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The Impact Of Growing Pension Obligations On States' Financial Health

Summary:George Mason’s Mercatus Center recently released the latest update of their analysis of the financial health of all 50 US states. Their work is often reported in terms of a state’s relative rank within a 2015 context. However their most recent study also reveals how much the aggregate financial picture has deteriorated for most states since 2014.  The largest changes since 2014 were driven by accounting changes that require states to bring their pension liabilities “on-balance sheet.” Even without accounting changes, however, state pension liabilities are growing faster than state personal income.State’s medical obligations to their future retirees are not yet on many state balance sheets, but must be reported on-balance sheet within the next 2 years.States could fund their negative net unrestricted asset positions either by increasing taxes and/or decreasing expenses. However some states with large negative net positions already have relatively high taxes and/or low expenses2…

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