Public pension system can be roughly separated into locally administered and state administered systems. Providence, Rhode Island, is an example of a locally administered pension system where the local jurisdiction administers pensions for firefighters, police officers and retirees. The California Public Employee Retirement System (CalPERS) is an example of a state multiple-employer plan where local municipalities pay into the system and the state administers the benefits. Pension reforms are taking different tracks depending on the pension system structure. For example, Rhode Island Superior Court signed off that Providence could cap pension benefits at 150% of state median income and suspended cost of living adjustments for ten years. These changes possibly saved Providence from filing for bankruptcy. CalPERS, on the other hand, is modifying its actuarial smoothing and amortization methods with the goal of improving long-term system sustainability, the results of which will increase pension contribution for all participating employers. SNW Asset Management views the Providence reform as a credit positive because it reduces the pension liability for the municipality while sparing the pain to bondholders from a default. We view the CalPERS reforms as credit negative for local California municipal credits because the changes increases pension liability to local municipalities, increasing the stress on member budgets. It’s becoming more and more apparent that pension reforms are needed, and how municipalities respond will have a lot to do with the structure of the pension system.