Jan. 16 (Bloomberg) — Pennsylvania, which shoulders one of the biggest pension burdens among U.S. states, is bucking the wave of local governments trimming the benefits. Its bondholders are paying the price.
Since 2011, seven of the 10 states with the nation's largest retirement liabilities as measured by Moody's Investors Service have cut the costs. Pennsylvania, ranked eighth, has made no progress in that span, after lawmakers last year failed to pass Republican Governor Tom Corbett's proposal to curb the expense.
In the $3.7 trillion local-debt market, the state may see its relative borrowing costs double within two years and its credit grade weaken without a fix, said Adam Mackey, head of munis at PNC Capital Advisors LLC. In 2013, Pennsylvania bonds fared worse than those of Massachusetts, which has credit grades one step higher, data compiled by Bloomberg show. Obligations of Illinois, which last month broke an impasse to bolster its pensions, outperformed both states last quarter.
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