California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink ”” budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.
And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis.
New Hampshire was recently ordered by its State Supreme Court to put back $110 million that it took from a medical malpractice insurance pool to balance its budget. Colorado tried, so far unsuccessfully, to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002. It wanted the money for its university system and seems likely to get a lesser amount, perhaps $200 million.
Connecticut has tried to issue its own accounting rules. Hawaii has inaugurated a four-day school week. California accelerated its corporate income tax this year, making companies pay 70 percent of their 2010 taxes by June 15. And many states have balanced their budgets with federal health care dollars that Congress has not yet appropriated.
Add to this the new debts that the states will have to pay for the new health care unfunded mandates that the Federal Government is imposing.
Elections have consequences.
The state pension obligations have only been funded to nearly
$2 trillion, yet the obligations themselves run to somewhat more
than $5 trillion. The difference of $3 trillion, average over the 50
states, is roughly $60 billion per state.
Also, very interesting was the article’s statement that the states
do not count pension fund obligations as debt, when clearly
it is debt. Why ? The only reason which comes to mind is that state
governments do not want us to know that overly generous
provisions are being made to state, county, and municipal
employees.