School District Pension Bond Issuance and the Influence on Spending Behavior
By
Thad Calabrese
Assistant Professor
Baruch College – CUNY
School of Public Affairs
thad.calabrese@baruch.cuny.edu
Todd Ely
Assistant Professor
University of Colorado Denver
School of Public Affairs
todd.ely@ucdenver.edu
DRAFT
Please do not cite without permission.
Comments and suggestions are welcome.
Abstract
Because unfunded pension liabilities increase demands on current government spending,
strategies for addressing these liabilities directly influence other spending within government
operating budgets. This paper examines the use of pension obligation bonds (POBs) by school
districts as a financing strategy to address these unfunded pension liabilities of educators. In
particular, we analyze whether and how the use of POBs alters spending patterns within school
districts. POBs are marketed as a money-saving mechanism for governments; from a policy and
management perspective, the oft-stated intent of POBs is to reduce the burden of annual pension
system payments while maintaining or increasing spending on other education priorities. In this
paper, we examine whether the use of POBs has allowed school districts to maintain or increase
spending for expenditures other than teachers’ pensions. Our empirical results consistently
indicate that school districts that have used POBs have, in fact, had declines in pension
expenditures, but also have experienced a decline in total spending, as well as declines in current,
instructional, and support service spending. The spending declines extend beyond the expected
reductions in annual benefits costs associated with POBs. The results suggest that the use of
POBs is not a painless solution to school districts’ unfunded pension liabilities.
“In the spring of 2008, the Denver public system needed to plug a $400 million hole in its
pension fund. Bankers at JP Morgan Chase offered what seemed to be a perfect solution. The
bankers said that the school system could raise $750 million in an exotic transaction that would
eliminate the pension gap and save tens of millions of dollars annually in debt costs – money that
could be plowed back into Denver’s classrooms, starved in recent years for funds.” – Gretchen
Morgenson, New York Times (August 5, 2010)
The financing of public employee retirement benefits has received attention recently as
increasing pension and health care expenditures place additional stress on already strained public
budgets. Although these concerns are frequently attributed to current unprecedented events (such
as severe economic recession), the funded status of public pension systems has been a major
policy consideration since the 1970s, when one study placed the estimated ratio of public
pension assets compared to public pension liabilities at approximately 50 percent (US GAO
1979). The funded status of teacher pension plans, in particular, significantly declined between
1971 and 1980 (Inman 1986), and studies have found that teacher pensions are less funded than
those for other public employees (Giertz and Papke 2007, Eaton and Nofsinger 2008). Teacher
pension plans even became a prominent theme in the 2010 Senatorial campaign of Colorado’s
Michael Bennet. Bennet’s handling of the Denver Public School System’s teacher pension plan
when he was the district superintendent became a major campaign issue, with opponents
charging that Bennet was too close to Wall Street banks and that he gambled with the financial
health of the school district.
As contributions to teacher pension plans increase to make up for past shortfalls in
funding and expected earnings, these increased expenditures may crowd-out other classroom
initiatives, such as reduced class-sizes, expanded curricula, capital investment in property, and
rehabilitation and maintenance of existing capital stocks (Barro and Buck 2010). Because
governments finance pension expenditures from general fund revenue, other programs funded
from the operating budget compete with pensions for resources (Peng 2004). As demonstrated in
recent years, unfunded liabilities tend to increase for government pension systems during the
same fiscal downturns that are traditionally accompanied by rising government service demands
and falling tax revenues. Strategies for addressing the unfunded liabilities of public pensions,
therefore, directly influence spending within the operating budgets of governments.
This paper examines the use of pension obligation bonds (POBs) by school districts as a
financing strategy to address the unfunded pension liabilities of educators. In particular, we
analyze whether and how the use of POBs alters spending patterns within school districts. POBs
are marketed as a money-saving mechanism for governments; from a policy and management
perspective, the oft-stated intent of POBs is to reduce the burden of annual pension system
payments and maintain or increase spending on other education priorities. In this paper we
examine whether the use of POBs has allowed school districts to maintain or increase spending
for expenditures other than teachers’ pensions. Our empirical results consistently indicate that
school districts that have used POBs have, in fact, had declines in pension expenditures, but also
have experienced a decline in total spending, as well as declines in current, instructional, and
support service spending. The spending declines extend beyond the expected reductions in
annual benefits costs associated with POBs. Only other current spending (such as on food) and
capital outlays remain unaffected by the use of POBs. Further, we find that these relative
declines in spending occur despite overall increases in education spending between 1992 and
2008.
4
Because pension underfunding will likely continue for the foreseeable future and place
considerable stress on public budgets, an increasing number of all governments will consider the
use of POBs as a financing strategy. However, limited analysis and attention has focused on
them. One goal of this paper is to inform public and financial managers considering using POBs
about the possible effect on education spending. This paper contributes to the public financial
management and education finance literatures in at least three important ways. First, the paper
describes the characteristics of those school districts that have used POBs to address their teacher
pension expenditures. Second, our analysis is the first empirical examination of how POB usage
affects government spending. Third, this paper is the first to document the use of POBs by
government issuers, and shows how school districts are the major player in this market based on
the number of POB issues.
The next section of this paper describes POBs in greater detail, and the third section
summarizes which governments have used POBs in the past to address pension funding issues.
The fourth section focuses specifically on Indiana and Oregon, where nearly 84 percent of school
district POB issuers are located. The fifth section articulates testable research hypotheses,
followed by a presentation of the empirical specification to analyze how using POBs has altered
spending patterns within school districts. The final section discusses the results and concludes.
Public Pension Systems, the Mechanics of Pension Obligation Bonds, and Impetus for
Usage
POBs are used by governments in an attempt to reduce current spending on pension
benefits; however, this reduced spending may be the result of three different incentives facing
5
governments: budgetary relief, potential investment arbitrage, and cost of capital arbitrage.1 To
understand each incentive and why governments use POBs, it is necessary to understand how
public pension plans are financed, how pension liabilities are calculated, and how pension
obligations interact with public budgets.
Background on Pension Expenditures and Underfunded Pensions
Annual budgeted pension expenditures are generally made up of two components: the
normal cost and the supplemental cost. The “normal cost” represents the amount the government
must put aside into the pension fund currently to finance the benefit earned by an employee in
the current period. In addition, the government has “supplemental costs,” which represent the
amortized shortfalls of past actuarial assumptions (such as investment returns, mortality rates,
etc.) as well as shortfalls in past annual funding (such as missed or lower normal costs in the
past).2 A public pension plan’s “Actuarial Accrued Liability” (AAL) represents the present value
of total pension obligations the government currently owes existing and past employees, based
upon a specific actuarial funding method. The AAL represents a claim on resources by
government workers (past and current) and other beneficiaries.
