So why are states in especially bad shape?
She identifies three things:
Government support is ending.
States relied heavily on General Obligation bonds, which means that short-term expenses are being funded by long-term debt, a less-than-idea mismatch.
Third: Pension costs are a huge long-term problem.
But the bigger problem is the giant shadow cast by the pension and OPEB liabilities that are absent from balance sheets. In fact, states weren't even required to report the OPEB number at all until 2008, and the pension figure is consistently understated because states generally far overestimate future returns on their retirement funds.
As Whitney shows, these off-balance sheet numbers are an incredible three times the size of all on-balance sheet debt, totaling $2 trillion. The load is rising quickly; the unfunded pension burden has jumped 50% in the past year.
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