In light of the exceptionally low interest rate environment and rapidly increasing public pension liabilities, a number of state and local governments are struggling to close their pension funding gaps. Governments are considering structural changes, such as lowering cost of living adjustments and raising retirement ages, and are also considering increasing investable assets by issuing bonds. Pension obligation bonds (POBs) are typically secured by either a general obligation (GO) or annual appropriation pledge of the issuer and are on parity with outstanding GO or appropriation debt. Bond proceeds have been most frequently used to shore up pension funded ratios, effectively substituting a debt for a pension liability. There have also been a few cases where issuers have imprudently used bond proceeds to fund the current year’s pension contribution as a budget-balancing measure, effectively issuing long-term debt to pay for current expenses. Standish considers structural pension reform to be the most prudent and creditworthy approach to addressing the growing liability, and the issuance of POBs can be merely a tactic that delays a long-term solution. We rely on the deep expertise and experience of our municipal credit analysts to quantify the relative risks of each issuer’s pension funding practices.