SACRAMENTO, Calif. (AP) — Leaders in Oakland, Calif., took a risk last year when they decided to borrow nearly $213 million to cover pension payments owed to retired city workers.
But such borrowing appeals to officials who otherwise would have to cut jobs and services or raise taxes.
According to a 2010 Boston College study, state and local governments have borrowed a combined $53 billion between 1986 and 2009 as their retirement liabilities have grown.
Finance officials advise state and local governments to use caution when they consider borrowing at low rates to squeeze a greater return from pension assets. Despite the possible payoff, the stock market is volatile.
If Oakland's bet pays off, a financial burden will be eased. But if not, the city is saddled with paying interest on top of the payments it has promised retirees.
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