Underfunded pension systems exist when the value of pension assets – which are generally
valued over several years to reduce the volatility of reported assets – are less than the value of
the AAL. The amount of underfunding is referred to as the “Unfunded Actuarial Accrued
Liability” (UAAL). This underfunding results, in general, from either benefit enhancements
1
In reality, governments may face more than one of these incentives at a time. These motivations, therefore, should
not be considered exclusive to one another.
2 Importantly, strong investment returns (in excess of the actuarial assumed rate) can actually result in negative
supplemental costs that lower future pension contributions from governments. Strong gains on invested pension
assets in the late 1990s allowed many governments to pay little or nothing into their pension systems while
maintaining well-funded plans. Giertz (2003) finds that the chronic underfunding of public pensions largely
disappeared in the 1990s not because of increased attention to improved funding by plan sponsors, but because of
equity returns during the 1990s that exceeded actuarial assumptions.
6
made retroactively (and, therefore, not paid during employees’ working careers), actual results
differing from actuarial assumptions (for example, lower than expected investment returns), or a
government failing to fund its normal pension cost.
POBs as Budgetary Relief
Given the nature of pension underfunding, POBs are borrowings by governments seeking
to reduce this differential between plan assets and plan liabilities. The government borrows
money - usually through the general fund by issuing taxable general obligation debt - and places
the proceeds into the pension fund – a separate fiduciary fund.3 By reducing this underfunded
liability using the POB proceeds, the government’s supplemental costs are reduced. However,
the government has also assumed a liability with the POB that requires interest and principal
payments, distributions to any associated sinking funds, and other additional related issuance
expenses.4 The POB essentially replaces an off-balance sheet liability (the UAAL) with a hard
liability owed by the government. The majority of these POB liabilities are paid from the general
fund of the government, which is also where most other routine operating expenditures are
financed. The use of POBs is ultimately intended to reduce the annual pension expenditures
required of a government or ease large one-time required contributions so that the impact on
alternate spending categories is attenuated.
POBs as Potential Investment Arbitrage
Beyond potential budgetary relief, POBs are marketed as arbitrage opportunities, in which
3
Initially, POBs were issued as tax-exempt bonds. The tax-exempt rate of interest on these bonds is generally below
the risk-free rate of return on comparable Treasury bills. This differential allowed governments to earn arbitrage
earnings that were effectively paid for by reduced income tax receipts for the federal government. Section 148 of the
Internal Revenue Code of 1986 (implemented with the Tax Reform Act of 1986 – TRA86) contained provisions that
forbade future POBs from receiving tax-exemption. Subsequent POBs have been issued as taxable securities (with
some minor exceptions).
4 It is not unusual for debt issuers to pay for some portion of issuance costs out of the bond proceeds.
7
a government can issue taxable debt at a low interest rate and invest the proceeds in securities
(held by the pension fund) expected to earn a rate of return in excess of the bond’s interest cost.
This “actuarial arbitrage” is premised on the notion that equity returns are greater on average
than the interest cost of the pension obligation bond incurred by the government.5 Many
governments have found the assumed rate of return (which averages approximately eight percent
for public pension systems6) is difficult to attain; one study estimated that following the financial
volatility that began in 2008, very few POBs were likely generating savings in excess of their
costs for governments (Munnell et al. 2010).7 The City of Oakland, California has reportedly lost
$250 million on investments made with proceeds from its POB issue in 1997 (Jensen 2011).
POBs as Cost of Capital Arbitrage
Most local governments and school districts, in particular, do not operate their own singleemployer pension systems. Rather, money from many governments is pooled together in a
multiemployer system to achieve economies of scale for administrative and investment expenses.
In 23 states, teachers belong to the same pension system as other public employees, while 27
states maintain separate pension systems specifically for teachers; only, 14 school districts
operate their own pension systems independently of statewide systems (Peng 2008).8
Governments that fail to make their annual required contributions (ARCs) to a multiemployer
5
The potential arbitrage can be stated as E(Ri) = E(R1) – rb where E(R1) is the expected return of the investment and
rb is the interest cost of the borrowed funds.
6 Based on the 2008 Public Fund Survey by the National Association of State Retirement Administrators (NASRA),
available at www.publicfundsurvey.org.
7 Gold (2000) and Bader and Gold (2002) argue that POBs transfer economic value from future taxpayers to current
taxpayers by definition. They point out that swapping risk-free Treasury bills for riskier equities has an economic
value of zero because the asset values of each are equal at the time of the swap. Because POBs cannot be issued
below the risk-free rate, they cannot invest in risk-free Treasuries and must invest in riskier equities. The riskier
equities, however, are economically equivalent to the risk-free Treasuries on a risk-adjusted basis; hence, POBs are
inherently negative value transactions.
8 One of these independent school districts was Denver Public Schools (DPS) in Colorado. The school district’s
pension system was merged with the state’s Public Employees Retirement System in 2009. The merger was
completed after the school district issued a POB to fully fund existing pension obligations (McPhee 2009).
8
system face additional interest costs from the pension system to induce full payment; the interest
cost is generally the assumed rate of return (essentially charging the government the expected
opportunity cost of the invested funds). When facing such penalties, governments may turn to
POBs as the cheaper alternative to missing a pension payment to the system. If a POB can be
issued at taxable municipal debt rates (usually below six percent9) and the interest penalty for
being underfunded is on average eight percent, then issuing a POB serves as a cost of capital
arbitrage for the local government since it actually does reduce its financing costs.
Use of Pension Obligation Bonds10
Since the passage of TRA86, more than 650 individual governments have issued nearly
$50 billion of taxable POBs. States tend to issue extremely large POBs when they go to market
(for example, Illinois sold a $10 billion face value POB in 2003 and a $3.7 billion issue in 2011),
but school districts have been the most frequent issuers of POBs to date – representing more than
70 percent of all POB issuers. These school districts tend to issue smaller bonds when compared
to other governments, tend to issue single rather than multiple POBs, and are more likely to
bundle their bond sale with other school districts in the state compared to other governments.
