Debt in State Government Hits Fever Pitch
Tuesday, June 26, 2012
Yesterday the Government Accounting Standards Board, which sets the accounting standards for governments, voted to mandate more transparency from state and local governments by requiring they post their net pension liability for their workforce. That means they have to share the real value of the assets they hold to cover the rapidly growing liabilities they face to keep their pension and retiree health care commitments to their workers.
This month the Pew Center for the States reported the gap between state pensions and retiree fringe benefit commitments and the assets they have to cover them had swollen to $1.380 trillion dollars for fiscal year 2010.
Pew reports that almost every state has taken some steps to reduce pension costs by getting concessions from their workforce and making future employee packages less generous. But few states have taken any steps to confront the exploding costs of retiree health care.
These exploding liabilities come as Washington is on a course—per the Obama White House and GOP House debt ceiling deal—to dramatically cut discretionary domestic spending on local aid. These are beltway lifelines such as the Community Block Development Grants that have their roots in the Nixon era of revenue sharing.
The above, all by itself, in good times would be cause for concern. But these are not good times. Consider these additional factors:
→Local governments are very reliant on property taxes, which are tied to property values. Across the country, property values have taken a major hit, setting into a tidal wave of property tax appeals.
→The Obama Administration and Congress, caught in their own dysfunctional dance, have been unable to address Main Street and State Street woes.
→Local, county and state governments have already pink-slipped 700,000 workers.
→The new normal of record long-term unemployed, homelessness and growth of the uninsured has hit towns and counties the hardest in additional demand on welfare services.
→Local, county and state governments have been increasingly reliant on revenue gimmicks to pay for recurring operations.