Rooted in Reason: Nurturing the Seeds of Liberty

A Drop in the Ratings by maliab
February 20, 2011, 4:27 pm
Filed under: Economy, Hawaii Sunshine | Tags:

By Malia Hill

I’m thinking that I’m going to have to start posting pictures of kittens or puppies or cute island babies in this space soon.  Because reporting on the state pension crisis is becoming such a downer, we may just have to resort to the occasional pick-me-up just to soften the blow a little.

As you may have guessed, there’s more bad news for Hawaii’s pension system.  Greg Wiles of the Hawaii Reporter has written an article explaining what the changes being made by Fitch Ratings (one of three major US credit ratings agencies) in the way it evaluates pension funding means for Hawaii. Allow me to sum it up–it’s not good.

The adjustments being made by Fitch are intended to help valuation of pension programs, including measuring different state pension funds against each other.  Under the new valuation system, Hawaii’s funding ratio (previously measured at 64.6%) could slip as low as 55.7%.  Fitch considers 70% to be an adequate funded ratio, while anything below 60% is considered weak.  The ratings slide has the potential to hurt the state’s efforts to sell bonds for major projects like roads, airport construction, and the like, as investors will likely demand higher interest rates.  Boy, isn’t it great that we’re building that light rail?  Awesome timing on that.

And let’s not forget that Moody’s (another ratings agency) just listed Hawaii as having the second-worst pension debt in the country.  I’m all for Hawaii leading other states, but not in unfunded pension liability.

Abercrombie has pledged to address the pension crisis, and there is a pending bill before the legislature that would take the (somewhat small) step of downgrading the amount that the state assumes the pension fund investments will earn annually from 8% to 7.75%.   Before we throw a party over that minor victory, consider that Fitch considers 7% a more realistic basis.  And then there’s the fact that this still doesn’t come close to responding the scope of the problem.  The good news?  Well . . . um . . . did I tell you about the cute thing my puppy did the other day?


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[…] This post was mentioned on Twitter by Lennie Jarratt, Hawaii Hawaii said: A Drop in the Ratings […]

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Malia, I’m wondering what you believe the solution should be for this “crisis”… Do you think that government workers should contribute mote to their pension fund? … Do you think the State should contribute more to their employees’ pension fund? … Do you think the taxpayers should contribute more to the government workers pension fund?

Do you know how the current pension fund is funded? … That might be a good place to start.

Is there any valid reason for any government workers to have a pension fund? … What’s wrong with Social Security, which is the only pension fund that the great majority of taxpayers have?

Are government workers paid less than those in private business? … Not according to current studies which show government workers are paid as much as 150% of private workers doing the same job.

Do you know that all the government pension funds at the city, state and county levels collectively own a majority interest in the Fortune 500 companies? … Have you ever wondered why governments seem to pass laws that ONLY benefit large corporations?

Watch Corporation Nation at

Comment by Mike Higgins

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