Although smaller than other POB issues, most school districts also have smaller budgets
compared to states, cities, and counties – because much of the districts’ own budgets come from
these higher-level governments. The average POB bond issue is over 28 percent of a school
district’s annual spending, indicating that these POBs are large relative to the districts’ annual
9
The weighted average interest rate for the S&P Taxable Municipal Bond Index was 5.3 percent as of August 31,
2010. The interest rates do not include Build America Bonds (which are also taxable municipal bonds), which have
higher weighted average interest rates because the federal government provides a credit (rather than a tax
exemption) on the interest.
10 The data are described in complete detail in the next section.
9
budgets.11 As a point of comparison, the largest POB issue of $10 billion by Illinois in 2003 was
only 23 percent of its annual governmental funds spending.12 City and county POB issues are
clustered in California, New York, and Pennsylvania, accounting for nearly 60 percent of the
total volume by these types of government.
<Insert Table 1, about here>
Within the school district POB issuing population, nearly 84 percent of issuers come from
just two states: Indiana and Oregon. In fact, the first POB issued by a local government was the
Multnomah County School District in Oregon in 1984, before the IRS ruled such tax-exempt
debt as arbitrage (Pierce 1984). Denver Public Schools issued a significant POB in 1997 and
again in 2008. The latter transaction fully funded past pension commitments to accommodate the
merger of the district’s pension system into that of the state.
<Insert Table 2, about here>
Table 3 compares the characteristics of school districts that have issued POBs and those
that have not by state. In general, school districts that have issued POBs tend to be larger (when
measured by enrollment), more dependent upon own-source revenue (as opposed to
intergovernmental transfers), have larger percentages of minority students, and are located in
suburban locales.
<Insert Table 3, about here>
11
Calculated through 2008 only, because spending data limited to these years. The minimum POB size to annual
spending was 1.2 percent, and the maximum was 120.3 percent.
12 Illinois Comprehensive Annual Financial Report for 2003 is available at http://www.apps.ioc.state.il.us/iocpdf/CAFR2003.pdf, and total governmental funds expenditures is found on page 24.
10
After the asset values of many technology companies significantly declined in 2000 (the
so-called “dot-com bubble”), interest rates fell significantly. This reduction in rates made
borrowing less expensive for governments. School districts may have capitalized on this low
interest rate environment in an attempt to maximize the supposed arbitrage opportunities
afforded by POBs. As interest rates began to flatten out (that is, not continue to decline) in 2006
and began to increase again in 2007, the volume of POB issues declined with it, as described in
Figure 1. At the same time, equities greatly appreciated in value (see Figure 2). Low interest
rates coupled with strong equity returns suggested that school districts could maximize the
supposed arbitrage opportunities (borrow at low rates to invest in higher returning securities) of
POBs. Figure 2 suggests that market timing may have been a major consideration for school
districts willing to issue POBs.13
<Insert Figure 1, about here>
<Insert Figure 2, about here>
Interestingly, Oregon and Indiana school districts used the most POBs (by number of
issuers), but the reasons for their usage were very different. State law limits the financing
alternatives available to school districts because they are corporations of the state. This vertical
intergovernmental relationship dictates whether POBs are available to school districts, although
13
Although not addressed directly in this paper, some school districts (especially in Minnesota) have begun issuing
OPEB (Other Post Employment Benefits) bonds to fund the actuarial accrued liabilities created by retiree healthcare
costs. Unlike pensions, these costs have largely been funded on a pay-as-you-go basis rather than during employees’
working careers. The Government Accounting Standards Board (GASB) required governments to disclose OPEB
liabilities beginning in 2007 or 2008 (depending on the government’s size) with the adoption of Statement Number
45. The issues raised in this paper about pension costs are applicable as well to OPEB costs, although OPEB
liabilities are underfunded to a much more severe extent than are pensions. According to the Pew Center on the
States (2010), only $32 billion of the accrued $587 billion in OPEB liabilities have been funded – an aggregate
funded ratio of approximately five percent. For comparison, public pensions have accumulated approximately $452
billion for $555 billion of accrued liabilities – an aggregate funded ratio of about 81 percent.
11
school districts have certainly played a role in advocating for changes in state law that allow
POB issuance. In Wisconsin, the State incentivized governments to pay any accumulated
underfunding of pension liabilities to the statewide retirement system by January 31, 2004 by
waiving the previous year’s interest payment (Shields 2003); New York State passed legislation
in 1996 that allowed school districts to avoid voter referenda on POBs (Birger 1996); in the
1990s, New Jersey school districts induced many workers to retire early to relieve budget stress –
the resultant increase in accrued pension liabilities led the State to pass legislation in 2002
allowing districts to issue POBs to fund these liabilities (Braun 2002).
The following section briefly describes what led school districts in Oregon and Indiana to
adopt using POBs to such a wide extent, especially in comparison to school districts in other
states. As shown in Table 3, Oregon spending per pupil is significantly lower for POB issuers
compared to non-issuers, while the opposite is true in Indiana at the time of issuance.
Oregon
Governments within Oregon began issuing POBs in the late 1990s. At this time, the
Oregon Public Employee Retirement System (PERS) – the retirement system in which Oregon
school districts participate – reported an increasing unfunded liability and associated higher
required annual pension contributions from members. However, only certain governments within
Oregon were permitted to issue POBs, with school districts generally excluded from issuing such
debt.14 In 2001, the Oregon state legislature passed legislation that permitted most public
corporations within the state to issue POBs, and also created mechanisms to allow governments
14
Only governments that kept individual reserve accounts with the state pension system were able to issue POBs,
using these accounts to hold the bond’s proceeds (Ryan 2009a). In general, Oregon school districts did not have
such reserve accounts, and, therefore, were unable to issue POBs.
