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Moody’s Pension Reporting Changes May Adjust Local Muni Ratings

Moody’s Pension Reporting Changes May Adjust Local Muni Ratings
Moody's Investors Service Inc. headquarters in New York. Photographer: Scott Eells/Bloomberg

Moody’s Investors Service plans to adjust how it reports U.S. state and local government pension data, according to a request for comment released today.

The changes “likely would result in rating actions for those local governments where the adjusted liability is outsized for the rating category and without mitigating factors such as demonstrated flexibility to respond to higher fixed costs,” the New York-based ratings company said in the report.

The new criteria aren’t expected to result in rating changes for states, according to the report. In January, the company downgraded Illinois to A2, its lowest grade for a state, in part because of its “severe pension under-funding.”

The company is seeking comment on the usefulness of the changes in increasing comparability among state and local pensions, and in treating retirement liabilities similarly to debt. Moody’s will consider four main adjustments, according to the report:

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