States on Track for Default

Louisiana’s unfunded liability of $24 billion cause for “serious concerns”

NEW ORLEANS, La. – On account of immense fiscal pressure, some states are “simply not going to be able to honor their promises,” asserts John Hood, author of “The States in Crisis,” a report from the latest issue of National Affairs.

Hood is president of the John Locke Foundation, a North Carolina policy institute, and he cites an estimated $3 trillion in state and local unfunded liabilities and a combined projected deficit of $130 billion for the coming year. That equates to around 20 percent of their total spending, and nearer to 30 percent in the case of Louisiana. Hood also doubts whether federal officials, who have channeled $140 billion of relief to states over the past three fiscal years, will continue aid of that magnitude. (Article continues below.)

Reproduced with permission from National Affairs. Data Source: Center on Budget and Policy Priorities.

The latest recession brought lower state tax revenues – 8.4 percent less in 2009 than in 2008, and a further 3.1 percent less in 2010. However, the problem will not go away, he says, even in the event of an economic recovery. States have roughly doubled their spending over the past fifty years, as a proportion of the economy, and the “fiscal calamity is not simply a function of the recession.”

“Their shaky financial foundations were in fact set long ago – through unsustainable obligations like retirement benefits for public employees, excessive borrowing, and deferred maintenance for public buildings and infrastructure.”

Click here for the full article and an in-depth interview with John Hood

Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy. He can be contacted at, and one can follow him on twitter.



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