12
to pool POB issues to reduce the underwriting fees associated with marketing new bonds.15 With
this new legislation, the number of school districts able to issue POBs rose from two before 2001
to approximately 129, out of nearly 200 total school districts statewide. Effectively, the state
permitted school districts to take advantage of the arbitrage strategy of issuing low interest debt
in the hopes of achieving higher returns on the investment, thereby lowering the school districts’
annual required contributions to the pension plan.16
The Executive Director of the Oregon Association of School Business Officials noted that
school districts entered into POBs specifically so that generated savings could be focused on
direct classroom spending (Ryan 2009b). The Portland schools’ chief financial officer and
controller noted in 2003 that using a POB “saved us millions of dollars. It would be silly for me
not to take this” (Jones 2003). Similarly, financial advisors and underwriters publicly favored
school districts issuing POBs. “[I]t is a prudent thing for districts to do. If you don’t take
advantage of this now when interest rates are in the 5 percent range, you may have lost the only
opportunity in your control to lower your PERS cost,” said a vice president of one of the major
bond-underwriting firms (Jones 1993).17 Although proponents of this financing policy –
including the Oregon School Boards Association – likened it to refinancing debt at a lower
interest rate, some school districts did not issue POBs because they saw the potential downside
of the instruments. For example, one district business manager noted that, “If I borrow money at
5 percent and PERS earns 4 percent on it, I’m worse off” (Jones 2003).
15
Oregon also created an aid intercept credit enhancement program to lower interest costs for POBs. In the event of
a school district default on a POB, the state will “intercept” aid payments to the school district and divert the funds
to bondholders. The Oregon Pension Obligation State Intercept Act is currently rated AA2 by Moody’s.
16 Some of the POB issuers sold bonds in excess of their unfunded liabilities specifically to invest the bond
proceeds in the equities markets and offset future pension contributions with the expected returns. These additional
funds are referred to as “side accounts” (Ryan 2009b).
17 Notably, this underwriter – Seattle Northwest Securities – lobbied with the Oregon School Board Association to
pass the 2001 legislation that permitted school districts to issue POBs.
13
Indiana
Unlike Oregon, in which POBs were essentially used as arbitrage opportunities to reduce
pension expenditures required of school districts, Indiana faced a completely different
circumstance. The Indiana State Teachers’ Retirement Fund (TRF) was created in 1921 as a payas-you-go pension system (Indiana TRF CAFR 2009). The implication of this legislative
decision was that teachers’ pensions were not pre-funded during the employees’ working careers;
rather, the state annually appropriated public funds for beneficiaries, as pension benefits were
due. Fiscal stress in 1971 led the pension system to use $2.7 million of current employee
contributions for benefit payments to retired beneficiaries (Florence Times 1971).
Legislation passed in 1995 contained two important changes to teachers’ pensions in the
state: 1) teachers hired after July 1, 1995 would no longer join the pay-as-you-go TRF (termed
the “Pre-1996 Account”), and would instead join a pre-funded pension system (termed the “1996
Account”) in which annual contributions would be made during teachers’ working careers; and
2) these new hires would no longer be employees of the state, and would instead be employees of
the school districts themselves. This second change moved the new pension obligations from the
State of Indiana to the individual school districts. As of June 30, 2008, nearly 95 percent of TRF
beneficiaries were receiving benefits from this Pre-1996 Account (at an average benefit of
$1,267 per month), and the remaining 5 percent were receiving benefits from the 1996 Account
(at an average benefit of $1,441 per month). For the beneficiaries in the Pre-1996 Account, these
benefit payments still come largely from annual state appropriations. Approximately $1.6 billion
of assets exist in a Pension Stabilization Fund making this Pre-1996 Account roughly 38 percent
funded on an actuarial basis (Indiana TRF CAFR 2009).
In 2000, the Penn-Harris-Madison School Corporation issued the first POB in Indiana,
14
after the school district requested and the state approved legislation for this single school district
to issue such debt. The move to prefunding retirement costs came at a time of budgetary stress,
and the school district wanted to use the bond proceeds to transition to this new program with
minimal cuts to other education spending. “If the district cannot issue the bonds, [it] would need
to spend $1 million in operating funds for the liability in the 1999-2000 school year, adversely
impacting programs that could be offered and the number of teaching positions,” said
Representative Michael Dvorak, who called for the passage of the 2000 measure (South Bend
Tribune 1999). Following the 2000 issue, the state legislature passed Public Law 253-2001,
which allowed school districts a one-time opportunity to issue POBs to either fund their pension
obligation on an “actuarial sound basis,” or implement solutions to such liabilities. The original
legislation required the POBs be issued prior to December 31, 2003. The legislation was
subsequently amended twice, changing the required issuance date to December 31, 2004 and
then July 1, 2006. Importantly, the school districts could not raise their property tax levies to
meet the obligations and payments of the POBs. Rather, districts had to depend upon reductions
in other expenditures, such as capital, bus transportation, or bus replacement.18
Approximately 259 of the state’s 296 school districts issued POBs before the legislation
finally expired in 2006, with the issuances spread across a number of years. While many districts
maintained a traditional defined benefit pension plan, others, like Portage Township School
Corporation, decided instead to use POB proceeds to fund existing pension liabilities and
establish a defined contribution plan for new employees as a solution to control future pension
obligations (Carvlin 2002). Overall, therefore, the Indiana experience of using POBs arose as a
response to assuming a major operating expenditure that had previously been funded by the state.
18
See Indiana Code Chapter 4, available at http://www.in.gov/legislative/ic/2004/title20/ar5/ch4.html for original
and first amended legislation, and http://www.in.gov/legislative/bills/2006/SCCP/CC132708.001.html for final
amended legislation.
15
As pension systems within the state were brought in line with other systems across the country –
through funding of pension benefits as they were earned rather than as they were paid – Indiana’s
school districts used POBs as the financing mechanism to fund these legacy costs while
maintaining steady property tax levies and protecting other educational spending priorities.
Hypotheses
The illustrative examples of Oregon and Indiana lead to several testable hypotheses about
school district budget responses to issuing POBs. First, school districts may use POBs as a
means of diverting current spending from pensions to other educational expenditures. Therefore,
we expect school districts that have issued POBs to reduce annual pension expenditures
compared to those districts that have not, ceteris paribus. Second, school districts that issue
POBs are expected to maintain or increase spending on non-pension educational expenditures
relative to similar districts. Third, school districts might use expected POB savings to maintain or
augment support services (that is, those education expenditures that are not directly linked to
classroom instruction). In other words, rather than cut support or overhead to channel resources
into teacher pensions, school districts might use POB proceeds and savings for these noninstructional spending categories. Fourth, school districts might use expected POB savings to
maintain or expand current spending for other spending (such as food service), similar to our
hypothesis regarding support services. Fifth, school districts may use POBs to maintain or
increase capital expenditures, rather than delay or cut capital investment in favor of teacher
pension requirements. Budget cuts are frequently directed towards capital spending because the
effects are not immediate noticeable (Hendrick 2006, Berne and Stiefel 1993). We expect capital
spending to be unaffected or maintained after using a POB because its usage effectively avoids
16
or delays a budget cut on current spending by using borrowed funds.19 Finally, school districts
issuing POBs may use the proceeds and expected savings simply to reduce local tax efforts,
essentially using the POB for tax relief rather than for education or spending on teacher benefits.
