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News Link • Government Debt & Financing

Downgrades Loom for US States

“The key questions are whether states and local governments are funding their pensions, how much it is taking up of their general fund and concern about the crowding out of spending for other needs,” said Laura Porter at Fitch. The rating agency, which used data from 2009, said there was cause for near-term concern about “a number of” pension plans and pointed to the “considerable pressure that these obligations will place on many government budgets”. The greatest risk would come at the local level since labor-related costs were a higher percentage of local government budgets, Fitch said. In Miami, Florida, a quarter of the city’s operating budget pays for pensions. Among states, Illinois stands out for setting aside 12 percent of its budget for its chronically underfunded pension.

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