Pension obligation bonds (POBs) are a type of financial instrument used by some state and local governments to fund part or all of a plan’s unfunded liability through borrowing. Proceeds from the issuance of the bond are invested, through the pension fund, with the intent of realizing higher investment returns than otherwise possible using only contributions. As one might imagine, there is a certain degree of risk associated with using these instruments.
Currently, POBs are the only type of general obligation bond in Texas allowed to be issued without an election, meaning that governments can expose the public to tremendous financial risk without allowing them a voice in the process first.
Voters need to be included in this conversation, especially since taxpayers could be obligated for full repayment in the event that the bonds fail to perform as expected. For this reason, the Foundation supports the passage of SB 957.