Moody’s Clarification on Fox & Hounds Article

David Jacobson
AVP - Communications Strategist, Public Finance Group, Moody's Investors Service

Editor’s Note: Moody’s Investors Services requested a clarification be provided in reference to Wayne Lusvardi’s piece, “Moody’s New Pension Rules Would Bankrupt Six Cal Counties,” which appeared on January 16.

Your article seems to conflate the role of Moody’s Investors Service (a credit rating agency) with that of GASB (a standard setting board).  This conflation, both in the title and the body of the article, serves to inaccurately characterize the proposed adjustments that Moody’s is considering making to its analysis of pension data.

As a credit rating agency, Moody’s publishes its opinions on credit risk.  It is not Moody’s role to prescribe funding or accounting “rules” for state or local governments.  That responsibility lies solely with GASB.

In the Request for Comment we published on July 2, 2012, we said:  “We are not suggesting that [the proposed adjustments] be a guide, standard or requirement for a state or local governments to fund pension liabilities.”  Instead, Moody’s is considering making these adjustments to improve comparability and enhance our credit analysis of rated entities.  In addition, the proposed adjustments have not been finalized and have not yet been incorporated into our ratings methodology.

We are concerned these important points may have been overlooked or misunderstood in your postings on the subject.  We want to make clear that these proposed adjustments are not funding requirements.

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