Data
We constructed our data of POB issuers using several distinct sources. We first identified
POB issues using Bloomberg. We documented all new taxable municipal bonds with pension
funding as a use of the bond proceeds. This list from Bloomberg was verified by searching for
POBs using the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market
Access (EMMA) database. Our searches on EMMA generally verified the Bloomberg data, but
we were able to identify additional POBs that had not been explicitly coded as pension
obligation bonds by Bloomberg. For example, Wisconsin school districts issued POBs labeled as
“Taxable Promissory Notes,” while Indiana (through its Bond Bank) issued “Severance” bonds.
From EMMA, we also collected the official statements for each POB issue. For bundled bond
issues – including many in Indiana and Oregon – we were able to identify the individual school
districts that issued POBs from the official statements.20
The primary source of school district financial data is the U.S. Bureau of the Census’
Annual Survey of Governments (ASG), which is considered to be “the most complete, accurate,
and timely source of information available on state and local government finances” (Gordon et
al. 2007). The ASG, now also referred to as the Survey of Local Government Finances, School
19
On the other hand, it may be possible that the elevated debt burden for a district that issues POBs might
crowd out future debt issuance for capital purposes. In reality, credit rating agencies have considered POB
debt service requirements to be comparable to outstanding pension obligations .
20 Several POB issues are excluded from our analysis. First, four issues from Wisconsin school districts went to
market after the 2008 school year, which is the last year of our financial panel dataset (one in 2009, two in 2010, and
one in 2011). Second, nearly a dozen education service districts (ESDs) in Oregon have issued POBs but are
excluded from the analysis because they do not have any enrolled students, since they provide services and support
to a number of districts.
17
Systems (F-33), is jointly conducted with the National Center for Education Statistics (NCES).
The sample period extends from the 1992 to 2008 school years. The NCES Common Core of
Data (CCD) provides the annual school district-level demographic information.
Methodology and Model Specification
Our analysis compares those school districts in Indiana and Oregon that issued POBs to
those districts within the same state that did not issue POBs. Within-state comparisons are
appropriate because education financing occurs within a state financing system; further, school
districts are limited in the forms of financing available to them based on state policies. Because
of such differences, we estimate our regressions on Oregon and Indiana school districts
separately. Further, because school districts have unobserved factors that may influence their
willingness to issue POBs – such as the financial sophistication or knowledge of a school board,
a board’s financial risk tolerance, a board’s willingness to follow a financial advisor’s
recommendation, among others – we control for these omitted variables with the use of districtlevel fixed effects. We analyze how POB issuances may have influenced spending over a long
panel (1992 – 2008) to determine whether the effect is a long-term change. Because of the
longitudinal nature of the data, we include time effects to control for general changes in
education spending, macroeconomic events, and other factors that affect each school district in
each state equally.
We estimate school district spending using the model summarized in equation 1:
SPENDINGit = 0 + POBISSUEDit1 + CHARACTERISTICSit2 + t +  +  
Spending (SPENDING) by school district i in year t is estimated as a function of having issued a
POB in the prior year or earlier (POBISSUED), a vector of school characteristics
18
(CHARACTERISTICS) thought to influence the demand for school expenditures supplied by the
district, and dichotomous variables for both year () and district-level () fixed effects. Due to
the longitudinal nature of the data, robust standard errors clustered by school districts are
included to allow for correlation within each school district while being independent between
districts, and also to address autocorrelation in the observations.
We define spending using several variables. These various spending measures are
expressed in per pupil terms since resources dedicated to each student are a primary concern for
educators. Our first definition looks specifically at the employee benefit expenditures in each
school district of the observed states in year t, to evaluate whether or not POB usage influences
such annual spending (our first hypothesis); although this variable also captures non-pension
benefits as well (such as life, unemployment, and health insurances), pensions are a sizable
portion of these benefits. Further, the data do not disaggregate the benefits any further. We then
examine total elementary and secondary school annual expenditures, and subsequently limit our
definition to current spending only, which excludes capital outlays. In additional specifications
we also limit our definition of spending to instructional (classroom) expenditures only, with and
without employee benefits included as part of this spending. These variables are used to test our
second hypothesis about whether the use of POB altered spending, and allow us to examine
alternate definitions of public school spending.
Spending on support services (our third hypothesis) and other current spending (our fourth
hypothesis) are both defined excluding both capital outlays as well as instructional expenditures.
Capital spending (hypothesis five) is defined as capital outlays in each school district. Local tax
effort (hypothesis six) is defined using local own-source revenue.
Our primary independent variable of interest is whether or not a school district has issued a
19
POB (POBISSUED). We use a dichotomous variable, which is coded “1” beginning in the year
following the issuance of a POB. Berne and Stiefel (1993) examine the long-run effect of budget
cuts in 1976 and 1977 on education spending in New York City; in a similar vein, we treat the
use of POBs as an alternative to budget cuts, in which borrowing replaces spending from
operations (which would require budget cuts in other areas or increased tax burdens on taxpayers
in the absence of such POB issuances). We hypothesize that we should observe the effects of a
POB issue in the subsequent year onwards – because pension expenditures are expected to be
lower and other spending either maintained or augmented as a result.21 A finding that the
coefficient on this variable is not significant would suggest that POBs have no influence on
school district spending. A positive and significant coefficient is indicative of increased spending
as a result of POBs augmenting spending (that is, avoiding budget cuts faced by similar districts
that did not issue POBs) in the case of total spending; in terms of other spending (current,
instructional, etc.), a positive and significant coefficient suggests the redirection of spending into
these particular expenditure categories – the publicly stated goal of many districts that chose to
use them. On the other hand, a negative and significant coefficient on total spending suggests
that overall spending is cut despite the use of POBs (that is, the use of POBs does not stop
budget cuts, possibly making this cut less apparent due to funds obtained through the debt issue);
in terms of other spending, such a finding is indicative of existing spending directed away from
these particular expenditure categories (perhaps to service the new liability).
To control for other factors that are likely to influence education spending, we include
21
Additional specifications were estimated using a variable that incorporated the size and years to maturity of the
POB issues. A variable was created by dividing each POB par value by the years to final maturity to determine the
average annual principal amount that would be paid back following an issuance (expressed in terms of per pupil).
