriously misleading investors about the riskiness of their investments in municipal securities,” said Daniel Gallagher, one of the five members of the Securities and Exchange Commission, which regulates U.S. financial markets.
“In the private sector, the SEC would quickly bring fraud charges against any corporate issuer and its officers for playing such numbers games,” he also said in a presentation to the Municipal Securities Rulemaking Board, which writes the rules for public sector debt that the SEC enforces.
Investors, take note. But perhaps more importantly, this is yet another friendly reminder for our readers who may be counting on a state pension: Assurances from city and state officials that these obligations will be met should be taken with a gargantuan brick of salt.