Rep. Nunes and Sen. Burr Introduce PEPTA: Another Threat to Municipal Bonds

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This is the first in a four part series on Public Employee Pension Transparency Act of 2013, also known as PEPTA.

More and more, Congress appears to be considering legislation that is based on anecdotal and inaccurate information and not on good public policy or the facts.

That certainly was the case when the House last month approved a bill to reauthorize the Workforce Investment Act (WIA).  Even though House leadership might tell you otherwise, the decision to move programmatic authority from local elected officials and local business leaders to governors had nothing to do with improving the governance structure of the workforce development system, nor did the decision to consolidate nearly 50 funding streams into one have anything to do with improving the delivery of services.  The proposed changes were made on ideological grounds, and information to support making those changes — a study of the Workforce Investment Act by the General Accountability Office – was taken out of context.

Now it appears to be happening again around public pensions and municipal bonds.  Numerous press reports, most notably in the New York Times, have suggested that public pensions are on the verge of collapse, and that their collapse will set off a wave of local bankruptcies that will seriously jeopardize the economic health of the United States.  Other reports have suggested that cities and towns are too heavily leveraged and are about to default in massive numbers on their tax exempt municipal bonds.  While the evidence is clearly otherwise – in 2011 only 13 municipalities filed for bankruptcy protection – members of Congress have latched onto these reports as an excuse to go after state and local public pensions and to link their sustainability to the issuance of municipal bonds.

Last week Reps. Devin Nunes (R-CA), Paul Ryan (R-WI) and Darrell Issa (R-CA) introduced H.R. 1628, the Public Employee Transparency Act of 2013 or PEPTA in the House and Sens. Richard Burr (R-NC), Tom Coburn (R-OK) and John Thune (R-SD) introduced S. 779, the Public Employee Transparency Act of 2013 or PEPTA in the Senate.

Like so many other bills introduced in Congress, this bill is based on fictitious notions that states and localities are about to declare bankruptcy, or come to the federal government for bailouts to prevent them from defaulting on their obligations.