The results for the spending variables were consistently negative (except for current other spending) like the
reported results; tax effort was also positive for Oregon and not significant at the five percent or higher level for
Indiana, similar to the presented results. We present the results using the dichotomous variables for two reasons: 1)
ease of interpretation, and 2) because we believe this variable better operationalizes the use of POBs as an
alternative to a budget cut or spending diversion to pensions from current resources.
20
several additional control variables. A school district’s size should have a negative effect on
spending due to economies of scale in the provision of educational services. For example, the
cost of a superintendent is more easily supported by a larger number of students in a district.
School district size is defined as the natural logarithm of student enrollment. The level of input
factors should have a positive effect on per pupil spending, since increased inputs increase
expenditures. The pupil-to-teacher ratio is included to measure the amount of teacher input
factors in the district. Low-income students and racially diverse student bodies may require
additional services that other students do not (such as English language learning courses, inschool nutrition and food, additional counseling or tutoring, among other services). To control
for low-income students, the fraction of the student population eligible for free lunch is included.
The fraction of non-white students in the school is included as a control for student ethnicity and
district heterogeneity.22 Table 4 reports descriptive statistics for our variables of interest for both
states.
<Insert Table 4, about here>
Results
The results of the statistical estimations are displayed in Tables 5 and 6. Table 5 presents
the results for our hypotheses regarding the effect of POB on spending, defined variously. The
results in Columns A indicate that school districts that issued POBs did in fact experience a
decline in spending on employee benefits. The results in Oregon indicate that following a POB
issue, school districts reduced benefit expenditures $277 per pupil, an approximate decline of
sixteen percent. The results in Indiana are marginally significant at the ten percent level, and
22
We also estimated equation 1 with an additional control variable measuring the annual change in student
enrollment because education spending might change as a result. The results were unchanged with those presented.
21
suggest an approximate decline of six percent. These results generally suggest that POB
issuances did permit school districts to reduce pension expenditures, as articulated in the first
hypothesis.
The important question remains, then, as to what happened to these annual savings in
spending. The results are consistent across estimations, that having issued a POB in prior years
reduces per pupil spending – whether it is measured as total, current (excluding capital), or
instructional. The results suggest that total education expenditures for elementary and secondary
schools in Oregon decline from an average of nearly $9,200 per pupil by approximately $860
annually (a roughly nine percent decline) following a POB issue; the effect size is attenuated in
Indiana, where average spending is expected to fall more than $200 from nearly $8,100 per
pupil, or approximately two percent. To further illustrate, the average Oregon school district
spends nearly $3,000 annually on instructional expenditures (excluding benefits); this spending
is predicted to drop by nearly $151 – or approximately five percent – in fiscal years following a
POB issue. In Indiana, the average school district spends nearly $2,700 annually on instructional
expenditures (excluding benefits); spending is expected to drop approximately $54 – or nearly
two percent – in fiscal years following a POB issue.
<Insert Table 5, about here>
These consistent results across spending definitions provide empirical support that
challenges the notion that POBs allow districts to maintain spending, or to direct education
spending to uses other than teacher pensions (hypothesis 2).23 The results consistently find
23
One alternate explanation is that other revenues (especially from the state or federal government) may be
declining and causing this decline in spending rather than the POB. When the models are re-estimated including
revenue variables (state revenue per pupil, and total revenue per pupil), the direction and significance of the primary
22
negative and significant results, indicating issuers of POBs reduced education spending
compared to those that did not issue POBs. Further, real per pupil spending consistently
increased during this time period; the time fixed effects, for example, are consistently positive
and generally increasing in magnitude throughout the panel period. Overall, one may reasonably
conclude that the negative and significant results with respect to the POB variable capture real
per pupil declines in spending from using such a financing vehicle, due perhaps to servicing the
new debt or the expected investment arbitrage not materializing (and, therefore, not reducing
pension expenditures in the future as much as anticipated). It is also important to note that the
panel ends in 2008; changes to pension liabilities and required contributions caused by the
economic crisis that began in September 2008 would not be reflected in the data (because these
changes are phased in over time). Therefore, this market turbulence is not the cause of the
reduction in education spending.
Table 6 presents additional estimation results. Columns A and B examine whether school
districts used POBs to maintain or increase spending in support services or other noninstructional services (hypotheses 3 and 4). The results in Column A indicate that school districts
that issue POBs experience declines in support service spending, ceteris paribus. The average
Indiana school district spends nearly $2,300 on current support services; the results in Table 6
suggest that POBs reduce such spending about $76 dollars, or approximately three percent. For
the average Oregon school district that spends over $3,000, the results suggest a more dramatic
reduction of $540, or 18 percent. On the other hand, other non-instructional current spending is
not affected by the issuance of POB. Because this spending is dominated by food expenditures,
this finding is not surprising: these expenditures are frequently financed through federal free
findings are not altered. The revenue variables themselves were each positive and significant when either was
entered into the specification.
23
lunch programs that would be unaffected by such a POB issuance because the use of the funds is
restricted.
<Insert Table 6, about here>
Our fifth hypothesis regarding capital spending is reported in Column C of Table 6. Capital
outlays are not affected by the issuance of POBs in both Indiana and Oregon. Therefore, given
the findings in Table 5, the reduction in spending after using POBs seems focused on current
spending and not capital. Capital outlays represent only about eight percent of total spending and
are characterized by their infrequent nature. Interestingly, the Indiana legislation authorizing the
POB issuances explicitly forbade reductions in current spending to service the debt – that any
such reductions should come from capital; nevertheless, the results in Tables 5 and 6 suggest that
current spending was in fact reduced and capital outlays maintained.
Column D presents the results for the local tax effort hypothesis (the sixth hypothesis). The
results indicate that Indiana school districts did not alter their own-source revenue following a
POB issuance, but Oregon school districts did. The average per-pupil own-source revenue
increased from nearly $3,200 to nearly $3,700, a fifteen percent increase. Therefore, taxpayers in
Oregon school districts not only paid more taxes following a POB issuance, but they received
less spending per pupil in the school and classroom.
Overall, the empirical results in Tables 5 and 6 suggest that the expected savings school
districts might generate from using POBs have not materialized on average, that school districts
that have used POBs have reduced spending on current, support, and instructional services.24 The
24
One concern we had was that POBs were not being captured in the data. We estimated a spending model with
long-term debt outstanding (from the F-33 data) as the dependent variable. For both Oregon and Indiana, the POB
variable was positive and significant in the year of issuance and after, indicating that this liability is in fact included.
