Does the GFOA recommend issuing pension obligation bonds?

The Government Finance Officers Association (GFOA) does not recommend issuing pension obligation bonds without careful consideration of specific circumstances. Pension obligation bonds are a form of debt that municipalities can issue to fund their pension liabilities, but they come with significant risks, including interest rate exposure and the potential for not achieving the projected investment returns.

The GFOA emphasizes that these bonds should not be considered as a regular or routine funding mechanism for pension liabilities. Rather, they may only be appropriate in particular scenarios where the expected benefits outweigh the financial risks. This cautious approach is grounded in the need for responsible fiscal management and the understanding that leveraging debt for pension funding can lead to higher long-term costs if the investments do not perform as anticipated.

Options suggesting unconditional support for issuing pension obligation bonds do not align with GFOA guidelines, which advocate for a more measured and situation-specific approach.