NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Improving Comparability of State Liabilities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=674670
Pension liabilities are demanding larger shares of U.S. state budgets and playing a greater role in state credit analysis, according to Fitch Ratings.
In a continuation of the enhanced pension analysis introduced last year, Fitch Ratings is introducing a new metric into its state analysis to facilitate improved comparisons of these liabilities from state to state. The new metric is discussed in greater detail in a new report.
The new metric combines each state's net tax-supported debt with the unfunded actuarial accrued liabilities (UAALs) of the major pension systems that are the responsibility of the state. Fitch measures the result against the state's personal income.
Since last year, Fitch has adjusted the reported liabilities of government pension systems to reflect a consistent 7% investment return assumption, which is more conservative than most plans now assume. The figures used to calculate the new metric will reflect this adjustment.
After applying the new metric, the median for net tax-supported debt combined with the adjusted pension UAAL for Fitch-rated states equals almost 7% of personal income. This is more than double the roughly 3% median figure for net-tax supported debt alone. Diving deeper into this figure, 14 of the 43 states rated by Fitch have a combined liability greater than 10% of personal income.
The new metric is intended to supplement, not replace, existing state debt and pension metrics. Fitch has long incorporated analysis of debt and pensions into its analysis. Therefore, the new metrics, in and of themselves, are not likely to precipitate any rating changes.
'Improving Comparability of State Liabilities' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'
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