The coefficient for Oregon suggests that per pupil long-term debt outstanding increases more than $8,000 following
24
expressed reason for using POBs in many cases was to protect or augment some of these very
services by diverting annual pension expenditures to other spending categories. The results
consistently indicate, however, that most spending categories are made worse off by using POBs.
Robustness Estimation
We estimated equation 1 using the natural log of current spending to ascertain whether our
results are robust to alternate specifications. The results of this specification indicated that the
use of POBs subsequently reduced current spending by Oregon school districts by 2.4 percent,
and 1.9 percent for Indiana school districts. Although the Oregon estimate is lower than the
results presented in Table 5, the significant and negative coefficient indicates that this reduction
in current spending following a POB issue is robust to alternate specifications. The Indiana
estimate is nearly identical to those in Table 5.
Conclusion
The allure of POBs is that they are expected to solve a seemingly intractable problem unfunded pension liabilities – while simultaneously freeing up additional resources that may be
devoted to classroom initiatives. The purpose of this paper was to examine whether the use of
POBs has changed school district spending, and, if so, how. Using data from 1992 through 2008,
the results unambiguously show that POBs reduce education spending, and reduce many
categories of annual expenditures (current, instructional, and support services).
As school districts and other governments continue to manage and increasingly large
required pension contributions with probably shrinking budgets with which to pay for them,
POBs will likely be viewed as attractive alternatives to other budget cuts, tax increases, or the
POB issuance, a 250 percent increase prior to issuance; for Indiana, per pupil long-term debt outstanding increases
approximately $630, or 39 percent.
25
renegotiation of employee benefits. However, the empirical results here suggest that viewing
POBs as a free lunch is problematic, and pupils will bear the (probable) resultant decline in
spending from POBs. The problems of managing unfunded pension liabilities and the budgetary
stress caused by them cannot be solved by simply issuing a bond and hoping for the best possible
outcome. Rather, politicians and public officials will have to make difficult decisions about tax
revenues (tax increases or new taxes altogether) and employee benefits (increased employee
contributions or less generous offerings). Somehow, these options seem more likely to bring
public budgets into structural balance than attempting to manage a liability (such as a pension)
by issuing an additional liability (such as a POB).
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28
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Table 1: Pension Obligation Bonds by Issuer and by Number, 1993-2010
Issuer
Type
Number of
Issuers
Percent of
Total
Number of
Issues
Percent of
Total
Average
Years to
Maturity
State
City/County
School
District
Other
9
174
463
1.38%
26.69%
71.01%
9
227
71
2.88%
72.52%
22.68%
26.10
17.82
20.90
Average
Size of
Issue
($000)
2,388,000
158,000
11,100
6
0.92%
6
1.92%
17.53
173,648
Total
652
100.00%
313
100.00%
Table 2: Description of Pension Obligation Bonds Issued by School
Districts, 1993-2010
State of
School
District
Number
of
Percent of
Issuers Total
Average
Years to
Maturity
Average Size of
Issue ($000)
CO
IL
IN
MN
NJ
NY
OR
WI
1
2
259
1
9
36
129
26
0.22%
0.31%
55.94%
0.22%
1.94%
7.78%
27.86%
5.62%
26.0
10.5
22.0
16.0
16.2
8.8
25.1
7.7
390,983
2,913
4,858
25,660
5,811
3,040
21,900
3,861
Total
463
100.00%
20.9
11,100
29
Table 3: Characteristics of Issuer and Non-Issuer School Districts by State
New York
Oregon
1993-1998
2003-2005, 2008
NonIssuer
Issuer
Indiana
2000-2007
NonIssuer
Issuer
New Jersey
1999, 2003, 2005
NonIssuer
Issuer
Wisconsin
1997, 1999, 2001,
2003-2006, 2008
NonIssuer
Issuer
Issuer Non-Issuer
Own-source Revenue
(proportion)
0.63
0.64
0.45
0.45
0.62
0.55
0.36
0.30
0.45
0.42
LT-Debt Per Pupil
1.26
1.28
5.09
4.89
7.04
6.31
1.76
2.38
5.63
2.76
Current Spending Per Pupil
9.24
9.15
13.41
11.69
8.86
8.73
7.26
11.71
8.32
7.21
Total Spending Per Pupil
10.02
10.54
15.17
14.26
10.53
10.37
10.07
13.03
10.25
9.00
Proportion of Students
Non-White
0.07
0.06
0.33
0.24
0.10
0.07
0.17
0.10
0.20
0.16
Urban Locale
0.14
0.06
0.10
0.05
0.08
0.08
0.00
0.02
0.21
0.03
Suburban Locale
0.89
0.81
0.26
0.21
0.64
0.38
0.33
0.15
0.29
0.22
Rural Locale
0.11
0.17
0.42
0.62
0.22
0.55
0.58
0.80
0.62
0.70
Number of Schools
7.03
6.13
4.00
4.10
8.17
5.74
10.58
4.16
11.42
4.93
Proportion of Students
Free-Lunch Eligible
0.16
0.19
0.32
0.33
0.13
0.13
0.22
0.19
0.01
0.06
Enrollment
2,310
2,369
5,530
3,885
5,128
1,460
3,681
2,981
5,306
1,944
N
36
4,057
89
488
237
1,497
9
1,636
22
3,323
* numbers in bold indicate statistical significance of the differences between the means of issuers and non-issuers at the 0.10 level or greater.
Dollar figures are in thousands. Only years in which POBs were issued are included in Table 3.
Table 4: Descriptive Statistics for Variables Used in Empirical Analysis
Oregon
Mean
Employee Benefits
Total Spending
Current Spending
Current Instructional
Spending
Instructional Spending
(benefits excluded)
Current Support
Services Spending
Current Other Services
Spending
Capital Outlays
Local (Own-Source)
Revenue
Past Pension Obligation
Bond Issuance
1.68
8.73
7.70
Std.
Dev.
0.67
3.77
3.02
4.57
Indiana
Min
Max
Mean
0.00
3.02
2.99
4.77
29.50
24.27
1.11
8.06
6.48
Std.
Dev.
