Why is it advised not to issue OPEB bonds?

Issuing Other Post-Employment Benefits (OPEB) bonds is advised against primarily because they can create significant future liabilities. When an organization issues bonds to cover OPEB costs, it is essentially taking on debt that must be repaid with interest. This obligation can strain the organization's financial resources in the long run as it adds to the existing liabilities on the balance sheet.

The nature of OPEB itself is inherently unpredictable; costs related to retiree benefits can fluctuate based on various factors such as healthcare costs and longevity. Thus, financing these expenses through bonds can lead to a situation where future cash flows are at risk, and the organization may find itself burdened with repayment obligations that outweigh the initial benefits of issuing the bonds.

Other factors, while relevant to financial decision-making, do not capture the essence of the central issue that comes with OPEB bonds: the long-term fiscal liability. Understanding this aspect is crucial for managing public entity finances effectively and ensuring fiscal sustainability.