0.57
2.12
1.67
1.61
1.56
12.67
3.90
2.83
0.92
0.00
7.86
2.86
1.45
0.00
0.25
0.73
0.16
2.04
3.02
0.10
Min
Max
0.27
3.09
2.33
4.81
17.85
14.32
1.01
1.32
9.85
2.73
0.56
1.02
5.88
11.12
2.29
0.69
0.61
6.51
0.00
0.00
0.90
61.29
0.28
0.71
0.08
0.68
0.00
0.04
0.64
9.32
1.49
0.09
11.00
3.54
1.51
0.80
13.35
0.30
0.00
1.00
0.17
0.38
0.00
1.00
All financial variables expressed in thousands of dollars.
31
Table 5: Pension Obligation Bond Issuance and School District Spending Models, 1992 - 2008
Dependent
Variables are
all per Pupil:
Employee Benefits
(A)
Oregon
Enrollment
(ln)
Indiana
Total Spending
(B)
Oregon
Indiana
Current Spending
(C)
Oregon
Indiana
-0.643*** -0.280*** -4.150*** -1.313*** -2.564*** -1.283***
(0.086)
(0.100)
(0.188)
(0.166)
(0.101)
(0.093)
Instructional Spending
(benefits excluded)
(E)
Oregon
Indiana
-1.503*** -0.836*** -1.014*** -0.485***
(0.067)
(0.063)
(0.038)
(0.034)
Pupil Teacher
Ratio
-0.003
(0.002)
-0.013*
(0.007)
Fraction Free
Lunch Eligible
0.088
(0.092)
0.768***
(0.272)
0.838**
(0.387)
0.989**
(0.431)
0.875***
(0.208)
1.505***
(0.241)
0.302**
(0.135)
0.580***
(0.163)
0.134*
(0.078)
0.105
(0.089)
Fraction NonWhite
0.084
(0.119)
0.552**
(0.241)
-0.171
(0.414)
1.296***
(0.297)
0.178
(0.224)
1.095***
(0.166)
-0.001
(0.147)
0.762***
(0.112)
-0.049
(0.084)
0.279***
(0.061)
Previously
Issued POB
-0.277***
(0.042)
-0.071*
(0.042)
Constant
5.475***
(0.549)
Observations
R-squared
Adj. Rsquared
3,666
0.861
0.848
-0.018*** -0.126*** -0.010*** -0.126***
(0.006)
(0.013)
(0.003)
(0.007)
Current Instructional
Spending
(D)
Oregon
Indiana
-0.860*** -0.205*** -0.721*** -0.202***
(0.151)
(0.059)
(0.079)
(0.033)
2.797*** 33.344*** 17.301*** 22.396*** 15.993***
(0.716)
(1.225)
(1.256)
(0.661)
(0.701)
4,968
0.752
0.736
3,666
0.766
0.743
4,968
0.845
0.834
3,666
0.878
0.867
4,968
0.923
0.917
Clustered-robust standard errors in parentheses. Year and district fixed effects are included but not reported
*** p<0.01, ** p<0.05, * p<0.10
32
-0.008*** -0.086*** -0.007*** -0.067***
(0.002)
(0.005)
(0.001)
(0.003)
-0.306*** -0.124*** -0.151*** -0.054***
(0.053)
(0.022)
(0.030)
(0.012)
13.283*** 10.377***
(0.435)
(0.474)
3,666
0.841
0.826
4,968
0.902
0.895
8.769***
(0.248)
6.952***
(0.258)
3,666
0.841
0.826
4,968
0.905
0.898
Table 6: Pension Obligation Bond Issuance and School District Other Spending and Tax Effort Results, 1992 - 2008
Dependent
Variables are all
per Pupil:
Enrollment (ln)
Current Support Services
Spending
(A)
Oregon
Indiana
Current Other Services
Spending
(B)
Oregon
Indiana
Capital Outlays
(C)
Oregon
Indiana
Local (Own-Source)
Revenue
(D)
Oregon
Indiana
Pupil Teacher
Ratio
-1.465***
(0.063)
-0.004**
(0.002)
-0.416***
(0.046)
-0.038***
(0.004)
-0.021***
(0.006)
0.000
(0.000)
-0.031***
(0.006)
-0.002***
(0.001)
-0.541***
(0.177)
0.010*
(0.006)
-0.496***
(0.122)
-0.002
(0.010)
-1.332***
(0.068)
-0.003
(0.002)
0.289*
(0.150)
-0.046***
(0.012)
Fraction Free
Lunch Eligible
0.563***
(0.129)
0.783***
(0.120)
0.058***
(0.012)
0.142***
(0.016)
0.073
(0.347)
-0.546*
(0.318)
0.340**
(0.139)
-1.828***
(0.390)
Fraction NonWhite
0.124
(0.138)
0.306***
(0.082)
0.033**
(0.014)
0.027**
(0.011)
-0.700*
(0.407)
0.435**
(0.219)
0.387**
(0.158)
-0.576**
(0.269)
Previously Issued
POB
-0.542***
(0.050)
-0.076***
(0.016)
-0.006
(0.005)
-0.002
(0.002)
0.093
(0.155)
-0.013
(0.043)
0.477***
(0.056)
0.077
(0.053)
Constant
11.511***
(0.409)
5.187***
(0.349)
0.313***
(0.040)
0.429***
(0.048)
3.806***
(1.139)
4.424***
(0.925)
12.047***
(0.442)
1.142
(1.137)
3,666
0.821
0.804
4,968
0.886
0.879
3,666
0.833
0.817
4,968
0.832
0.821
3,666
0.150
0.069
4,968
0.181
0.126
3,666
0.795
0.775
4,968
0.750
0.733
Observations
R-squared
Adj. R-squared
Clustered-robust standard errors in parentheses. Year and district fixed effects are included but not reported
*** p<0.01, ** p<0.05, * p<0.10
33
Figure 1: Pension Obligation Bond Issues by School Districts Versus New Issue Municipal
Debt Costs, 1993-2011.
160
7.00
6.00
140
POB Issues
120
5.00
100
4.00
80
3.00
60
2.00
40
20
0
1.00
Avg. BB 20 GO index Interest Rate
180
0.00
180
1799.5
160
1599.5
140
1399.5
120
1199.5
100
999.5
80
799.5
60
599.5
40
399.5
20
199.5
0
-0.5
S&P 500 Index
POB Issues (calendar year)
Figure 2: Pension Obligation Bond Issues by School Districts Versus Equity Prices, 19932011.